Rami Levy Chain Stores Hashikma Marketing2006 Ltd.

(“The Company”)

Board of Directors Report on the State of theCompany’s Business for the Three Months

Ending March 31, 2012

1. Explanations by the Board of Directors of the Company’soperations, its operating results, its equity and its cash flows

1.1 Description of Company’s Business

1.1.1 Rami Levy Shivuk Hashikma Stores Chain 2006 Ltd(hereinafter: the “Company”) is a company engaged in

food retailing – supermarket management. The Company,

correct as of the date of the financial statements, operatestwenty-two supermarkets of various sizes in the area of

Jerusalem, Modi’in, Ma’aleh Adumim, Beitar Ilit, Kastina

Junction, Ayalon (Bnei Brak), Tiberias, Nesher, PardesHannah, Gush Etzion, Afula, Rosh Haayin, Netanya, and

Ashdod. Two additional stores operate on a franchise basis

in Kiryat Haim and Zichron Yaakov.

The Company’s branches are discount branches. TheCompany ensures that the basket of products sold at its

branches is the least expenses in relation to the local

competition in the environment of each branch.

The Company’s branches as at the date of the financial

statements:

HaUman Branch – Talpiot, Jerusalem

Rav Chen Branch – Rav Chen Mall, Talpiot, Jerusalem.

Achim Israel Branch – Talpiot, Jerusalem.

Modi’in – Shilat Branch – Shilat Junction.

Mishor Adumim Branch – Ma’aleh Adumim.

HaKastel Branch – Mevasseret Yerushalaim.

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Sha’ar Binyamin Branch – Binyamin Industrial Area

Ramot Branch – Jerusalem.

Kastina Branch - Kastina Junction.

Beitar Ilit Branch – Beitar settlement.

Kiryat Haim Branch – operating under a franchise.

Givat Shaul Branch.

Zichron Yaakov Branch – operating under a franchise.

Tiberias Branch.

Ayalon Branch (Bnei Brak).

Nesher Branch (Haifa)

Pardes Hannah Branch – Opened March 16, 2010.

Gush Etzion Branch – Opened June 15, 2010.

Afula Branch – opened October 5, 2010.

Givat Shaul Mehadrin Branch, Jerusalem, opened on

October 21, 2010.

The Rosh Haayin branch opened on April 12 2011.

Netanya Branch – opened May 31, 2011.

Ashdod Branch – opened February 7, 2012.

Pardes Hannah Branch – Opened March 20, 2010.

The Company operates a customer club, consisting of

approximately 500,000 members who are entitled to various

discounts and benefits.

In addition to its retail operations, the Company is engaged

in wholesale marketing to grocery stores, mini-markets,

and institutions in the Greater Jerusalem area, and themarketing of dry goods that do not require refrigerated

transportation. For this purpose, the Company has a central

warehouse at HaUman Street – Talpiot, Jerusalem,

operates four trucks, and has six agents.

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The Company purchases fruit and vegetables for its

branches from Bikurei HaShikma Ltd – a subsidiary owned

jointly (50%) with Bikurei Sadeh Darom Shivuk Ltd.

New branches and their scheduled opening dates: Modi’inIshpro Industrial Area – second quarter 2012; Kadima –

third quarter 2012; Akko, Naharia, South Tel Aviv and

Atarot – fourth quarter of 2012; Ashkelon, Kfar Saba andBeit Shemesh – first quarter of 2013; Netivot and Petach

Tikva – second quarter of 2013.

Mobile virtual network operator (MVNO) license: The

Communications Minister granted a general license toRami Levy Shivuk Hashikma Communications Ltd (a

fully-owned subsidiary of the Company) on September 7,

2010, for providing Mobile Virtual Network Operator(MVNO) services. The Company’s strategy is to use the

chain’s points of sale, maximizing the Company’s

branding in the area of low prices and good service.

On February 15, 2011, the Company announced that RamiLevy Communications has entered a contractual

arrangement in an agreement to provide virtual network

cellular services through another network (“CellularServices Agreement”), with Pelephone Communications

Ltd (“Pelephone”). According to the terms of the

agreement, Pelephone will supply Rami LevyCommunications with the services required by Rami Levy

Communications to provide cellular services to its

customers under the RTN license, both within the Pre-Paidframework and within the Post-Paid framework. The

cellular services, to be provided by Rami Levy

Communications, will in the first stage be provided in thebranches of Company’s chain. In respect of these services,

Rami Levy Communications will pay subscription fees,

call minutes, and SMS fees to Pelephone, based on theactual usage of these services. Termination clauses will be

contained in the cellular services agreement, pursuant to

which, if and insofar as regulatory restrictions are lawfullyimposed on the contractual arrangement as stipulated in the

cellular services agreement, the contractual arrangement

between the parties will be terminated. The agreement’speriod is three and a half years, with an option to extend it.

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The Company estimates that no significant investments or

expense are expected as a result of this activity.

On December 5, 2011, the Company commenced the

commercial launch of the service, and as at the date of thefinancial statements, it serves approximately 56,000

customers. The revenue, expenses, and operating profits of

the communications company from communications

operations in the first quarter of 2012 are insignificant.

Entry into insurance sector – The Company commenced

a pilot in the third quarter of 2010 to provide insurance

services at the Shilat Branch. It is the Company’s intention,if the pilot succeeds, to set up a joint insurance agency

together with an insurance company, in order to operate the

agency in its branches, and to provide its customers withthe possibility of purchasing insurance via a legally

authorized insurance agency. The Company does not

expect to make material investments in this sector. In thefuture, the Company expects to receive its share of

insurance commissions within the framework of the

partnership in the insurance agency.

1.1.2 Online sales – The Company is operating an online salespilot via the Company’s website. During the pilot period,

the Company carries out online sales to its customers

located in the neighborhoods adjacent to the Company’sAyalon Branch. During the pilot, the Company is checking

the operation of the online and physical systems, and after

drawing conclusions, will gradually introduce the onlineservices to the rest of its customers across the country.

During the second half of 2011, the Company increased the

distribution area and the number of customers served bythe website. As of the date of this report, the website serves

approximately 20,000 customers and dispatches

approximately 8,500 orders per month. The Company plansto open three additional online sales centers in 2012 (Shilat,

Rosh Haayin and Netanya) and an additional sales center in

South Tel Aviv, with the opening of the South Tel Avivbranch. In the Company’s estimation, this increase in the

number of online sales centers, as aforesaid, is expected to

significantly increase the number of customers and orders

via the Company’s website.

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1.1.3 The Company ended the fourth quarter of 2012 with net

earnings totaling approximately NIS 25.2 million, in

contrast with NIS 23.1 million in the same quarter in 2011.

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1.2 Financial StatusThe Company’s consolidated financial statements include the

financial statements of the Company, the subsidiaries: Shikma

Markol Modi’in Ltd, Shikma Markol Machsanei Mazon Ltd, whichoperate the Modi’in and Achim Israel branches respectively,

commencing April 1, 2007, Rami Levy Communications Ltd, which

operates the cellular services, as well as 50% of the financialstatements of Bikurei Hashikma Ltd, which is proportionately

consolidated. The inter-company mutual transactions were canceled

in the consolidated financial statements.

Assets – The assets in the Statement of Financial Position as atMarch 31, 2012 totaled NIS 836.6 million. As at December 31, 2011

totaled NIS 683 million.

Current assets – The Company’s current assets as at March 31, 2012

totaled NIS 666.4 million, compared with NIS 552.6 million onMarch 31, 2011. The change is primarily attributed to growth in

Accounts Receivables items (credit cards) and inventory as a result

of increased activity (see Section 1.3 of this statement).

Non-current assets – Totaled, as at March 31, 2012, NIS 170.2million , compared with NIS 130.5 million on March 31, 2011. The

Company invested a total of approximately NIS 18.3 million net in

fixed assets in the first quarter of 2012. An amount of approximately

NIS 5 million for depreciation was recorded in this period.

Current liabilities – The Company’s current liabilities totaled NIS

585.5 million as at March 31, 2012, compared with NIS 456.2 million

as at March 31, 2011. The increase is primarily due to an increase insupplier balance as a result of increased activity and opening of new

branches.

Non-current liabilities – Totaled NIS 27.8 million as at March 31,

2012, compared with NIS 44.4 million as at March 31, 2011. Thereduction was mainly due to a payment of debentures principle in an

amount of approximately 18 million NIS.

Equity – The Company’s current equity as of March 31, 2012 totaled

NIS 222.3 million, compared with NIS 182.4 million NIS on March31, 2011, after distribution of a dividend of NIS 83 million in 2011

and NIS 15 million in the first quarter of 2012.

1.3 Operating Results

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The operating results for the first quarter of 2012 and the comparison

figures for the operating results for this period, are taken from the

statement of comprehensive Profit and Loss report for the years2011 and 2012, based on the consolidated financial statements of

Rami Levy Shivuk Hashikma Stores Chain 2006 Ltd. Operating

Expenses for the First Quarter of 2011 in contrast with the First

Quarter of 2010

Total Company Sales – The Company ended the first quarter of 2012

with net earnings totaling approximately NIS 636.7 million, in

contrast with NIS 475.6 million in the same quarter in 2011; anincrease of 33.9%. The increase is explained by an increase of

approximately 11.39% in turnover in identical stores, and the

opening of four new stores in Rosh Haayin, Netanya, Ashdod, andBeer Sheba that opened on April 12, 2011, on May 31, 2012, on

February 7, 2012 and on March 20, 2012 respectively.

The sales areas (not including warehouses) in the first quarter of

2012 were 32,626 m². In contrast with 27,178 m² (on average) in thefirst quarter of 2011. Sales per square meter in the first quarter of

2012 totaled NIS 19.52 thousand in contrast with NIS 17.5 thousand

in the first quarter of 2011.

Gross Company Profit – During the first quarter of 2012, gross profittotaled NIS 140.3 million, in contrast with NIS 115.9 million in the

parallel quarter of 2011; an increase of 21%. The percentage of gross

profits from sales in the first quarter of 2012 was 22.03%, in contrast

with 24.37% in the parallel quarter of 2011.

The Company, which increased its sales turnover by approximately

34% (in the present quarter vs. the parallel quarter last year) did so

while remaining committed throughout to the consumer to providethe least expensive prices, even at the expense of a decrease in gross

profits.

Under this policy, the Company believes that customer loyalty,

reflected in increased identical-store revenue (an increase of 11.4%),will help improve the trade agreements with suppliers and increase

gross profit but not at the expense of the consumer. The Company is

establishing its status among consumers as a company that sellsproducts in its branches at the lowest price. In this way, the

Company maintains the loyalty of its customers and its market

share. This is the basic principle that constitutes the main engine ofCompany growth and for strengthening its brand. The Company’s

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policies, as aforesaid, resulted in a significant increase in sales

during this quarter, a growth attributed to both the opening of new

stores and a marked increase in sales in identical stores (11.39%). Onthe other hand, the reduction in prices and the comprehensive

campaigns resulted, as aforesaid, in a reduction in the percentage of

gross profits in this quarter.

All along, the Company presents an increase in sales turnover,which allows it to improve its trading terms with suppliers and even

improve its gross profitability without affecting competitive prices,

quality, and service provided to customers.

The opening of new branches, improved terms of trade, andadvancement of payments to suppliers, whenever necessary, will

also improve gross profitability. The Company wishes to point out

that as of the writing of this report, it manages its tradingagreements, in which its purchasing power includes the purchasing

power of the Company together with the purchasing power of the

franchisee, who benefits from the Company’s terms of trade. As ofthe writing of this report, the Company’s purchasing power,

together with that of the franchisee, reflects a business with a sales

turnover exceeding NIS 2.8 billion a year. This fact helps theCompany and will help the Company improve its terms of trade

even under stiff competition to prevailing in market conditions,

without affecting the competitive prices that it offers its customers.

Sales, Marketing, Administrative and General Expenses – TotaledNIS 108.5 million in the first quarter of 2012, in contrast with NIS

85.6 million during the same quarter in 2011; an increase of 26.7%.

The percentage of the aforementioned expenses from sales

decreased from 18.00% in the first quarter of 2011 to 17.04% in the

first quarter of 2012.

Sales and Marketing Expenses – Totaled during the first quarter of

2012 to NIS 101.8 million, in contrast with NIS 76.9 million in 2011;

an increase of 32.41%. The percentage of the aforementionedexpenses from sales decreased from 16.17% in the first quarter of

2011 to 15.99% in the first quarter of 2011. The decrease in the

percentage of sales expenses is primarily attributed to the growth insales turnover and as part of Company policy to constantly improve

its operational efficiency.

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Administrative and General Expenses – Totaled during the first

quarter of 2012 approximately NIS 6.6 million in contrast with NIS

8.6 million in the first quarter of 2011. The percentage of theaforementioned expenses from sales decreased from -1.82% in the

first quarter of 2011 to - 1.04% in the first quarter of 2012. The

decrease in the rate of administrative and general expenses isexplained primarily by the lack of approval of bonuses to managers

in 2012 in contrast with bonuses in 2011.

Profit from Regular Operations– During the first quarter of 2012

totaled NIS 31.8 million, in contrast with NIS 30.3 million in the

same quarter of 2011; an increase of 4.8%.

The percentage of operating profits from sales decreased from a rate

of 6.38% in the first quarter of 2011 to 4.99% in the same quarter of

2012. The decrease in the percentage of operating profit is explained

by a reduction in the percentage of gross profit.

The operating profit before depreciation and interest EBITDA was

in the first quarter of 2012 NIS 36.8 million, in contrast with NIS 34.3

million in the same quarter of 2011; an increase of 7.4% that is

primarily attributed to the increase in operating profit.

The Company’s Net Financing Income – Totaled in the first quarter

of 2012 approximately NIS 2 million in contrast with the net

financing income of NIS 0.2 million in the same quarter of 2011. Thefinancing expenses are primarily attributed to interest and linkage of

index-linked bonds bearing an interest rate of 4.5%, in an amount of

NIS 80 million that were issued by the Company in 2007 (up to theperiod of the financial statements, one half of the principal of the

bonds had been paid). The financing revenues are primarily

attributed to interest on deposits and negotiable securities.

The Company’s Net Profit – totaled in the first quarter of 2012 NIS25.2 million, in contrast with NIS 23.1 million in the same quarter of

2011; an increase of 9.14%. The percentage of net profits from sales

decreased from 4.85% in the first quarter of 2011 to 3.95% in thesame quarter of 2012. The decrease in the percentage of the

Company’s net profit in the first quarter is primarily attributed to the

decrease in the percentage of operating profit.

Summary of operating results for the first quarter

NIS in thousands

Quarter 1 – 2012 Quarter 1 – 2011 2011

Percentage Amount Percentage AmountPercenta

ge AmountTotal Sales 636,741 475,603 2,222,181

Increase 33.88%

Gross profit 22.03% 140,261 24.37% 115,918 22.22% 493,670Increase 21%

Sales and marketingexpenses 15.99% 101,830 16.17% 79,904 15.28% 339,583Increase 32.41%

General and administrativeexpenses 1.04% 6,641 1.82% 8,634 1.39% 30,786Others - 56 158

Profit from RegularOperations 4.99% 31,790 6.38% 30,324 5.54% 123,078

Increase 4.83%

Financing revenues, net 2,021 186 -286

Net profit 3.95% 25,160 4.85% 23,053 4.24% 94,255Increase 10.68%

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Additional information on activity Additionalinformation on

activityNIS in thousands NIS in thousands

Quarter 1 – 2012 Quarter 1 – 2011 2011 2010

Percentage Amount Percentage Amount Percentage AmountOperating profit before

depreciation andfinancing EBIDTA 5.79% 36,837 7.21% 34,289 6.32% 140,445

Increase

Sales area in m² (average) 32,626 27,178 29,555

Sales per m² 19.52 17.50 75.19

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Year 2012 2011

Group of products Total revenues

(NIS in Thousands)

PercentageFrom Total

Revenues

Total Revenues

(NIS in Thousands)

Percentage From Total

Revenues

Groceries 124,147 19.50% 90,924 19.12%

Fruits and vegetables 79,829 12.54% 65,378 13.75%

Dairy products and

their substitutes

66,724 10.48% 53,033 11.15%

Data regarding revenues, revenue rate, and gross profit rate of groups

of products constituting more than 5% of total company revenues in

the first quarter of 2012 in contrast with the first quarter of 2011.

The estimated gross profit rate of the groceries, fruit and vegetables anddairy and substitutes product groups is not materially different from the

gross profitability of the products as a whole.1.2

Data on Turnover and Sales for the First Quarter of 2012 in Contrast

with the First Quarter of 2011

Turnover and sales 2012 – Percentage

change2011

NIS in

Thousands

NIS in

Thousands

Turnover per sq.m. in the

chain’s identical branches

20.35 11.39% 18.27

Sales per sq. m. in the

chain’s identical branches

(Estimate:3)

19.52 13.11% 17.26

Turnover of identical stores 553,069 11.39% 496,532

Sales of Identical Stores

(estimate)

530,569 13.11% 469,077

Sales per sq. meter (average) 19.52 11.52% 17.50

Turnover per m² (average) 20.34 9.83% 18.52

Turnover per employee4 202.79 4.25% 194.53

1. The Company does not prepare financial data for products groups in accordance with generally

accepted accounting principles. The gross profit data for the products groups are management

estimates only.

2 The estimate of the percentage of gross profits included over 80% of the products in the products

group. The percentage of gross profitability in each of the aforesaid groups of products is within

the range of 20% to 25%.

3 Since the Company does not prepare financial data for each branch in the chain in accordance

with generally accepted accounting principles, the sales figures of the same stores are company

management estimates only that are derived from the revenue figures of the same stores).

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The sales data are calculated as the difference between the total

consolidated turnover of the Company and the turnover of the franchisees,

plus the commissions paid by the franchisees to the Company.

Turnover and sales data for identical stores are data from stores that

operated before January 1, 2011.

The aforementioned data indicates an improvement in the Company’s

operating efficiency in the first quarter of 2012 in contrast with the first

quarter of 2011. The change is primarily attributed to an increase in theCompany’s sales in identical stores and from the opening of new branches

in the chain.

1.4 LiquidityThe balance of cash and cash equivalents on March 31, 2012 totaled

NIS 212.2 million. On March 31, 2011, the balance of cash and cash

equivalents totaled NIS 157 million.

1.5 Cash Flow from Current ActivitiesThe Company has a positive flow from current activities in the firstquarter of 2012, totaling NIS 82.4 million. During the first quarter of

2011, the flow from current activities was positive, totaling NIS 2.4

million. The increase in cash flow from current activities isprimarily attributed to the increase in supplier balances, inventory,

and customers. See Cash Flows from Current Activities – in the

Financial Statements.

Cash Flow from Investment Activities

The first quarter of 2012 recorded a positive flow from investmentactivities totaling NIS 13.9 million. This is largely attributed to the

sale of investments and short-term deposits.

During the first quarter of 2011, investment activity totaled NIS 43.7

million, mostly from investment in fixed assets and securities. Seecash flows from investment activities – in the Financial Statements

in Part 3 of this report.

1.6 Cash Flow from Financing Activities

4 Turnover data for an employee does not include employees working through employment

agencies.

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The Company’s financing activities in the first quarter of 2012

totaled NIS 0.1 million, and NIS 4 million in the first quarter of 2011.

See cash flows from financing activities – in the Financial

Statements in Part 3 of this report.

2. Description of Market Risks and Risk Management

2.1 The Company’s Chief Financial Officer and Comptroller, Mr. OferBaharel, is responsible for Company Risk Management, under the

supervision of Company CEO Mr. Rami Levi. Financing of the

Company’s current activities relies on supplier credit. TheCompany pays its suppliers in accordance with the existing

arrangements between the parties.

The Company invests the money available to it primarily in interest-

bearing deposits, short-term loans, financial funds, and grade bondsThe Company is exposed to index fluctuations due to the public

offering of index-linked bonds in the amount of NIS 80 million. The

Company’s subsidiary purchased in 2008 approximately NIS 17.6million (n.v.) of bonds that it issued, and as of the date of the

Statement of Financial Position, the subsidiary holds NIS 8,792,746

nominal value of Company bonds.

Company revenue is received in cash, credit cards, and checks. Therevenue in checks is guaranteed against a lack of coverage. During

the first quarter of 2012, there were no significant changes in

Company exposure to market risks and its management in relationto the Company’s statements in this area for the year ending

December 31, 2011.

Changes in the economic environment:

In the third quarter of 2008, the global markets experienced a

financial crisis that peaked with the collapse of internationalfinancial institutions and the nationalization of insurance companies

and banks. As a result of the global financial crisis, the global

economy recorded decreased growth, which affected the Israelimarket as well. During 2010 and in the first half of 2011, the world

economy showed a trend towards recovery from the financial crisis.

However, the ramifications of the crisis in the Euro bloc are stillbeing felt in the form of financial instability. The Israeli market

continues to grow although social and political developments in the

Middle East might affect economic activity. During the second half

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of 2011, Israel experienced social protests, largely due to living costs

and the demand for government reform.

One of the ramifications of the financial crisis was the continued

growth in market shares of private supermarket chains. The Groupbelieves that this trend can be attributed to, inter alia, a shift of

customers from chains that are not discount chains to less expensive

chains, something that increased as a result of the financial crisis,and subsequently an increase in sales at companies that specialize in

discount stores. Another effect of the financial crisis was reflected

in the transition from purchasing expensive brands to inexpensive

brands.

Listed below is a breakdown of bond payments based on their year

of payment (sums do not include linkage calculation of the April

2007 index):

Year Sum NIS in Millions

2012 172013 16.3

The Company has current assets and cash flows from current

activities that allow payment of said liabilities. The Company does

not have any other significant loans.

According to the Statement of Income presented as part of theFinancial Statements and the Chapter on Activity Results in this

Report, the Company showed a steady improvement in its activity

results in relation to the same period last year. The Company’sfinancial investment portfolio, as of the balance sheet date, is

primarily composed of shekel bank deposits and graded bonds.

The said portfolio is valued at NIS 229.6 million, as of the balance

sheet date.

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2.2 Tables on Sensitivity Tests to Sensitive Instruments, in

accordance with changes in market factors

Listed below are market risks that reflect the risk of changes in the

value of financial instruments that are affected by changes in

interest rates and security prices:

Interest Rate Risk

The Company is exposed to changes in the interest rates on deposits

and short-term investments.

(A) Sensitivity to interest ratesGain (Loss) from

ChangesFair

ValueNIS in

Millions

Gain (Loss) from Changes

2%increase

in interest

1%increase

in interest

1%decrease

in interest

2% decreasein interest

[1] NIS in millionsCash and

CashEquivalents

4.24 2.12 212.2 (2.12) (4.24)

Short-termInvestments

Parentcompany

(0.02) (0.01) (1.4) 0.01 0.02

Market Test to Changes in Inflation Rates

(B) Sensitivity to changes in the inflation rateGain (Loss) from

ChangesFair

ValueNIS in

Millions

Gain (Loss) from Changes

3%Increase

2%Increase

2%Decrease

3% Decrease

[1] NIS in millionsBonds (1.087) (0.73) (36.3) 0.73 1.087

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Market Test to Changes in Trading Rates of Negotiable

Securities

(C) Market Test to Changes in Trading Rates of Negotiable SecuritiesGain (Loss) from

ChangesFair

ValueNIS in

Millions

Gain (Loss) from Changes

10%Increase

5%Increase

5%Decrease

10% Decrease

[1] NIS in millionsNegotiableSecurities

1.74 0.87 17.4 (0.87) (1.74)

Minimum Wage Risks

Listed below are the risks that reflect changes in minimum wage:

(D) Sensitivity to minimum wageGain (Loss) from

ChangesGain (Loss) from Changes

10%Increase

inMinimum

Wage

5%Increase

inMinimum

Wage

AnnualSalary

5%Decrease

inMinimum

Wage

10% Decreasein Minimum

Wage

[1] NIS in millionsPayrollexpenses

(NIS 5.8million)

(NIS 2.9million)

NIS 58.6million

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2.3 Linkage basis Report

Balance on March 31, 2012 (NIS in Thousands Reported)

Israeli currency Foreigncurrency

Total

Non-linked

Index-linked

Cash and cashequivalents

212,184 212,184

Short-terminvestments

17,407 17,407

Tradereceivables

257,334 257,337

Accountsreceivable

11,858 11,858

Total assets 498,783 498,783

Short-termcredit frombanks

72 72

Suppliers andserviceproviders

503,348 503,348

Accountspayable

48,390 48,390

Currentmaturity ofbonds

18,205 18,205

Bonds 18,081 18,081Employeeliabilities

9,698 9,698

TotalLiabilities

561,508 36,286 0 0 597,794

Totaldifference

- 62,725 - 36,286 - 99,011

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3. Corporate governance

3.1 Disclosure regarding Process of Approving Financial

Statements

The Company’s Board of Directors is the organ responsible for

overall control in the Company and it is the entity that discusses andapproves the Company’s financial statements, after the Board

Members receive a draft of the financial statements several days

before the meeting, as well as the Balance Committee’srecommendations, which is a dedicated committee for reviewing the

said financial statements as stipulated by the Companies

Regulations (Instructions and Terms for the Process of ApprovingFinancial Statements) 5770 - 2010 (“The Balance Committee”).

Serving on the Company’s Board of Directors, as of the date of

approval of the statements, are six directors, two of whom areexternal directors. The Company’s Board of Directors, in its current

composition, includes three directors with accounting and financial

skills.

The Company’s Audit Committee also acts as the Balance

Committee, which is composed of three members:

Mr. Uri Zazon – serves as External Director in the Company;

and as an independent director, serves as Chairman of the

Balance Committee;

Mr. Erez Huja – serves as External Director in the Company

and as an independent director;

Mr. Yaakov Avisar – serves as External Director in the

Company and as an independent director;

Mr. Uri Zazon, Mr. Erez Huja, and Mr. Yacov Avisar have financialand accounting skills. Mr. Uri Zazon, Mr. Erez Huja, and Mr.

Yacov Avisar submitted to the Company an affidavit regarding their

financial and accounting skills for the appointment as directors inthe Company in accordance with Regulation 3 of the Companies

Regulation (Terms and Tests for Director with Financial and

Accounting Skills and for Director with Professional Competency)5766 - 2005 and an affidavit regarding their ability to read and

understand financial statements for their appointment as members

of the Balance Committee. For a list of the skills, education andexperience of the members of the Balance Committee, based on

which and based on the said affidavits, the Company views them

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has having the ability to read and understand financial statements,

see Regulation 26 of Chapter D of the Financial Statements for 2011

- Additional Information about the Company.

On May 21, 2012, the Balance Committee convened a meeting towhich were invited, in addition to the three Balance Committee

members, internal auditor Mr. Ofer Sossover, legal advisors Mr.

Ran Efraty and Ms. Inbal Saidof-Barashi, and Chief FinancialOfficer Mr. Ofer Baharel, as was present CPA Meirav Kaplan from

the office of the company’s auditors. Draft financial statements and

additional incidental data to the Company’s financial statementswere submitted to the Balance Committee. During the meeting, the

Balance Committee reviewed the main points of the financial

statements. Material issues and assessments in the financialstatements were presented as were critical estimates that were

implemented in the financial statements. In addition, data was

presented for clarification of the aforementioned statistics. Theaccountant expressed his opinion about the financial statements.

The Balance Committee examined and discussed, inter alia, the said

valuations and estimates that were made, as previously mentioned,on the internal audits related to the financial statements, on the

integrity and fair disclosure in the financial statements, on the

accounting policies that were adopted and on the accountingtreatment implemented in the Company’s material affairs. Also

covered during the meeting, were effective internal control

processes in the Company, including internal controls for financialreporting in the Company. Participants at the meeting who were not

Balance Committee members, were available to Committee

members to answer any question or provide any clarificationregarding issues discussed in the meeting. Balance Committee

members discussed these issues and after having reviewed them,

formulated their recommendations on said issues that were then

delivered in writing to the Board of Directors.

Afterwards, on May 23, 2012, the Board of Directors convened to

review the main points of the financial statements. The material

issues and assessments were presented in the financial statements aswere the critical estimates that were implemented in the financial

statements, while focusing on various details that were submitted as

incidental material to the directors to clarify the mentioned data.Participating in the meeting were all members of the Board of

Directors, including the external directors. Also invited to attend

-22-

and did attend were the Company’s auditors (CPA Meirav Kaplan

from Shalvi, Kop & Co.), Chairman of the Board of Directors (Mr.

Mordechai Berkowitz) and Company CEO (Mr. Rami Levi), ChiefFinancial Officer (Mr. Ofer Baharel), and the Company’s legal

advisors (Adv. Ran Efraty and Adv. Inbal Saidof-Barashi). The

officers gave, as needed and as requested, a review of the variousissues pertaining to the financial statements, answered questions

and supplied clarifications, including material issues that arise in the

financial statements.

Following the Board of Directors discussion of the financialstatements, including Balance Committee recommendations, the

Company’s Board of Directors approved the financial statements

for the first quarter of 2012.

The Company’s Board of Directors determined that in theirestimate, the Balance Committee recommendations were delivered

in reasonable time before the Board of Directors meeting, and that 2

business days is sufficient time to review the Balance Committee’srecommendations under the circumstances of the matter and in light

of the scale and complexity of the recommendations.

4. Disclosure regarding the corporation’s liability certificates

4.1 On May 31, 2007, (as a part of a package issue) the company issued2,000,000 ordinary shares each with a nominal value of NIS 0.01,

bonds (Series A) with a nominal value of NIS 80,000,000, and

1,500,000 option warrants (Series 1) to the public for a net total

consideration, after issue expenses, of NIS 164,408 thousand.

4.2 The bonds, recorded according to name, at a nominal value of NIS

1, bearing annual interest at a rate of 4.5%, linked (principal and

interest) to the CPI published for April 2007, are redeemable in 4equal annual payments on May 30 in each year from 2010 to 2013

(inclusive). The interest in respect of the bonds will be paid from

2008 to 2013 (inclusive).

4.3 The Company’s subsidiary purchased in 2008, NIS 17.59 million(n.v.) of the bonds that were issued, a fact that reduces the

Company’s liability for redemption of the bonds.

4.4 On May 30, 2011, the Company made the second payment of NIS

20,000,000 par value along with interest and linkage.

4.5 Information regarding the liability certificates in the volume:

Series DateAllocation

Par valueOn the

IssuanceDate (NIS

thousands)

The parvalue on

theReportingDate (NIS

inThousands)

The parvalue on

theReporting

Date,includingLinkage(NIS in

Thousands)

Sum of theinterestaccrueduntil the

ReportingDate (NIS

inThousands)

Fair Value(NIS

thousands)

StockExchange

Value(NIS

thousands)

Type ofInterest

InterestRate

Date ofPrincipalPayment

Date ofInterestPayment

Number ofpayments

forprincipal

redemption

Type ofLinkage

Are thebonds

convertible?

Does thecompanyhave theright to

earlyredemption

or forcedconversion?

MaalotRating

SeriesA’

31

May

2007

80,000 40,000 46,668 1,750 49,552 49,552 Interest

Fixed

4.5% Four

Payments

Equal onDay

30/05

in each

of theyears

until 2010

2013

One

a Year

on Day

30/05

in each

of theyears

until2008

2013

4 Index

Price

Consumer

No - A+/Stable5

The Board of Directors expresses its appreciation of Company customers, theCompany’s management, and the staff of employees for their dedicated work and

contribution in promoting the Company

May 23, 2012

Mordechai Berkowitz Rami LeviChairman of the Board of

DirectorsGeneral Manager and

Director

Rami Levy Chain Stores HashikmaMarketing 2006 Ltd.

Summary of the Unaudited InterimConsolidated Financial Statements

For the Three Months

Ending on March 31, 2012

1

Rami Levy Chain Stores Hashikma Marketing 2006 Ltd.

Contents

Page

Independent Auditors Report 2

Interim Consolidated Financial Statements:

Summary of Consolidated Statements of Financial Status 3-4

Summary of Consolidated Comprehensive Profit and Loss Statements 5

Summary of Consolidated Statements of Changes in Equity 6

Summary of Consolidated Cash Flow Statements 7-8

Notes to the Consolidated Financial Statements 9-10

2

Shalvi, Kop & Co.Chartered Accountants

Jerusalem, 23 May2012

Independent Auditors Report for Shareholders ofRami Levy Chain Stores Hashikma Marketing 2006 Ltd.

IntroductionWe have reviewed the attached financial information for Rami Levy Chain StoresHashikma Marketing 2006 Ltd. and its subsidiaries (hereinafter: “The Group”),including the Summary Consolidated Statements of Financial Status as of March 31,2012 and the Summary of Consolidated Statements for Comprehensive Profit and Loss,Changes in Equity, and Cash Flows for the three months ending on that date.

The Company’s Board of Directors and Management are responsible for preparing andpresenting the financial information for this interim period in accordance withInternational Accounting Standard IAS34, “Interim Financial Reporting,” and areresponsible for the preparing financial information for this interim period in accordancewith Chapter D of the Securities Regulations (Periodical and Immediate Reports) 5730-1970. Our responsibility is to express a conclusion on the financial information for thisinterim period based on our review.

We did not review the financial information in the summary interim period for acompany that was consolidated proportionately, the assets of which that are included inthe consolidation, and constitute approximately 5.25% of all of the consolidated assetsas at March 31, 2012. Those revenues are included in the consolidation formingapproximately 6.46% of total consolidated revenues for the three months ending on thatdate. The summary of the financial information for the interim period of that companywas reviewed by other auditors whose reports were furnished to us, and in our opinion,insofar as it relates to the financial information in respect of that company, is based onthe reports by the other auditors.

The Review ScopeWe conducted our review in accordance with Review Standard 1 of the Institute ofCertified Public Accountants in Israel, “Review of Financial Information for InterimPeriods Performed by the Independent Auditor of the Entity.” The review of financialinformation for interim periods consists of making inquiries, primarily of personsresponsible for financial and accounting matters, and applying analytical and otherreview procedures. A review is substantially less in scope than an audit conducted inaccordance with generally accepted auditing standards in Israel and consequently doesnot enable us to obtain assurance that we would become aware of all significant mattersthat might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

3

Based on our review and on the review reports of other auditors, nothing has come toour attention that causes us to believe that the aforementioned financial information wasnot prepared, in all material respects, in accordance with International AccountingStandard IAS34.

In addition to the stipulations in the previous paragraph, based on our review and on thereview reports of other auditors, nothing has come to our attention that causes us tobelieve that the aforementioned financial information does not meet, in all materialrespects, the instructions of the disclosure provisions of Chapter D of the SecuritiesRegulations (Periodic and Immediate Reports) 5730-1970.

Shalvi, Kop & Co.Chartered Accountants

Amot House, 11 Kiryat Meida St. Har Hotzvim, Jerusalem 91450,Tel: 02-5485000; Fax: 02-5485001

4

Rami Levy Chain Stores Hashikma Marketing 2006 Ltd.

Summary of Consolidated Statements of Financial Status

(NIS thousands)

ForMarch 31

ForDecember

312012 2011 2011

(unaudited) (audited)Current Assets

Cash and cash equivalents 212,184 156,966 115,989

Short-term investments 17,407 85,551 43,682

Current receivable taxes 19,940 6,258 20,127

Accounts Receivables 257,334 199,672 235,354

Debtors and net receivables 11,858 3,338 7,974

Inventory 147,639 100,767 91,499

666,362 552,552 514,625

Non-current Assets

Net Fixed Assets 162,046 122,719 148,828

Intangible assets 1,144 529 1,114

Long-term prepaid expenses 1,486 1,522 1,555

Deferred taxes 5,559 5,703 5,686

170,235 130,473 157,183

836,597 683,025 671,808

5

The attached notes constitute an integral part of the consolidated financial

statements

Rami Levy Chain Stores Hashikma Marketing 2006 Ltd.

Summary of Consolidated Statements of Financial Status

(NIS thousands)

ForMarch 31

ForDecember 31

2012 2011 2011(unaudited) (audited)

Current Liabilities

Short-term credit from banking

corporations

72 2,210 187

Current maturity of bonds 18,205 17,908 18,205

Liabilities to suppliers and service

providers

503,348 352,193 376,693

Current Payable Taxes 493 156 405

Accounts Payable & Credit Balances 48,390 48,726 36,023

Dividends to be paid 15,000 35,000 --

585,508 456,193 431,513

Non-current Liabilities

Bonds 18,081 35,500 18,036

Liabilities in respect of employee

benefits

9,698 8,888 9,109

27,779 44,388 27,145

Equity Capital

Share capital 135 132 135

Receipts in respect of option warrants -- 1,039 --

Premium on shares 149,197 140,658 149,197

Retained Earning 73,978 40,615 63,818

6

223,310 182,444 213,150

836,597 683,025 671,808

May 23, 2012

Date of authorizing Rami Levy – Mordecai Berkowitz -Ofer Baharel –

The financial statements CEO and Director Chairpersonof the Board of Directors Financial Manager and Comptroller

7

The attached notes constitute an integral part of the consolidated financial

statementsRami Levy Chain Stores Hashikma Marketing 2006 Ltd.

Summary Consolidated Statements on Comprehensive Profit and Loss

(NIS thousands)

For three monthsending

March 31For the year ending

December 312012 2011 2011

(unaudited) (audited)

Sales 636,741 475,603 2,222,181

Cost of Sales 496,480 359,685 1,728,511

Gross Earnings 140,261 115,918 493,670

Sales and Marketing ExpensesGeneral and Administrative Expenses

101,830 6,641

76,904 8,634

339,583 30,786

Other Expenses -- 56 223

Earnings from Regular Operations 31,790 30,324 123,078

Financing ExpensesFinancing Revenues

(598) 2,619

(1,491) 1,677

(6,943) 6,657

Loss before Taxes on Income 33,811 30,510 122,792

Taxes on Income 8,651 7,458 28,537

Net Income 25,160 23,052 94,255

Comprehensive Earnings 25,160 23,052 94,255

Net earnings per Share (1 sharewith a nominal value of NIS 0.01)

Basic Earnings: 1.867 1.736 7.03

Diluted Earnings: -- 1.718 --

8

Number of Shares used to calculate

Earnings

Basic per Share:

13,478,769 13,281,086 13,406,795

Number of Shares used to Calculate

Earnings

Diluted Earnings per Share

-- 13,415,049 --

9

The attached notes constitute an integral part of the consolidated financial

statements

Rami Levy Chain Stores Hashikma Marketing 2006 Ltd.

Summary Consolidated Statements of Changes in Equity

(NIS thousands)

ShareCapital

Receipts in

respectof

OptionWarra

nts

Premiumon

Shares

RetainedEarningUnappropriated

Total

(unaudited)

Balance as at January 1,2012

135 -- 149,197 63,818 213,150

Comprehensive earnings forthree monthsending March 31, 2012

-- -- -- 25,160 25,160

Dividends that were declared -- -- -- (15,000) (15,000)

Balance on March 31, 2012 135 -- 149,197 73,978 223,310

ShareCapital

Receipts in

respectof

OptionWarra

nts

Premiumon

Shares

RetainedEarningUnappropriated

Total

(unaudited)

Balance on January 1, 2011 132 1,550 135,899 52,563 190,144

Comprehensive earnings forthree monthsending March 31, 2011

-- -- -- 23,052 23,052

Realization of share optionswarrants

* (511) 4,759 -- 4,248

Dividends that were declared -- -- -- (35,000) (35,000)

10

Balance on March 31, 2011 132 1,039 140,658 40,615 182,444

ShareCapital

Receipts in

respectof

OptionWarra

nts

Premiumon

Shares

RetainedEarningUnappropriated

Total

(audited)

Balance on January 1, 2011 132 1,550 135,899 52,563 190,144

Comprehensive earnings for2011

-- -- -- 94,255 94,255

Realization of share optionswarrants

3 (1,550) 13,298 -- 11,751

Dividend paid -- -- -- (83,000) (83,000)

Balance on December 31,2011

135 -- 149,197 63,818 213,150

*A sum less than NIS 1,000

11

The attached notes constitute an integral part of the consolidated financial

statements

Rami Levy Chain Stores Hashikma Marketing 2006 Ltd.

Summary Consolidated Statements of Cash Flows

(NIS thousands)

For three monthsending

March 31For the year

endingDecember 31

2012 2011 2011(unaudited) (audited)

Cash Flow from Current Activities:Net Income 25,160 23,052 94,255

The required adjustments for presentingthe cash flow from current activities:

Adjustment for Profit and Loss EntriesNet interest expenditures (revenue) (771) (277) (4,064)Depreciation and Amortization 5,047 3,965 17,367Loss (Earnings) from realizing a fixed asset -- 56 223Amortization of discounting an increase(decrease) in bond values

45 527 1,412

Decrease (increase) in the value of securitiesvalued at fair value through profit or loss (1,238) (380) 3,209Decrease (Increase) in deferred taxes 127 (442) (425)Taxes on income (not including deferredtaxes)

8,523 7,899 28,962

Decrease (Increase) in assets and liabilitiesin respect of employee benefits

589 187 408

12,322 11,535 47,092

Changes in the assets and liabilitiesentries:Decrease (Increase) in customers (21,980) 897 (34,785)Decrease (Increase) in Accounts Receivableand Debit Balances

(7,121) (1,213) (2,612)

Decrease (Increase) in Inventory (56,140) (32,992) (23,724)Decrease (Increase) in prepaid long-termexpenses

69 (129) (162)

Increase (Decrease) in liabilities to suppliersand service providers

126,655 3,004 26,983

Increase (Decrease) in Accounts Payable 10,530 7,652 (3,259)

12

52,013 (22,781) (37,559)

Cash paid and received during the yearfor:Interest paid (5) (14) (2,467)Interest received 1,174 907 5,619Taxes paid (12,155) (10,316) (47,373)Taxes received 3,918 -- 2,844

(7,068) (9,423) (41,377)

Net cash derived from current activities 82,427 2,383 62,411

The attached notes constitute an integral part of the consolidated financialstatements

13

Rami Levy Chain Stores Hashikma Marketing 2006 Ltd.

Summary Consolidated Statements of Cash Flows

(NIS thousands)

For three monthsending

March 31For the year

endingDecember 31

2012 2011 2011(unaudited) (audited)

Cash flows from investment activities:

Proceeds from realizing (acquiring)securities valued at fair value through netprofit and loss

12,962 (29,938) 13,893

Investments in Short-term Deposits 14,551 -- (5,551)Repayment (Granting) of loan from (to) theparent company

4,665 -- (3,587)

Proceeds from realizing fixed assets -- 36 143Acquisition of fixed assets (18,240) (13,628) (53,408)Investment in intangible assets (55) (200) (269)Net cash derived from (used for)investment activities

13,883 (43,730) (48,779)

Cash flow from financing operations:Receipt (repayment) of loans from theparent company

-- 384 --

Receipt (Repayment) of short-term creditfrom banking corporations

(115) (587) (2,610)

Proceeds from realization of share optionwarrants

-- 4,248 11,751

Redemption of bonds -- -- (18,052)Dividend paid -- -- (83,000)

Net cash derived from (used for)financing operations

(115) 4,045 (91,911)

Increase (decrease) in cash and cashequivalents

96,195 (37,302) (78,279)

Cash and cash equivalent balance at thebeginning of the period

115,989 194,268 194,268

Cash and cash equivalent balance at the endof the period

212,184 156,966 115,989

Non-cash Material Operations

14

In March 2012, a dividend announcement was made amounting NIS 15 million to be paid inApril 2012.

In March 2011, an announcement was made of dividends amounting to NIS 35 million to bepaid in April 2011.

Supplier credit against other assets for March 31, 2012, and for December 31, 2011, totals NIS521 thousand.

15

The attached notes constitute an integral part of the consolidated financialstatements

Rami Levy Chain Stores Hashikma Marketing 2006 Ltd.

Notes to the Consolidated Financial Statements

(unaudited)

Note 1 – The Reporting Entities

Rami Levy Chain Stores Hashikma Marketing 2006 Ltd. (hereinafter: “The Company”) isa company that resides in Israel. The consolidated financial statements as at March 31,2012, include those of the company, its subsidiaries, and companies under joint control(hereinafter jointly: “The Group”). The group operates a chain of supermarkets in Israel.As of December 2011, the consolidated company provides mobile radio telephone servicesin another network (MVNO). The company's securities are listed on the Tel Aviv StockExchange (TASE).

Note 2 - Basis for Preparing the Financial Statements

a. An affidavit on complying with International Financial Reporting Standards and theformat for preparation of interim statements.A summary of the interim consolidated statements was prepared in compliance with IAS-34– Interim Financial Reporting and in accordance with the disclosure requirements ofChapter D of the Securities Regulations (Periodic and Immediate Reports) 5730 - 1970.Interim financial statements do not include all of the information required in full annualreports. These statements should be reviewed along with the financial statements for theyear ending December 31, 2011.

The interim consolidated statements were approved for publication by the Group's Board ofDirectors on March 23, 2012.

b. The use of estimates and judgmentsIn preparation of the financial statements in accordance with the IFRS, Companymanagement had to use reasoning and evaluations, estimates and assumptions that affectimplementation of the policies and the sums of the assets and liabilities, revenue andexpenses. It must be clarified that the actual results might differ from these estimates.

The estimates and judgments used by management to implement accounting policies and inpreparing the interim financial statements were identical to those used in preparing theconsolidated financial statements for December 31, 2011.

16

Rami Levy Chain Stores Hashikma Marketing 2006 Ltd.

Notes to the Consolidated Financial Statements

(unaudited)

Note 3 – The principles of the accounting policy

The Company’s accounting policies in the summary of these interimconsolidated statements were consistently applied in the implementation ofthe annual financial statements published by the Company for the day andyear ending December 31, 2011.

New Standards and Interpretations Not YetAdopted

New standards and amendments to other existing standards that are not yetin effect were listed in the Group’s annual financial statements for the year2011. The Group began reviewing the effects of implementing the notedstandards without any intention for early adoption.

Note 4 – Dividends

On March 19, 2012, the Company’s Board of Directors decided todistribute dividends totaling NIS 15 million. The dividend was paid onApril 8, 2012.

Note 5 – Seasonality

The Company’s business results in the retail sector are affected byseasonality due to consumer conditions of the market around the holidaysin Israel. Likewise, the balances in the balance sheet due to inventory,customers, and suppliers are also affected.