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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

oREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
(g)
OF THE SECURITIES EXCHANGE ACT OF 1934

OR

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
December 31, 2004

OR

oTRANSITION REPORT PURSUANT TO SECTION  13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from ____________ to ______________

Commission File No. 0-29256

G.
WILLI-FOOD INTERNATIONAL LTD.(Exact name of Registrant as specified in its charter
and translation of Registrants name into English)

Israel(Jurisdiction of incorporation or
organization)3 Nahal Snir St., Northern
Industrial Zone, Yavne, 81224, Israel(Address of principal executive offices)

Securities registered or to be registered pursuant to Section
12(b) of the Act:None

Securities registered or to be registered pursuant to Section
12(g) of the Act:

Ordinary Shares, NIS 0.10 par value per share(Title of Class)

Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act:None

Indicate
the number of outstanding shares of each of the issuers classes of capital or
common stock as of the close of the period covered by the Annual Report:

The
registrant had 8,615,000 outstanding ordinary shares, NIS 0.10 nominal
value per share as of December 31, 2004.

Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:

Yes x   No 
o

Indicate
by check mark which financial statement item the Registrant has elected to
follow:

Item 17. x   Item
18. o

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TABLE OF CONTENTS

|                                                                |                                                                                |     
|--------------------------------------------------------------- | ------------------------------------------------------------------------------ | ----
|                                                                |                                                                                | Page
|                                                                |                                                                                |     
|                                                                |                                                                                |     
|PRESENTATION OF INFORMATION                                     | 1                                                                             
|                                                                |                                                                               
|CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS | 1                                                                             
|                                                                |                                                                               
|PART
  I                                                        |                                                                                | 2   
|                                                                |                                                                                |     
|ITEM 1.                                                         | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
  AND ADVISORS                        | 2   
|                                                                |                                                                                |     
|ITEM 2.                                                         | OFFER STATISTICS AND EXPECTED TIME TABLE                                       | 2   
|                                                                |                                                                                |     
|ITEM 3.                                                         | KEY INFORMATION                                                                | 2   
|                                                                |                                                                                |     
|ITEM 4.                                                         | INFORMATION OF THE COMPANY                                                     | 6   
|                                                                |                                                                                |     
|ITEM 5.                                                         | OPERATING AND FINANCIAL REVIEW AND
  PROSPECTS                                 | 20  
|                                                                |                                                                                |     
|ITEM 6.                                                         | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                     | 30  
|                                                                |                                                                                |     
|ITEM 7.                                                         | MAJOR SHAREHOLDERS AND RELATED PARTY
  TRANSACTIONS                            | 39  
|                                                                |                                                                                |     
|ITEM 8.                                                         | FINANCIAL INFORMATION                                                          | 41  
|                                                                |                                                                                |     
|ITEM 9.                                                         | THE OFFER AND LISTING                                                          | 43  
|                                                                |                                                                                |     
|ITEM 10.                                                        | ADDITIONAL INFORMATION                                                         | 45  
|                                                                |                                                                                |     
|ITEM 11.                                                        | QUANTITATIVE AND QUALITATIVE DISCLOSURES
  ABOUT MARKET RISK                   | 47  
|                                                                |                                                                                |     
|ITEM 12.                                                        | DESCRIPTION OF SECURITIES OTHER THAN EQUITY
  SECURITIES                       | 47  
|                                                                |                                                                                |     
|PART
  II                                                       |                                                                                | 48  
|                                                                |                                                                                |     
|ITEM 13.                                                        | DEFAULTS, DIVIDEND ARREARAGES AND
  DELINQUENCIES                              | 48  
|                                                                |                                                                                |     
|ITEM 14.                                                        | MATERIAL MODIFICATIONS TO THE RIGHTS OF
  SECURITY HOLDERS AND USE OF PROCEEDS | 48  
|                                                                |                                                                                |     
|ITEM 15.                                                        | CONTROLS AND PROCEDURES                                                        | 48  
|                                                                |                                                                                |     
|ITEM 16.                                                        | [RESERVED]                                                                     | 48  
|                                                                |                                                                                |     
|ITEM 16A.                                                       |  AUDIT COMMITTEE FINANCIAL EXPERT                                             | 48  
|                                                                |                                                                                |     
|ITEM 16B.                                                       |  CODE OF ETHICS                                                               | 48  
|                                                                |                                                                                |     
|ITEM 16C.                                                       |  PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       | 49  

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Table of Contents
(continued)
Page 2

|          |                                                                             |   
|--------- | --------------------------------------------------------------------------- | --
|ITEM 16D. |  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                | 49
|          |                                                                             |   
|ITEM 16E. |  PURCHASES OF EQUITY SECURITIES BY THE COMPANY AND AFFILIATED
  PURCHASERS | 49
|          |                                                                             |   
|PART III  |                                                                             | 50
|          |                                                                             |   
|ITEM 17.  | FINANCIAL STATEMENTS                                                        | 50
|          |                                                                             |   
|ITEM 18.  | [RESERVED]                                                                  | 50
|          |                                                                             |   
|ITEM 19.  | EXHIBITS                                                                    | 51

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PRESENTATION OF INFORMATION

In this Annual Report, references
to the Company, we and us refer to G. Willi-Food International Ltd. and
its consolidated subsidiaries.

The Company presents its
consolidated financial statements in New Israeli Shekels, the currency of the
State of Israel.  Unless otherwise
specified or the context otherwise requires, references to $, US$,
Dollars, USD and U.S. Dollars are to the United States dollars and
references to NIS are to New Israeli Shekels.

Solely for the convenience
of the reader, this Annual Report contains translations of certain NIS amounts
into U.S. Dollars at specified rates. 
These translations should not be construed as representations that the
translated amounts actually represent such dollar or NIS amounts, as the case
may be, or could be converted into U.S. dollars or NIS as the case may be, at
the rates indicated or at any other rate. 
Therefore, unless otherwise stated, the translations of NIS into U.S.
dollars have been made at the rate of NIS 4.308 = $ 1.00 the representative
exchange rate on December 31, 2004.

CAUTIONARY STATEMENT WITH
RESPECT TO FORWARD-LOOKING STATEMENTS

Certain of the statements
contained in this Annual Report that are not historical facts, including,
without limitation, certain statements made in the sections hereof entitled
Information of the Company, Dividends, Operating and Financial Review and
Prospects, and Quarantitative and Qualitative Disclosure of Market Risk are
statements of future expectations and other forward-looking statements that are
based on managements current views and assumptions and involve known and
unknown risks and uncertainties that could cause actual results, performance or
events to differ materially from those expressed or implied in such
statements.  Actual results, performance
or events may differ materially from those in such statements due to, without
limitation,

|  |                                                                                                                       
|- | ----------------------------------------------------------------------------------------------------------------------
| | changes in general
  economic conditions, including in particular economic conditions in the
  Companys core markets,
| | changes affecting interest
  rate levels,                                                                             
| | changes affecting currency
  exchange rates, including the NIS/U.S. dollar exchange rate,                             
| | increasing levels of
  competition in Israel and other markets in which we do business, including
  emerging markets, 
| | changes in laws and
  regulations,                                                                                    
| | regulatory changes
  relating to the food distribution industry,                                                      
| | changes in the policies of
  central banks and/or foregoing governments, and                                          
| | general competitive
  factors, in each case on a global, regional and/or national basis.                              

The Company is under no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information or for any other reason.  See Item 3:  Key Information-Risk factors and
Item 5:   Operating and Financial Review and Prospects
 Results of operating.

Page 1

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PART
I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIME TABLE

Not applicable.

ITEM 3.  KEY INFORMATION

A.   SELECTED
FINANCIAL DATA

The
following selected consolidated financial data for the years ended
December 31, 2004, 2003, 2002, 2001 and 2000 have been derived from the
consolidated financial statements of the Company and notes included in those
statements. These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in Israel (Israeli
GAAP).  Israeli GAAP, as applicable to
the financial statements are, in all material respects, substantially identical
to generally accepted accounting principles in the United States (US GAAP),
except for the accounting recognition of the effects of inflation on the
financial statements, until December 2003 (see Note 2C of the Notes of the
Companys consolidated financial statements), and except for presentation of cash
flows.  Reference is made to Notes 2 and
13 of the Notes of the Companys consolidated financial statements for a
description of the significant differences between Israeli GAAP and US GAAP.

The
Companys consolidated financial statements for each of the five years ended as
of December 31, 2004 have been audited by Brightman Almagor & Co.
independent certified public accountants and a Member Firm of Deloitte Touche
Tohmatsu, whose report with respect thereto appears in the consolidated
financial statements included in this report. 
The selected consolidated financial data set forth below should be read
in conjunction with Item 5: Operating And Financial Review And Prospects,
the consolidated financial statements and notes thereto for the Company and the
other financial information included in this annual report.

The
Company maintains its accounts and presents its financial statements in New
Israeli Shekels (NIS), adjusted for changes in the general purchasing power
of the Israeli currency as measured by changes in the Israeli Consumer Price
Index (CPI) and compiled in the manner explained in Note 2 of the Notes to
the Companys consolidated financial statements.  All references in this report to dollars or USD
are to United
States dollars.  For convenience
purposes, all financial data presented in this annual report that is stated in
USD has been translated into USD using the representative exchange rate as of
December 31, 2004 which was NIS 4.308 = USD 1.00.

Recent Exchange Rates of U.S. dollars per NIS

The
table shows the high and low exchange rate of U.S. dollars per NIS for the last
six months.

|                                    | High  |  | Low  
|----------------------------------- | ----- |  | -----
|                                    |       |  |      
|December 2004                       | 4.374 |  | 4.308
|January 2005                        | 4.414 |  | 4.308
|February 2005                       | 4.392 |  | 4.357
|March 2005                          | 4.379 |  | 4.302
|April 2005                          | 4.395 |  | 4.360
|May 2005                            | 4.416 |  | 4.348
|June 2005 (through June
  27, 2005) | 4.541 |  | 4.405

Page 2

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The
representative exchange rate for NIS on December 31, 2004 was NIS 4.308 = $1.00
and the representative exchange rate for NIS on June 27, 2005 was NIS 4.541 =
$1.00.

The
average exchange rate of NIS to one U.S. dollar was 4.482 for the year ended
December 31, 2004, 4.548 for the year ended December 31, 2003, 4.738 for the
year ended December 31, 2002, 4.206 for the year ended December 31, 2001, and
4.077 for the year ended December 31, 2000.

CONSOLIDATED
STATEMENT OF OPERATIONS
(In thousands except per share data)
(NIS)

|                                                            | Years ended December 31
|----------------------------------------------------------- | -----------------------
|                                                           
|                                                            |                        
|                                                            |                        
|                                                            |                        
|                                                            |                        
|                                                           
|Sales                                                       |                        
|Cost
  of Sales                                             |                        
|Gross
  Profit                                              |                        
|Selling
  Expenses                                          |                        
|General
  and administrative expenses                       |                        
|Total
  Operating expenses                                  |                        
|Operating
  income                                          |                        
|Financial
  income (expenses), net                          |                        
|Other
  income, net                                         |                        
|Income
  before taxes on income                             |                        
|Taxes
  on income                                           |                        
|Net
  income                                                |                        
|Earnings
  per ordinary share data Basic earnings per share |                        
|Shares
  used in computing earnings per ordinary shares     |                        

BALANCE SHEET
DATA
(In thousands)
(NIS)

|                            |                   |      |         |      |  |        |  |      |         |      |  |        |  |     |        |     |  |        |  |     |        |  |  |        |  |  |        |  |  |        | 
|--------------------------- | ----------------- | ---- | ------- | ---- |  | ------ |  | ---- | ------- | ---- |  | ------ |  | --- | ------ | --- |  | ------ |  | --- | ------ |  |  | ------ |  |  | ------ |  |  | ------ | 
|                            | As of December 31
|                           
|                            |                   | 2004 |         | 2003 |  | 2002   |  | 2001 |         | 2000 | 
|                            |                   |      |         |      |  |        |  |      |         |      | 
|                            |                   | NIS  |         | USD  |  | NIS    |  | USD  |         | NIS  |  | USD    |  | NIS |        | USD |  | NIS    |  | USD |       
|                            |                   |      |         |      |  |        |  |      |         |      |  |        |  |     |        |     |  |        |  |     |       
|                           
|Working
  capital           |                   |      | 95,986  |      |  | 22,281 |  |      | 83,861  |      |  | 19,466 |  |     | 75,732 |     |  | 17,579 |  |     | 68,614 |  |  | 15,927 |  |  | 59,815 |  |  | 13,885 | 
|Total
  assets              |                   |      | 129,861 |      |  | 30,147 |  |      | 109,619 |      |  | 25,445 |  |     | 94,741 |     |  | 21,992 |  |     | 92,460 |  |  | 21,442 |  |  | 77,476 |  |  | 17,984 | 
|Short-term
  bank debt      |                   |      | 2,489   |      |  | 578    |  |      | 45      |      |  | 10     |  |     | 1,052  |     |  | 244    |  |     | 2,251  |  |  | 523    |  |  |       |  |  |       | 
|Loans
  from parent company |                   |      |        |      |  |       |  |      |        |      |  |       |  |     |       |     |  |       |  |     |       |  |  |       |  |  |       |  |  |       | 
|Shareholders
  equity      |                   |      | 98,900  |      |  | 22,958 |  |      | 87,150  |      |  | 20,229 |  |     | 78,374 |     |  | 18,193 |  |     | 71,306 |  |  | 16,552 |  |  | 62,679 |  |  | 14,549 | 

Page 3

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B.       CAPITALIZATION
AND INDEBTEDNESS

Not
applicable.

C.       REASONS
FOR THE OFFER AND USE OF PROCEEDS

Not
applicable.

D.       RISK
FACTORS

Legal Risk

In
the future, the Company may fail to comply with the Nasdaq Small Cap Market
regulations and listing requirements as to minimum net income, minimum number
of shareholders and public float. If the Company shall so fail to comply in the
future, Nasdaq may initiate procedures to delist the Companys ordinary shares
from the Nasdaq Small Cap Market. In this event, trading of the Companys shares
may be conducted over-the-counter or in the so-called Pink Sheet or, if
available, in the OTC Bulletin Board Service or in another market. Any such delisting
may severely complicate trading of the Companys shares by shareholders, or
prevent them from reselling their shares at/or above the price they paid.
Furthermore, the Companys relatively low trading volumes may make it difficult
for shareholders to trade shares or initiate any other transactions.

In
July 2003 and in November 2004, the Company received letters from the Nasdaq
Stock Market informing the Company that it had failed to meet a continued
listing requirement that the Company have 500,000 publicly held shares, and
that its ordinary shares were therefore subject to delisting from the Nasdaq
Small Cap Market, unless a proper plan for complying with the requirement was
presented. Following the letter of November 2004, Willi-Food Investments Ltd.
and Mr. Joseph Williger sold 75,000 shares of the Company to the public and at
the same time the Company distributed a one to one stock dividend to its
shareholders. As a result of these actions, the Company now complies with the
abovementioned listing requirements and the threat of delisting was removed.

Credit Risk

Financial
instruments, that potentially subject the Company to concentrations of credit
risk, consist principally of trade receivables. Despite the Companys large
number of clients (over 1,000 throughout Israel), a major and significant part
of its sales are made to a limited number of customers (mainly the organized
market). The Company generally does not require and does not receive collateral
from those customers. However, it does require and receive collateral from the
remainder of its clients to insure security of collecting payments. The Company
maintains an allowance for doubtful debts, based upon factors surrounding the
credit risk of specific customers, historical trends and other information
which management believes adequately covers all anticipated losses in respect
of trade receivables. There can be no assurance that this allowance will be
adequate.

Available Sources of Supply of Products

Until
the fiscal year of 2004, the Company was not dependent on any single supplier
in respect of a majority of its products. In respect of certain products,
however, it used to be dependent exclusively on one source of supply. Five of
such products accounted, in the aggregate, for 21% and 15% of the Companys
total sales in 2003 and 2002, respectively. For the year ended December 31,
2004, the company was not dependent on any single supplier in respect of all
its products. However, termination of the Companys business relationships with
certain suppliers and/or a material adverse change in the terms at which it
purchases products from certain suppliers may have a material adverse effect on
the Companys financial results. There can be no assurance that alternative source
of supply, if required, will be readily available nor can there be any
assurance as to purchase terms.

Page 4

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Monetary Risk

The
Company holds a portfolio of marketable securities traded primarily on the Tel
Aviv Stock Exchange and certain bonds traded abroad. This portfolio of
marketable securities is subject to various market risks resulting from
fluctuations in interest rates and foreign currency, exchange rates, price
fluctuations and other market risks. The Company deals with these risks in
accordance with policies established to ensure liquidity. The Company maintains
an investment policy adopted by management which diverts most of the Companys
capital to liquid and tradable investments, most of which are characterized by
a comparative low risk. The Company does not utilize derivative securities for
trading purposes, enter into swap arrangements or otherwise hedge its currency
in a manner that could expose the Company to significant market risk.

The
Company is exposed to fluctuations in the rate of the United States dollar and
Euro towards the NIS. Most of its income is in NIS, whereas a large portion of
its expenses are in United States dollar and Euro. A significant depreciation
in the United States dollar or Euro value of NIS could have a material adverse
effect on the Companys results of operations and financial condition.

The
Company strives to minimize market risks arising from exchange rates and the
cost of imported goods, especially by opening wide documentary credits for
suppliers abroad and holding foreign currency surpluses.

The
financial instruments of the
Company consist mainly of cash and cash equivalents, current accounts
receivable, short-term borrowings, accounts payable and accruals.

In view of
their nature, the fair value
of the financial instruments, included in working capital, is usually
identical or close to their book value.

Inventory Storage Policy

The
Company is dependant to some extent on critical products. Due to the conditions
in Israel it accumulates inventories of these products based on its prediction
of the consumption of these products. If actual consumption does not meet the
prediction, the Companys financial condition and results of operations could
be materially and adversely affected. On the other hand, to the extent the
Company does not have adequate inventory of these critical products, the
Companys revenues may be adversely affected.

Key Personnel

The
Company depends on a small number of technical staff, managers and Directors,
including managing services provided to the Company by interest holders via
companies they control. The loss of one or more of them could have a material
adverse effect on the Companys business and operations.

Initiation and Enforcement of Legal Action in
Israel

The
Company is organized under the laws of the State of Israel. Many of its
executive officers and Directors and some of the experts named in this annual
report are nonresidents of the United States, and a substantial portion of the
Companys assets and the assets of these persons are located outside the United
States. Therefore, it may be difficult to enforce a judgment obtained in the
United States against the Company or any of those persons. It may also be
difficult to enforce civil liabilities under United States federal securities
laws in actions initiated in Israel.

Page 5

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Political, Economic and Military Conditions
in Israel and the Middle East

Political,
economic and military conditions in Israel have a direct influence on the
Company because its operations are located there. Any major hostilities
involving Israel or the interruption or curtailment of trade between Israel and
its present trading partners could materially and adversely affect its
operations. The Company cannot assure that ongoing or revived hostilities
related to Israel will not have a material adverse effect on its business and
on its share price. Several Arab countries still restrict business with Israeli
companies and these restrictions may have an adverse impact on the Companys
operating results, financial condition or the expansion of its business. The
Company could be adversely affected by restrictive laws or policies directed
towards Israel and Israeli businesses. Despite the progress towards peace
between Israel and its Arab neighbors prior to 2000 the future of these peace
efforts is uncertain. Since October 2000, there has been a significant
deterioration in Israels relationship with the Palestinian Authority, and a
series of armed clashes between Israel and the armed forces of the Palestinian
Authority. Also, the recent war in Iraq led by coalition forces and the short
and long term consequences of such war may negatively impact the Companys
business. As a result of the political and military situation, Israels economy
has suffered considerably, unemployment is high, and the situation may continue
for the foreseeable future.

Generally,
all male adult citizens and permanent residents of Israel under the age of 45
are, unless exempt, obligated to perform up to 36 days of military reserve duty
annually. Additionally, all Israeli residents of this age are subject to being
called to active duty at any time under emergency circumstances. Many of the Companys
officers and employees are currently obligated to perform annual reserve duty.
Although the Company has operated effectively under these requirements since it
began operations, management cannot assess the full impact of these
requirements on its workforce or business if political and military conditions
should change, and management cannot predict the effect on it of any expansion
or reduction of these obligations.

A
deterioration of the economic situation in Israel may erode the real wages and
lower the buying power. This in turn may adversely affect the Companys
activities and business results.

Dependence on Major Clients

Despite
the Companys wide dispersion of clients, it has three major clients as
described in Item 4. Losing one or more of them may adversely affect the
Companys business results.

|        |                           
|------- | --------------------------
|ITEM 4. | INFORMATION OF THE COMPANY

A.       HISTORY AND
DEVELOPMENT OF THE COMPANY

G.
Willi-Food International Ltd. was incorporated in Israel in January 1994 under
the name G. Willi-Food Ltd. and commenced its operations in February 1994. It
changed its name to G. Willi-Food International Ltd. in June 1996.

In
May 1997, the Company completed an initial offering to the public in the United
States (hereinafter the Initial Public Offering) of 1,397,500 units, each
unit consisting of one ordinary share and one redeemable ordinary share
purchase warrant.

In
April 2000, the Company filed a Registration Statement on Form F-3 for the
registration, under the United States Securities Act of 1933, as amended, of
2,880,000 ordinary shares, held by certain principal shareholders.

As
of December 31, 2003, 50,000 stock options were outstanding and exercisable, at
an exercise price of $4.1 per share.

In April 2004, 30,000 of the above-mentioned stock options were exercised, by
related parties, for a total consideration of NIS 557 thousand (USD 129
thousand). The remaining 20,000 stock options expired unexercised in May 2004.

Page 6

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In
December 2004, the Company declared a stock dividend of 1 ordinary share for
each outstanding ordinary share (an aggregate of 4,307,500 ordinary shares).

All
shares and per share amounts have been retroactively restated to reflect the
aforementioned share dividend for all periods presented.

In
February 2005, the companys authorized share capital was increased by
40,000,000 shares of NIS 0.1 par value, from 10,000,000 to 50,000,000 shares.

For
a discussion of the Companys recent execution of agreements to acquire a
majority interest in a U.S. food distributor, please see Item 4: Information
of the Company - - Business Overview.

Unless
the context otherwise requires, all references herein to the Company, we or
our shall mean G. Willi-Food International Ltd. together with all of its
subsidiaries.

The
Companys principal executive offices are situated at 3 Nahal Snir St.,
Northern Industrial Zone, Yavne, 81224 Israel. The Companys telephone number
is 972-8-9322233, its fax number is 972-8-9322299, its e-mail address for
communications is gil@willi-food.co.il and its Web site is www.willi-food.co.il.

B.       BUSINESS
OVERVIEW

Overview

G.
Willi-Food International Ltd. (the Company) is an Israeli-based company
engaged, directly and through subsidiaries, in the import, marketing and
distribution in Israel of a wide variety of over 400 food products. The Company
sells products with widespread demand in the Israeli marketplace, as well as
products which cater to more select groups. The Company distributes certain of
its products on an exclusive basis. Some products are currently also sold in
insubstantial volume in the areas administered by the Palestinian Authority.
The Company has occasionally sold, in insubstantial volume, to importers in
Europe (mainly, France) and in the US. The Company intends to continue its
marketing efforts outside of Israel  mainly in the US and Europe.

The
Company purchases food products from over 100 suppliers located around the
world, including the Far East (China, India, the Philippines and Thailand),
Eastern Europe (Hungary, Latvia, Poland, Bulgaria), South America (Argentina,
Ecuador and Costa Rica), the United States, Western and Northern Europe (The
Netherlands, Belgium, Germany, Sweden, Denmark, France) and southern Europe
(Spain, Portugal, Italy, Turkey, Greece and Cyprus).

The
products imported by the Company are marketed and sold to over 1,000 customers,
including supermarket chains, wholesalers and institutional consumers. The
Company markets most of the products under the brand name Willi-Food. Certain
products are marketed under brand names of the manufacturers, or under other
brand names.

The
Company is re-evaluating its strategic position and considering other business
opportunities, including acquisitions by and mergers of the Company. As part of
this re-evaluation, the Company is also considering forming strategic alliances
with or entering into different lines of business. The Company has not made any
definitive plans or reached any definitive conclusions on these matters. There
can be no assurances that the Company will form any such alliances or enter
into any other line of business.

The
Companys principal shareholder, Willi-Food Investments Ltd., which we refer to
as Willi-Food, holds (as at June, 15 2005) approximately 72.33% of the
Companys outstanding share capital. The primary assets of Willi Food are the
Companys ordinary shares. See Item 7: Major Share Holders and Related Party
Transactions. Willi-Foods securities are traded on the Tel Aviv Stock
Exchange.

Page 7

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Our Business

The
following is a description of the Companys principal business activities.

Subsidiaries

Willi-Food
Frozen Products Ltd., which we refer to herein as Willi Frozen (previously
Fanny Food Importing and Distribution (1996) Ltd.), a wholly-owned subsidiary
of the Company, was incorporated in Israel in September 1996. According to our best
knowledge, Willi Frozen was removed by Israeli Register of Companies from list
of Israeli companies registration.

It is the Companys practice, occasionally, to import, market and distribute
certain food products, including frozen and chilled fish, dairy and other
products through this subsidiary. Willi Frozen has no assets, facilities or
obligations, other than those amounts owed to suppliers overseas with respect
to products purchased from them. The sales of Willi Frozen as of the year ended
December 31, 2004 amounted to NIS 0 thousand, of the year ended December 31,
2003 amounted to NIS 0 thousand, of the year ended December 31, 2002 amounted
to NIS 0 thousand, of the year ended December 31, 2001 amounted to NIS 0
thousand.

In
November 1995, the Company also incorporated a wholly-owned subsidiary, W.F.D.
(Import, Marketing and Trading) Ltd., which we refer to herein as W.F.D. The
Company occasionally imports certain foodstuffs through this subsidiary, which
sells these products to the Company. W.F.D. has no assets, facilities or
obligations, other than those amounts owed to suppliers overseas with respect
to products purchased therefrom. The sales of W.F.D. as of the year ended
December 31, 2004 amounted to NIS 0 thousand, of the year ended December 31,
2003 amounted to NIS 0 thousand, of the year ended December 31, 2002 amounted
to NIS 0 thousand, of the year ended December 31, 2001 amounted to NIS 0
thousand.

In
May 2001, the Company acquired all the shares of Gold Frost Ltd., which we
refer to herein as Gold Frost, for NIS 336 thousand (USD 78 thousand).
Gold Frost is engaged in locating suppliers abroad and importing frozen and
chilled food products. Among the products imported by Gold Frost are smoked
fish, antipasti, cheese, butter and other dairy products. Gold Frost imports
these products from the US, Denmark, Sweden, Bulgaria, Italy, Greece and the
Netherlands.

The
Company purchased Gold Frost in order to take advantage of Gold Frosts
know-how in importing frozen and chilled products as well as of its well known
brand name in the Israeli market. In June 2001, the Company signed an agreement
with Gold Frost to store and market the food products imported by Gold Frost
through the Company for a commission of 20% (which changed from 15% since 2002)
of the total monthly sales of Gold Frosts products which were sold by the
Company within that month. Gold Frost imports to Israel over 120 products,
usually packed for private consumers (cans, jars, containers and plastic sealed
and vacuumed packages), but also for institutional consumers. Gold Frost is
working towards widening the variety of products it imports.

Gold
Frost does not market its products, but rather uses the Company for this
purpose. The agreement between the Company and Gold Frost states that the
Company shall provide Gold Frost with marketing services until December 31,
2003. The agreement is automatically renewable each year for one year periods.
The volume of commissions paid by Gold Frost to the Company in 2004 amounted to
NIS 6.77 million (USD 1.57 million), in 2003 NIS 5.40 million (USD 1.25
million), in 2002 NIS 3.51 million (USD 0.81 million) and in 2001 NIS 1.43
million (USD 0.33 million).

During
July 2001, Gold Frost entered in two agreements with private companies for
consultation services regarding the operation and maintenance of refrigerated
warehouses and refrigerated storage. This service was provided for a one-year
period.

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Gold
Frost finances its activities by its equity. As of December 31, 2004, Gold
Frosts equity amounted to NIS 12.2 million (USD 2.8 million) and it held cash
and cash equivalents of NIS 19.1 million (USD 4.4 million) and inventory of NIS
4.8 million (USD 1.1 million). As of December 31, 2003, Gold Frosts equity
amounted to NIS 7.66 million (USD 1.78 million) and it held cash and cash
equivalents of NIS 6.38 million (USD 1.48 million) and inventory of NIS 3.70
million (USD 0.86 million). As of December 31, 2002, Gold Frosts equity
amounted to NIS 4.30 million (USD 1 million) and it held cash and cash
equivalents of NIS 2.77 million (USD 0.64 million) and inventory of NIS 3.1
million (USD 0.72 million). As of December 31, 2001, Gold Frosts equity
amounted to NIS 1.78 million (USD 0.41 million) and it held cash and cash
equivalents of NIS 0.48 million (USD 0.11 million). Gold Frost has at its
disposal bank credit, which is guaranteed by the Company without limitation.

As
of December 31, 2004, the Companys wholly-owned subsidiaries had no
indebtedness to banks. See Item 8: Financial Information  Guarantees
and Pledges.

Business Strategy

The
Companys business strategy is:

| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to increase
  market penetration of products that are currently sold by the Company
  through, among other things, marketing and sales campaigns; and
| |   |                                                                                                                                                      
| |  | to expand
  its current food product lines and diversify into additional product lines; and                                                          
| |   |                                                                                                                                                      
| |  | to expand
  the Companys activity in the food international markets mainly in the US and
  Europe.                                                  

Utilizing
managements expertise in identifying market demand and preferences, as well as
its sourcing abilities, the Company intends:

| |   |                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to continue
  to locate additional food products, some of which may be new to Israeli
  consumers; and                                                                                                    
| |   |                                                                                                                                                                                                           
| |  | to increase
  its inventory levels from time to time both to achieve economies of scale on
  its purchases from suppliers and to more fully meet its customers demands;
  and                            
| |   |                                                                                                                                                                                                           
| |  | to penetrate
  the food international markets mainly in the US and Europe by purchasing food
  marketing companies or/and cooperation with local existing distributors
  or/and by exporting products; and
| |   |                                                                                                                                                                                                           
| |  | to penetrate
  new markets within the Middle East, through the establishment of business
  relationships and cooperation with representatives in such markets subject to
  a positive political climate.  

The
Company has developed certain trade relationships locally, as well as in areas
administered by the Palestinian Authority, although the current sales volume to
the Palestinian administered areas is rather low. In addition, the Company has:

| |   |                                            
| | - | -------------------------------------------
| |  | initiated
  sales in Europe and the US; and

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| |   |                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | entered into
  arrangements with recognized manufacturers to market their products under
  their respective brand names, in addition to brand names under which the
  Company currently markets its products; and
| |   |                                                                                                                                                                                                                  
| |  | introduced
  additional food products to the Israeli marketplace under the brand name
  Willi-Food.                                                                                                            

On
March 7, 2000, the Companys Board of Directors authorized the Companys
management to examine proposals and conduct negotiations with respect to the
potential investment by the Company and, subject to applicable law, the
Companys major shareholder, Willi Foods, of an aggregate sum of up to USD 4 million
in businesses engaged in communications and/or Hi-Tech activities, provided
that the terms of any particular transaction are subject to Board approval and,
if required by law, shareholder approval. As of the date of this report, the
Company has not yet entered into any definitive agreements in implementation of
such resolution and there can be no assurance that the Company will enter into
any such definitive agreements.

In
June 20, 2005 a wholly-owned subsidiary of the Company (the Acquiror) executed
definitive agreements regarding the acquisition of Vitarroz Corp., a New
Jersey-based distributor of food products for the Hispanic market in the United States
(Vitarroz).

The
definitive agreements provide that the Acquiror may elect to acquire either a fifty
percent interest in the business of Vitarroz (the Business) or a fifty-five
percent interest in the Business. If the Acquiror elects to acquire a fifty
percent interest in the Business, the Acquiror will at closing invest
USD 1,000,000 in the Business for use as working capital. If the Acquiror elects
to acquire a fifty-five percent interest in the Business, the Acquiror will (i)
invest at closing USD 1,000,000 in the Business for use as working capital and
(ii) make a loan at closing of USD 1,200,000 to the Business. The
definitive agreements also provide that the Company will guarantee the payment
of up to USD 2,250,000 in outstanding commercial bank indebtedness of the
Business. The repayment of the commercial bank indebtedness of the Business
will also be secured by the receivables and the inventory of the Business. If the Acquiror elects to
acquire a fifty percent interest in the Business, the definitive agreements
provide that within eighteen months of the closing of the transaction, the
Acquiror shall have the option either to (i) acquire for a nominal price an
additional one percent interest in the Business in consideration of making a
loan of USD 1,200,000 to the Business or (ii) require that its fifty percent
interest in the Business be reacquired by Vitarroz for USD 1,000,000. If the
Acquiror elects to acquire a fifty-five percent interest in the Business, the
definitive agreements provide that within twelve months of the closing of the
transaction the Acquiror shall have the option to require that its fifty-five
percent interest in the Business be reacquired by Vitarroz for USD 2,200,000.

Consummation
of the Vitarroz transaction is contingent upon completion of final due
diligence, Board of Director approval of the transaction, approval of
regulatory bodies (if necessary) and the satisfaction of other customary
closing conditions, as well as the satisfactory resolution of any issues that
arise during the acquisition process. As a result there can be no assurance
that the Vitarroz transaction will be consummated.

Products

The Company
imports, markets and distributes two kinds of products: preserved products and
non-preserved products.

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Preserved Products

The
Company imports, markets and distributes a broad variety of over 160 preserved
food products, most of which enjoy a long shelf life (mostly between 34
years). Such preserved products which consist 49% of Companys sales in 2004
are sold in a variety of sizes and types of receptacles, such as tin cans,
glass jars and glass bottles, intended for use by the individual consumer, as
well as the institutional consumer food markets.

The
Company aims at widening the variety of the preserved products it imports. Due
to commercial considerations, the Company occasionally stops importing certain
preserved products.

The
Companys main preserved product lines and the principal products of each line
are as follows:

Canned
Vegetables and pickles: including okra, mushrooms (whole and sliced), artichoke
(hearts and bottoms), beans, asparagus, corn, baby corn, palm hearts, vine
leaves (including vine leaves stuffed with rice), sour pickles, mixed pickled
vegetables, pickled peppers, an assortment of black and green olives, as well
as additional canned vegetables. These products are particularly imported from
China, Spain, Greece, Thailand, South America, Turkey, France, India, Poland
and The Netherlands.

Canned
Fish: including tuna (in oil or in water), sardines, anchovies, smoked cod
liver, sprats, mackerels, herring and salmon. These products are primarily
imported from the Philippines, Thailand, Portugal, Canada, Spain, Greece,
Sweden and Latvia.

Canned
Fruit: including pineapple (sliced or pieces), peaches, fruit cocktail,
apricot, pears, cherries, mangoes and lichi. These products are primarily
imported from the Philippines, Thailand, Greece, Europe and South America.

Non-Preserved Products

The
Company imports, markets and distributes a broad variety of over 260
non-preserved food products, most of which enjoy a relatively long shelf life
(mostly between 1-2 years). Such non-preserved products which consist 51% of
Companys sales in 2004 are sold in a variety of sizes and types of
receptacles, such as tin cans, glass jars, plastic and glass bottles and
containers and sealed plastic vacuum packages, intended for use by the
individual consumer, as well as the institutional consumer food markets.

The
Company aims at widening the variety of the non-preserved products it imports.
Due to commercial considerations, the Company occasionally stops importing
certain non-preserved products.

The
Companys main non-preserved product lines and the principal products of each
line are as follows:

Dairy
and Dairy substitute products: hard and semi-hard cheeses (parmesan, edam and
kashkaval and emental), molded cheeses (brie, camembert, danblue) feta,
Bulgarian cheese, butter, butter spreads, yogurt, margarine, melted cheese,
cheese alternatives, condensed milk profitrols and others. These products are
primarily imported from Greece, Denmark, Bulgaria, Italy and The Netherlands.

Edible
Oils: including sunflower oil, soybean oil, corn oil and olive oil. These
products are primarily imported from Argentina, Turkey, Italy and Spain.

Dried
Fruit, Nuts and beans: including figs, apricots, pineapple, raisins, sunflower
seeds, almonds, walnuts, pine nuts, cashew nuts, peanuts. These products are
primarily imported from Greece, Turkey, India, China, Thailand and the United
States.

Other
Products: including, among others, coffee creamers, fruit juices, jams, halva,
Turkish delight, tahini, cookies, vinegar, sweet pastry and crackers, sauces,
corn flour, rice, rice sticks, pasta and noodles, ketchup, mayonnaise, breakfast
cereals, couscous. These products are primarily imported from the Netherlands,
Italy, Greece, Belgium, the United States, Scandinavia, China, Thailand,
Turkey, India and Argentina.

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Some
of the products sold by the Company and which are listed above and below are
imported by Gold Frost. The Company did import some of these products in the
past, but this was done on a small-scale basis aimed at testing the demand for
such products and their profitability. After the purchase of Gold Frost the
import of these products was emphasized and expanded by Gold Frost.

The
line products (preserved and non preserved) which gained the largest sales
volume for the year ended December 31, 2004 were canned vegetables (23% of
sales), canned fish (21% of sales), dairy and chilled products (17% of sales) and
edible oils (10% of sales).

The
line products with the largest sales volume for the year ended December 31,
2003 were canned fish (22% of sales), canned vegetables (19% of sales), edible
oils (16% of sales) and dairy and chilled products (14% of sales).

The
line products with the largest sales volume for the year ended December 31,
2002 were canned vegetables (22% of sales), canned fish (19% of sales), dairy
and dairy substitute products (11% of sales) and edible oils (9% of sales).

Most
of the products, which the Company imports and markets, are approved as Kosher
by and/or under the supervision of various supervisory institutions including
the Kashrut Committee of the Shearit Israel Rabbinical Court, Chug Chatam Sofer
Bnei Brak, Chug Chatam Sofer Petach Tikva, the Chief Rabbinate of Israel,
Achdut Israel, certain Jewish organizations administering Kashrut procedures
and certifications (such as the Union of the Orthodox Jewish Congregation of
America (UO), OK, Kof-k, Star-K etc.) and rabbis of local Jewish congregations
abroad. See Government Regulation.

Suppliers

The
Company purchases food products from over 100 suppliers worldwide, including
suppliers located in the Far East (China, India, the Philippines and Thailand),
Eastern Europe (Bulgaria, Hungary, Latvia, Poland), South America (Argentina,
Ecuador and Costa Rica), the United States and Canada and Western, Northern and
Southern Europe (Sweden, Denmark, Greece, The Netherlands, Italy, Portugal,
Spain, Belgium, Germany, France, Turkey and Cyprus).

In
addition, the Company actively maintains contact with approximately 150
suppliers worldwide, through which it assesses on an on-going basis world
market trends, fluctuations in prices and terms internationally available and
other updating of issues relevant to its business.

The
Companys management and personnel visit food trade fairs world wide on a
regular basis and create new business relationships with potential suppliers on
an ongoing basis.

The
following table represents the percentage of purchases by the Company from
suppliers who account for more than 5% of the total purchases in the years
2004, 2003 and 2002:

|           |  |      |   |          |            |      |      |          |  |            |  |      |   | 
|---------- |  | ---- | - | -------- | ---------- | ---- | ---- | -------- |  | ---------- |  | ---- | - | 
|Supplier   |  | 2004 |   | Supplier |            | 2003 |      | Supplier |  | 2002       | 
|           |  |      |   |          |            |      |      |          |  |            | 
|Supplier A |  | 13.2 | % |          | Supplier A |      | 10.8 | %        |  | Supplier A |  | 13.0 | % | 
|Supplier B |  | 10.7 | % |          | Supplier B |      | 9.2  | %        |  | Supplier B |  | 8.3  | % | 
|Supplier C |  | 9.1  | % |          | Supplier C |      | 7.5  | %        |  | Supplier C |  | 6.2  | % | 
|Supplier D |  | 7.0  | % |          | Supplier D |      | 7.1  | %        |  |            |  |      |   | 
|Supplier E |  | 6.9  | % |          | Supplier E |      | 5.9  | %        |  |            |  |      |   | 

Prior
to 2004, the Company was not dependent on any given supplier in respect of a
majority of its products. In respect of certain products, however, prior to
2004 the Company was dependent exclusively on one source of supply. Five of
such single-source products accounted, in the aggregate, for 21% and 15% of the
Companys total sales in 2003 and 2002, respectively. For the year ended
December 31, 2004, the Company was not dependent on any given supplier with
respect to any of its products.

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Termination
of the Companys business relationships with certain suppliers and/or a
material adverse change in the terms at which the Company purchases such
products from such suppliers may have a material adverse effect on the
Companys financial results. There can be no assurance that alternative sources
for such products, if required, will be readily available nor can there be any
assurance as to the terms of purchase of such products from such alternative
sources.

The
Company does not generally enter into written agency or other agreements with
its suppliers. However, the Company has written confirmations from certain
foreign suppliers, confirming the exclusive appointment of the Company as the
sole agent and/or distributor of such suppliers either with respect to a
specific product or, in certain cases, with respect to a line of products,
within the State of Israel. These exclusivity rights have generally been
granted for a period ranging between 12-60 months terminating through
2005-2009, and in certain cases are conditional upon the Companys compliance
with certain minimum purchase requirements. The suppliers from which the Company
received such letters of confirmation accounted for approximately 23%, 23%, and
22% of the Companys purchases in 2004, 2003 and 2002, respectively. In a few
instances the Company did not fulfill its commitment to the minimum purchase
requirements, but since the onset of its activities no supplier terminated its
agreement with the Company due to not filling the quotas. The Companys
purchases are not motivated by a desire to fulfill minimum quota requirements,
and the considerations in purchasing products from these suppliers are
identical to those for purchasing from other suppliers.

In
addition to such arrangements, the Company routinely varies its sources of
supply and purchases depending on price levels, product quality and product
availability. Sales of products for which no written agreements (or written
confirmations for exclusivity rights) exist between the Company and such
suppliers accounted for approximately 77%, 77% and 78%, of the Companys total
purchases in 2004, 2003 and 2002, respectively.

Certain
of the products imported by the Company are seasonal agricultural products,
such as artichokes, cherries, lichi, pears, apricots, mushrooms and peaches. In
order to assure itself a continued supply of these seasonal items, the Company
generally arranges with the manufacturers of such products at the beginning of
the season for the terms of purchases of such items for the coming year.

The
Companys products are packaged by various manufacturers and suppliers abroad
and labeled with Hebrew, English and, in certain cases, Arabic and Russian
labels, according to the Companys instructions and requirements. See
Government Regulation.

A
substantial portion of the Companys purchases from suppliers is made in USD
(such as purchases from the Far East, the United States, South America and
certain European countries, including Greece and Turkey) with the remaining
purchases usually made in Euro and other foreign currencies (e.g. Swedish
Kronas). Supply is generally made against letters of credit for a period of up
to 90 days. See Item 5: Operating And Financial Review and Prospects  Impact
of Inflation and Devaluation on Results of Operations, Liabilities and Assets.

For
the years ended December 31, 2004, 2003 and 2002, respectively, the
Company issued orders to suppliers against letters of credit amounting in the
aggregate of approximately NIS 47.6 million (USD 11.1 million), NIS 49.7
million (USD 11.53 million) and NIS 48.7 million (USD 11.3 million)
respectively.

The
average volume of Companys suppliers credit balance amounted in 2004 to NIS
17.5 million (USD 4.1 million) consisting 49 days of suppliers credit on
average, in 2003 to NIS 14.3 million (USD 3.3 million) consisting 56 days of
suppliers credit and in 2002 to NIS 12.3 million (USD 2.9 million) consisting
44 days of suppliers credit.

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Customers

The
Companys products (preserved and non-preserved) are marketed and sold to over
1,000 customers throughout Israel (including territories under Israeli
administration and in a substantially lower extent to customers in the areas
administered by the Palestinian Authority). The Company has occasionally sold
to importers from Europe and the US. During 2004 the Company sold a variety of
its products to importers from France and the US. In 2003 the Company sold tuna
fish and corn to France. In 2001 and 2002 the Company sold sugar cubes and
pickles to France. In 1998, the Company sold, as its first transactions in
Europe and South America, one of its food products  olive oil, to importers in
France and another one of its food products  canned mushrooms, to Argentina.

The
Companys customers are generally comprised of two major groups:
i. supermarket chains in the organized market, and ii. private
supermarket chains, minimarkets, wholesalers, manufactures and institutional
customers.

The
first major group includes the four largest supermarket chains in the organized
market in Israel, including: Supersol Ltd. (which also includes the Supersol,
the Hyperneto, Cosmos, Supersol deal, Zol Lemehadrin, Birkat Rachel and Hutzot
Lahav); Club Market Marketing Chains Ltd. (which also includes the Club Market,
Hatzi Kupa, Zol Po, Imperia and Jumbo); the Co-op Blue Square Cooperative
Society Ltd. (which also includes the Co-op Blue Square Super Company Ltd., the
Co-op Blue Square Hyper Company Ltd., the Supercenter, Mega and Shefa Shuk);
Co-Op Jerusalem (Co-Op Jerusalem and Mister Zol). The Companys contracting
with the supermarkets in the organized market is done with their centers and
buyers.

The
second major group includes private supermarket chains, wholesalers,
minimarkets, manufacturers and institutional consumers such as catering halls
and food service companies and food producers.

The
Companys contracting with the supermarkets in the organized market is done
through their principal executive or sales offices and buyers. The Company also
distributes its products in the private supermarket chains and through a
network of wholesalers and institutional consumers such as catering halls and
food service companies.

The
Companys sales, by customer group, for the years ended December 31, 2004,
2003, 2002 and 2001 are as follows:

| |                                                                                        |  |                                                    |      |   |  |      |   |  |      |   |  |      |  
| | -------------------------------------------------------------------------------------- |  | -------------------------------------------------- | ---- | - |  | ---- | - |  | ---- | - |  | ---- | -
| |                                                                                        |  | Percentage of Total Sales
  Year Ended December 31 |     
| |                                                                                        |  |                                                    |     
| | Customer Groups                                                                        |  |                                                    | 2004 |   |  | 2003 |   |  | 2002 |   |  | 2001 |  
|
| | Supermarket Chains in the organized market                                             |  |                                                    | 41   | % |  | 42   | % |  | 41   | % |  | 43   | %
| | Private Supermarket Chains, minimarkets,                                               |  |                                                    | 59   | % |  | 58   | % |  | 59   | % |  | 57   | %
| | Wholesalers, manufacturers
  and institutional consumers and the Palestinian Authority |  |                                                    |      |   |  |      |   |  |      |   |  |      |  
| |                                                                                        |  |                                                    | 100  | % |  | 100  | % |  | 100  | % |  | 100  | %

Page 14

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For
the years ended December 31, 2004, 2003 and 2002, the Companys three
largest customers (all of which are supermarket chains in the organized market)
constituted, in each case, in excess of 5% of the Companys sales, and together
aggregated approximately 39%, 39%, and 41%, respectively, of the Companys
sales during such periods. The largest customer accounted for 22% of the
Companys sales in 2004, compared with 18% of the Companys sales in 2003 and
27% of the Companys sales in 2002. The loss of any of these major customers
could have a material adverse effect on the Companys financial condition and
results of operations. The Company is seeking to expand its operations in other
areas so as to reduce its dependence on any single significant customer.

The
Company is under a commitment to pay incentives to certain customers in the
organized market, to certain private supermarket chains and to some wholesalers
in relation to the increase in volume of sales in excess of a certain agreed
upon amount, or an incentive calculated as a fixed percentage of the customer
annual sales, which varies among customers. Such incentives range from 1% to
7.5% of the annual sales of the Company to such customers. Such incentives are
generally paid at the beginning of each year with respect to the previous
years sales. Such arrangements also generally include specific exclusions,
such as direct or joint importing of products that are not considered for
purposes of such incentives. Certain of such commitments are oral and not
evidenced in written documents. For the years ended December 31, 2004, 2003,
2002 and 2001, the Company paid and/or is obligated to pay approximately NIS
3,870 thousand (USD 898 thousand), NIS 3,380 thousand (USD 785 thousand),
NIS 2,418 thousand (USD 561 thousand) and NIS 4,350 thousand
(USD 1,010 thousand) respectively, in respect of such incentives. As of 2004,
the Company decided to award incentives to some wholesalers for annual
purchases over a certain sum.

The
average volume of the Companys consumers debit balance amounted in 2004 to NIS
41.1 million (USD 9.5 million) consisting 85 days of debit on the average, in
2003 to NIS 32.6 million (USD 7.6 million) consisting 84 days of debit on the
average and in 2002 to NIS 26.2 million (USD 6.1 million) consisting 64 days of
debit on the average.

Distribution, Marketing and Sales

The
Company markets its products via internal sales agents, apart from to clients
situated in the South of Israel, there it utilizes an external distributor who
does not have an exclusivity agreement. This distributors sales are not
significant.

The
Company generally has no written agreements with its customers, nor are its
arrangements with its customers on an exclusive or binding basis. The Company
generally extends its customers approximately 60-90 days credit beginning at
the end of the month in which the sale took place. The supermarket chains in
the organized market generally effect payment by wire transfers or cash
payments on the due date, while other customers are generally required to
provide promissory notes. The Company generally does not require the supermarket
chains in the organized market to provide any kind of security for payments;
however, other customers may be required to provide security, including
personal guarantees. The Company generally enables its customers to return
products.

The
volume of customer bad debt of the Company amounted in the years ended December
31, 2004, 2003 and 2002 to NIS 167 thousand (USD 39 thousand), NIS 0 thousand
and NIS 0 thousand respectively.

Sales
are made by the placement of customers orders (except for part of the dairy
and dairy substitute products), which are directed to the Companys regional
office and placed by the sales personnel or directly by the customers. Orders
are transferred to the Companys warehouse facilities in Yavne for preparation
and delivery by the Companys transporters (including twelve refrigeration
trucks and five regular trucks). In certain cases, the Company transports
products directly from port to customers, utilizing the services of independent
transporters. The sale of part of the dairy and Dairy substitute products is performed by Van Sale
using small terminals. The sales agents supply these products immediately from
the stock of products in the refrigeration trucks in which they travel.

Page 15

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The
Company generally holds an inventory of products, which the Company believes to
be sufficient to meet market requirements for a period of 80 days. The Company
may, occasionally, take advantage of purchasing some inventory items; at those
cases the inventory quantities may be even higher then 80 days. Products
ordered in full container loads by customers are generally forwarded directly
to the customers facilities, without being stored in the Companys facilities.
The Company does not regularly maintain significant backlog of orders from
customers. The Companys inventory as of December 31, 2004 amounted to 27.1
million (USD 6.30 million) compared with NIS 18.8 million (USD 4.37 million) as
of December 31, 2003, and NIS 16.3 million (USD 3.79 million) as of December
31, 2002.

The
Company launches advertising campaigns. In 2004 it initiated an extensive
promotional campaign in the electronic media under the name Willi-Food.

The
Company participates in various sales campaigns within the supermarket chains
that are intended to stimulate sales volume. Among such campaigns are food
festivals initiated by the supermarket chains and certain importers, including
the Company, in which the import and marketing of products from a specific
country or region are celebrated and promoted. In the years 2004, 2003 and 2002
the Company participated in various festivals, including ethnic and the
Mediterranean Festival, for certain products imported from Italy, The
Netherlands, Turkey and Greece. Such festivals typically involve increased
display space as well as enhanced promotional activities, both with respect to
the festival itself and the products. Such activities are sponsored by the
supermarkets in collaboration with the importers participating in the festival.
The cost of the Companys participation in such activities is minimal. Within
this framework, the Company imports a wide variety of products which include
pastries, vegetables, jams, cheese, fish, and dairy products, as well as
certain artifacts typical to the culture and/or cuisine of each specific
festival.

The
Company maintains close contact with its consumer markets in an effort to be
attentive to market needs, market trends, the demand for certain products and
their value to the market. The Company also regularly gathers information on
new products manufactured worldwide, including by attending food exhibitions
and maintaining close relations with manufacturers and suppliers worldwide.

Regarding
part of the institutional clients in the private market, the Company engages
with them by winning tenders or via wholesalers.

Seasonality

Each
year as the Passover and Rosh Hashana feasts approach, the Company usually increases
its inventories in order to be prepared for the seasonal increase in demand for
its products at these times of the year. Usually there is also an increase in
the Companys sales towards the Rosh Hashana holiday (celebrated in
September-October) and the Pesach holiday (celebrated in March-April). In spite
of the impact of the holiday season on the Companys activities, the Companys
quarterly sales are not affected in a material fashion as result of the holiday
season.

Competition

The
food distribution business in Israel is highly competitive with respect to
imported, as well as locally manufactured, food products. The Company believes
that it presently faces direct competition from a number of importers of food
products. The food market is very price sensitive.

Certain
of the products imported by the Company are also produced by local
manufacturers in Israel, such as canned fish and corn, edible oils, certain
pickles, olives, pasta and certain dairy products. Local producers are not
subject to the financial risks of importing food products, governmental
policies regarding import of food products (determining tax rates and
classification of products not to be taxed). The Company believes that it may
also face competition from potential new-comers to the food business, as well
as from existing importers and/or manufacturers currently not involved in the
same line of products as the Company.

Page 16

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The
barriers to entry in the food market are low, and new potential competitors are
constantly joining the market.

To
the Companys knowledge, several of its competitors (Shemen and Milomor with
respect to edible oils, Fodor (Star kist and Yona), Posidon and Williger of the
Neto Group, Filtuna and Shastowits with respect to fish products, Pri
HaGalil-Vita, Yachin-Zan laKol, Williger of the Neto Group, Alaska and Johnson
with respect to canned vegetable products and canned fruits, Tnuva, Tara,
Strauss, Siman, Machlvot Gad and Meshek Zuriel with respect to dairy and Dairy
substitute products, etc.) are substantially more established, have greater
market recognition and have greater financial, marketing, human and other
resources than those of the Company. If any of the Companys major competitors
materially reduce prices, the Company would experience significantly more
competitive pressure and a decrease in profitability. The Company cannot
predict whether it could successfully compete with these pressures and, if it
were unable to do so, the Companys business would suffer.

The
Companys management does not hold exact information regarding the extent of
the import of food products to Israel. However, it believes it is one of the leading
companies in Israel in this field.

The
acceptable way of dealing with competition is to follow the availability of
products, their prices, offers for performing transactions and business
opportunities while diversifying sources of supply and in addition, following
the selling prices of competing products and setting product prices according
to changing market prices.

Intellectual Property Rights

The
Company markets certain products under the trademark Willi-Food, which has
been approved for registration in Israel in May 1997 for certain uses relating
to the food industry. In 2001 the trademarks validity was extended for an
additional fourteen years. The Company markets certain products under the
trademark Gold-Frost, which was registered in Israel in February 2002. The
Company also markets cheeses and cheese substitute for pizza under the
trademark Pizza Top which was registered in September 2002. There can be no
assurances as to the degree of protection this registration will afford. Other
products marketed by the Company under their original brand name are
Completa, Flavor House, Hazer Baba, Carapelli, Arla and Lurpak. The
Company imports several products for the Supersol chain under the brand name
Superclass, which is the chains brand name.

In
2004 the Company petitioned for several new trademarks. There is no certainty
that these will indeed be registered as the Company requested. Regarding one of
these names, objections on behalf of third parties have been submitted.

The
Company also owns two trademarks which were used in the past, but not
currently. The Companys investment in registering these trademarks was
insignificant.

Employees

As
of December 31, 2004, the Company, including its subsidiaries, employed a total
of 70 persons, 6 of whom are in management, 11 of whom are in accounting and
importing positions, 23 of whom are involved in the Companys sales and
marketing departments, 30 of whom are employed in logistics networks (warehousing
and transportation). This compared with 60 persons as of December 31, 2003, 5
of whom are in management, 12 in accounting and importing positions, 20
involved in the Companys sales and marketing departments, 23 in logistics
networks (warehousing and transportation).

On
December 31, 2004, 36 additional employees (stewards and sales people) were
engaged on an hourly basis. On December 31, 2003 the number was 18. Other
employees were supplied by manpower companies.

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During
the past two years there was an increase in the number of employees in the
sales and marketing departments as well as in the logistics department due to
an increase in sales.

The
Companys employees are hold written employment contracts, which arrange their
working terms. Regarding the Companys management services agreements with
companies controlled by Messrs. Joseph and Zvi Williger, see Item 6:
Directors, Senior Management and Employees- Compensation.

The
Company believes that the working relations within the Company are
satisfactory. Israeli labor laws are applicable to all of the Companys
employees as are certain provisions of the collective bargaining agreements
between the Histadrut (General Federation of Labor in Israel) and the
Coordination Bureau of Economic Organizations (including the Industrialists
Association), by order of the Israeli Ministry of Labor. These provisions
principally concern the length of the work day, minimum daily wages for
professional workers, paid annual sick leave, discrimination, insurance for
work-related accidents, social security, procedures for dismissing employees,
determination of severance pay and other conditions of employment.

In
addition, Israeli employers, including the Company, are required to provide
certain escalations in wages in relation to the increase in the Israeli
consumer Price Index (CPI).  The
specific formula for such escalation varies according to agreements between the
Government of Israel, the Manufacturers Association and the Histadrut.

A
general practice in Israel followed by the Company, although not legally
required, is the contribution of funds on behalf of its senior employees to a
fund known as Managers Insurance. This fund provides a combination of
savings plan, insurance and severance pay benefits to participating employees,
giving these employees a lump sum payment upon retirement and securing their
right to receive severance pay, if legally entitled, upon termination of
employment. The employee contributes an amount equal to 5%-5.5% of his wages
and the Company contributes an additional 13.3%-15.8%. In addition, Israeli law
generally requires severance pay upon the retirement or death of an employee or
termination of employment without due cause. Furthermore, Israeli employees and
employers are required to pay predetermined sums to the National Insurance
Institute (which is similar, to some extent, to the United States Social
Security Administration). The payments thereto amount to approximately 11% of
wages; the employees share being 4.59% (depending on the marginal level of
wages) and the employers about 5%.

Government Regulation

The
import, storage, distribution, marketing and labeling of food products is
subject to extensive regulation and licensing by various Israeli government and
municipal agencies, principally the Ministry of Health and the Ministry of
Trade and Industry of the State of Israel. 
The Company is required to maintain its distribution processes, as well as
the products imported by it, in conformity with all applicable laws and
regulations. Failure to comply with such applicable laws and regulations could
subject the Company to civil sanctions, including fines, injunctions, recalls
or seizures, as well as potential criminal sanctions, any of which could have a
material adverse effect on the Company. The Company believes it complies in all
material respects with the above-mentioned requirements.

In
1978 the Israeli government issued the free import decree, which exempts the
import of most food products from the need to acquire a license. However,
permits from the Ministry of Health and the Ministry of Agriculture are still
required. Israeli government policy in favor of exposing the local market to certain
imported products has directly impacted the Companys operations since, as of
September 1991, certain qualitative customs duties, formerly levied on
products, including those imported by the Company, have been canceled. Customs
duties and charges are levied on a portion of the Companys products.

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The
Company is required to obtain import licenses for the import of certain food
products.  The Company has obtained the
necessary import licenses for the products imported by it as required by the
import authorities. The Company has also obtained the necessary authorization
required by the Ministry of Health (Food Authority) for the import of food
products to Israel.

The
Companys products are packaged by various manufacturers and suppliers abroad
and labeled in Hebrew, English and, in certain cases, Arabic and Russian,
according to the Companys instructions and the requirements of the Israeli
authorities.

Since
the beginning of the Companys activities, the Company has been found to have
mislabeled packages four times, as a result of which the Company has paid an
immaterial amount of fines.

The
Israeli in charge of Antitrust Authority published on January 2005 his policy
regarding practices between suppliers and retail chains. This practice is based
on Dominant suppliers. The Company is of the opinion that it does not fall
between the Dominant suppliers and that implementation of this policy may
weaken the power of its competitors and reduce their ability to compete lower
competitors.

Most
of the products which the Company imports and markets are approved as Kosher by
and/or under the supervision of various supervisory institutions including the
Kashrut Committee of the Shearit Israel Rabbinical Court, Chug Chatam Sofer
Bnei Brak, Chug Chatam Sofer Petach Tikva, the Chief Rabbinate of Israel,
Achdut Israel, certain Jewish organizations administering Kashrut procedures
and certificates (such as the Union of the Orthodox Jewish Congregation of America
(O.U.), OK, Kof-k, Star-K, etc.) and rabbis of local Jewish congregations
abroad. Such procedures include, in certain cases, personal supervision by a
Kashrut supervisor sent by such institutions to the manufacturing facilities
from which the Company purchases products, who is present at the plant during
the processing of the product. Under Israeli law, the Company is required to
ascertain that the Kosher foodstuffs which it offers for sale bear kosher
certification approved by certain authorities, such as the Chief Rabbinate of
Israel, and also the name of the individual authorized to certify such
product.  Not all products marketed by
the Company have been so certified, although they do bear certain kosher certification
from other certification bodies.

C.       
ORGANIZATIONAL STRUCTURE

The
Company has three wholly owned subsidiaries, Willi Frozen, W.P.D and Gold
Frost. The offices of the Companys subsidiaries are located in the Yavne,
Israel office of the Company.

D.       PROPERTY,
PLANTS AND EQUIPMENT

The
Companys principal executive offices are situated at a leased facility in the
northern industrial zone of Yavne, at 3 Nahal Snir St., Israel, 35 km south of
Tel-Aviv. These premises serve as the Companys logistic center for warehousing
and distribution of food products as well. The Yavne facility is leased by the
Company from Titanic Food Ltd. (Titanic), a private Israeli company controlled
by Messrs. Joseph Williger, the Companys Chief Executive Officer and a
director, and Zvi Williger, the Companys Chief Operating Officer and Chairman
of the Board. The lease, which was signed on November 29, 1998, was for a basic
period of two years with an option for three additional periods of two years
each. The lease will expire on January 14, 2007.

This
facility consists of approximately 5,387 square meters (approximately 48,500
square feet) (a four-story building plus a basement). The monthly rental fee
(excluding VAT) for this facility is USD 35,886 starting January 2005, the last
option period. The rent is payable in advance on a quarterly basis. The Company
believes that the terms of the above-mentioned lease are no less favorable to
it than could be obtained from an unaffiliated third party. The amounts paid by
the Company as rental fees in the years ended December 31, 2004, 2003 and 2002
were NIS 1,833 thousand (USD 425 thousand), NIS 1,837 thousand (USD 426
thousand) and NIS 1,815 thousand (USD 421 thousand) respectively. Since March
27, 2000, the Company has been operating the Yavne facility under a municipal
business license as required under Israeli law. The license has been granted
permanently.

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The
Company utilized free warehouse services in the area of the Ashdod seaport. The
Company is charged only for storage per container, i.e., there is no charge for
rental while the Company does not use the free warehouse services. The payment
for these services for the years ended December 31, 2004, 2003, 2002 and 2001
was NIS 1,400 thousand (USD 325 thousand) NIS 822 thousand (USD 187 thousand),
NIS 823 thousand (USD 188 thousand) and NIS 863 thousand (USD 197 thousand)
respectively. The Company owns twelve refrigeration trucks (capacity of 6.5 to
19 tons) and seven regular trucks (capacity of 15-28 tons).

On
May 25, 2005 the Board of Directors and the Audit Committee of the Board of
Directors of the Company approved an agreement with Titanic, regarding the
purchase by the Company from Titanic of a parcel of real estate comprising 18.5 square kilometers situated in the northern
industrial zone of Yavne, on which the Company intends to build a new logistic
center on about 8,600 square meters (approximately 77,400 square feet).  The new logistic center will replace the
Companys current logistic center (which the Company rents from Titanic), and
will spare the Company the expense of using storage services in warehouses far
from the current logistic center. Furthermore, the new logistics center should
better suit the Companys operational needs. This purchase is subject to the
approval of the Shareholders of the Company at the General Meeting of
Shareholders that will convene on July 20, 2005.

It
should be pointed out that while completing the construction of the new logistics
center (which has not yet begun), the Company will move out of the present
logistics center and return it to Titanic. The current lease for the present
logistics center (the Current Lease) ends in January 2007. It is expected to
take a year and a half to build the new logistics center. If constructing the
new logistics center ends before the end of the Current Lease of the present
logistics center, Titanic has agreed to shorten the Current Lease term of the
present logistics center accordingly, without receiving any recompense for
shortening the Current Lease term. Alternatively, if the construction of the
new logistics center ends after the termination of the Current Lease for the
present logistics center, Titanic has agreed that the Current Lease will be
extended until the completion of the construction of the new logistics center
under the same terms the present logistics center is being rented today
($35,886 a month).

In
connection with the purchase of the parcel of real estate, the Company will pay
Titanic the costs which Titanic has incurred so far regarding the parcel of real
estate, which consist of the cost of purchasing the rights for the parcel of
real estate from the Israel Land Administration, payments to Industrial
Buildings Ltd. for development and other expenses incurred in planning the new
logistic center.  In addition to the
abovementioned costs the Company will pay Titanic interest on its costs at the
prime rate (as defined by the Bank of Israel  now 5% annually), which will be
calculated from the date of each expense incurred by Titanic.  Accordingly, Titanic will not profit from
the transaction, and only its costs already incurred and its carrying costs
shall be paid to it by the Company.  It
has also been agreed by Titanic and the Company that all expected expenses for
completing the planning of the contemplated development up to the date of the
Companys annual meeting of shareholders will be incurred by the Company.  If the purchase of the parcel of real estate
is not authorized by the shareholders as mentioned above, Titanic shall
reimburse the Company for these expenses.

It is
estimated that the Company shall pay Titanic approximately NIS 10,305,000
(about USD 2,300,000) (the Price to Titanic) with interest at the prime rate
until date of actual payment.  The
Company estimates that the costs of constructing the logistic centers
building, apart from the Price to Titanic and apart from purchasing designated
equipment, should amount to about USD 5,400,000.

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|        |                                             
|------- | --------------------------------------------
|ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

The
following review and prospects should be read in conjunction with the
consolidated financial statements and the related Notes thereto included
elsewhere herein.  The consolidated
financial statements have been prepared in accordance with Israeli GAAP, which
differs in certain significant respects from U.S. GAAP.  Reference is made to Notes 2 and 13 of Notes
to the consolidated financial statements for a description of the significant
differences between Israeli GAAP and U.S. GAAP.  Unless otherwise indicated, financial information for the Company
included herein is presented on a consolidated basis under Israeli GAAP.

The
Company is engaged in the import, marketing and distribution of a broad range
of food products purchased from over 100 suppliers worldwide and marketed
throughout Israel, and to a much lesser extent, the areas administered by the
Palestinian Authority.  The products
imported by the Company are marketed in Israel and sold to over 1,000 customers
including supermarket chains in the organized market, private supermarket
chains, minimarkets, wholesalers, manufacturers and institutional
consumers.  The Company was incorporated
in Israel in January 1994 and commenced its operations in February 1994.

For
the year ended December 31, 2004, each of the Companys three largest
customers accounted for more than 5% (or in the aggregate approximately 39%) of
the Companys sales. For the year ended December 31, 2003, each of the
Companys three largest customers accounted for more than 5% (or in the
aggregate approximately 39%) of the Companys sales. For the year ended
December 31, 2002, each of the Companys three largest customers accounted
for more than 5% (or in the aggregate approximately 41%) of the Companys
sales. The loss of any of these major customers could have a material adverse
effect on the Companys financial condition and results of operations.

For
convenience purposes, the financial data for the years ended December 31,
2004, 2003, 2002, 2001 and 2000 has been translated into U.S. dollars using the
representative exchange rate. This rate as of December 31, 2004 is
NIS 4.308 = USD 1.00.

The
following discussion and analysis should be read in conjunction with the
Companys Consolidated Financial Statements and notes thereto which appear in
this Annual Report.

The
Company is not involved in any off balance sheet transactions or long-term
contractual obligations.

Critical Accounting
Policies

Managements
discussion and analysis is based upon the consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in Israel and adapted to the generally accepted principles accepted in
the United States. The use of these generally accepted principles requires the
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting accounting periods presented.  These estimates include assessing the
collectibility of accounts receivable, and the use of recoverability of
inventory. Actual results could differ from those estimates. The markets of the
Companys products are characterized by intense competition and a rapid
turnover of products and frequent new introductions of products, all of which
may impact the future realizability of the Companys assets.

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The
following critical accounting policies may affect significant judgments and
estimates used in the preparation of the consolidated financial statements.

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | Revenue
  Recognition  revenue from product sales is recognized upon the shipment to
  the consumers, when the title and risk of loss have been transferred to the
  consumer, price and terms are agreed and when no significant vendor
  obligations exist and collection of the resulting receivable is reasonably
  assured. Incentive to certain customers  the Company is obligated to pay
  incentives to certain customers in relation to the volume of sales in excess
  of a certain amount. The incentive is calculated as a percentage of the
  annual sales to the customer. In accordance with EITF 01/9 the Company
  presents revenue net of such incentives. The Company grants its customers the
  right to return the products.  A
  provision for customers return is recorded for the estimated future products
  return, based on the Companys experience. This policy is significant because
  the revenue is a key component of the Companys operations, as well as the
  fact that the revenue recognition determines the timing of certain expenses.
  Revenue results are difficult to predict and any shortfall in revenue or
  delay in recognizing revenue could cause the operating results to vary from
  quarter to quarter and may result in operating losses.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2. | Inventories
   are stated at the lower of cost or market value. Cost is determined by the
  FIFO (first in first out) method. 
  Inventorys values and quantities review cause the Company to write
  down the difference between the cost and the estimated market value upon
  assumption about future demand and market conditions. If the inventory is
  determined to be undervalued, the Company may have to recognize additional
  operating income at the time of sale. Any significant unanticipated change in
  demand or expiration of product life could have a significant impact on the
  value of the inventory.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | In November
  2004 the FASB issued SFAS No. 151, Inventory Costs, an Amendment of ARB No.
  43, Chapter 4. SFAS No. 151 amends the guidance in ARB 43, Chapter 4,
  Inventory Pricing, which provides guidance on the allocation of certain
  costs to inventory. SFAS 151 clarifies that abnormal amounts of idle facility
  expense, freight, handling costs, and wasted material (spoilage) should be
  recognized as current-period charges. In addition, SFAS 151 requires that
  allocation of fixed production overheads to the costs of conversion be based
  on the normal capacity of the production facilities. The provisions of this
  statement are effective for inventory costs incurred during fiscal years
  beginning after June 2005. The provisions of the attached financial statement
  shall be applied prospectively. The Company is assessing the impact of the
  adoption of this Standard, and currently estimates that its adoption is not
  expected to have a material effect on the Companys financial position and
  results of operations.                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|3. | Share based
  Payments  In December 2004, the FASB issued SFAS No. 123 (revised 2004)
  Share Based Payments (SFAS 123(R)). This Statement is a revision of FASB
  Statement No. 123, Accounting for Stock-Based Compensation, which
  supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and
  its authoritative interpretations. SFAS 123(R) establishes standards for the
  accounting for transactions in which an entity exchanges its equity
  instruments for goods or services; focuses primarily on accounting for
  transactions in which an entity obtains employee and directors services in
  share-based payment transactions; and does not change the accounting guidance
  for share-based payment transactions with parties other than employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | SFAS 123(R)
  eliminates the alternative to use APB 25s intrinsic value method of
  accounting that was provided in SFAS 123 as originally issued and requires to
  measure the cost of employee services received in exchange for an award of
  equity instruments based on the grant-date fair value of the award. The
  fair-value-based method in this Statement is similar to the fair-value-based
  method in SFAS 123 in most respects. The costs associated with the awards
  will be recognized over the period during which an employee is required to
  provide service in exchange for the award - the requisite service period
  (usually the vesting period). The grant-date fair value of employee share
  options and similar instruments will be estimated using option-pricing models
  adjusted for the unique characteristics of those instruments (unless
  observable market prices for the same or similar instruments are available).
  If an equity award is modified after the grant date, incremental compensation
  cost will be recognized in an amount equal to the excess of the fair value of
  the modified award over the fair value of the original award immediately
  before the modification.                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The
  provisions of SFAS 123(R) apply to all awards to be granted by the Company
  after June 30, 2005 and to awards modified, repurchased, or cancelled after
  that date. When initially applying the provisions of SFAS 123(R), in the
  first quarter of 2006, the Company will be required to elect between using
  either the modified prospective method or the modified retrospective
  method. Under the modified prospective method, the Company is required to
  recognize compensation cost for all awards granted after the adoption of SFAS
  123(R) and for the unvested portion of previously granted awards that are
  outstanding on that date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Under the
  modified retrospective method, the Company is required to restate its
  previously issued financial statements to recognize the amounts previously
  calculated and reported on a pro forma basis, as if the original provisions
  of SFAS 123 had been adopted. Under both methods, it is permitted to use
  either a straight line or an accelerated method to amortize the cost as an
  expense for awards with graded vesting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Management
  has recently commenced identifying the potential future impact of applying
  the provisions of SFAS 123(R), including each of its proposed transition
  methods, yet is currently unable to fully quantify the effect of this
  Standard on the Companys future financial position and results of
  operations. Nonetheless, it is expected that the adoption of SFAS 123(R) will
  increase the stock-based-award expenses the Company is to record in the
  future in comparison to the expenses recorded under the guidance currently
  applied by the Company.                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4. | Exchange of
  Nonmonetary Assets  In December 2004, the FASB issued SFAS No. 153,
  Exchanges of Nonmonetary Assets an amendment of APB No. 29. This Statement
  amends Opinion 29 to eliminate the exception for nonmonetary exchanges of
  similar productive assets and replaces it with a general exception for exchanges
  of nonmonetary assets that do not have commercial substance. The Statement
  specifies that a nonmonetary exchange has commercial substance if the future
  cash flows of the entity are expected to change significantly as a result of
  the exchange. This Statement is effective for nonmonetary asset exchanges
  occurring in fiscal periods beginning after June 15, 2005. Earlier
  application is permitted for nonmonetary asset exchanges occurring in fiscal
  periods beginning after the date this Statement is issued. Retroactive
  application is not permitted.

A.       
RESULTS OF OPERATIONS

The
following table sets forth for the periods indicated, the correlation (in
percentages) between items from the Companys statements of operations to its
total sales for such periods:

|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 
|----------------------------------- |  |  | ----------------------------- | ----- | - | -------------------------------- |  |  | ----------------------------- | - |  |  |  | ----- | -- | 
|                                    |  |  | Year EndedDecember 31,
  2004 |       |   | Year Ended
  December 31,
  2003 |  |  | Year EndedDecember 31,
  2002 |  
|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 
|Sales                               |  |  |                               | 100   | % |                                  |  |  | 100                           | % |  |  |  | 100   | %  | 
|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 
|Cost of sales                       |  |  |                               | 76.20 | % |                                  |  |  | 80.17                         | % |  |  |  | 78.47 | %  | 
|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 
|Gross profit                        |  |  |                               | 23.80 | % |                                  |  |  | 19.83                         | % |  |  |  | 21.53 | %  | 
|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 
|Selling expenses                    |  |  |                               | 9.14  | % |                                  |  |  | 8.49                          | % |  |  |  | 7.78  | %  | 
|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 
|General and administrative expenses |  |  |                               | 5.34  | % |                                  |  |  | 6.07                          | % |  |  |  | 6.36  | %  | 
|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 
|Operating Income                    |  |  |                               | 9.32  | % |                                  |  |  | 5.27                          | % |  |  |  | 7.39  | %  | 
|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 
|Financial income (expenses), net    |  |  |                               | 0.67  | % |                                  |  |  | 3.16                          | % |  |  |  | (0.19 | )% | 
|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 
|Income before taxes on income       |  |  |                               | 9.99  | % |                                  |  |  | 8.49                          | % |  |  |  | 7.22  | %  | 
|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 
|Taxes on income                     |  |  |                               | 3.44  | % |                                  |  |  | 2.10                          | % |  |  |  | 1.74  | %  | 
|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 
|Net Income                          |  |  |                               | 6.55  | % |                                  |  |  | 6.39                          | % |  |  |  | 5.48  | %  | 
|                                    |  |  |                               |       |   |                                  |  |  |                               |   |  |  |  |       |    | 

Page 23

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Year Ended December 31, 2004 Compared
With Year Ended December 31, 2003

Sales.
Sales for the year ended December 31, 2004, increased by approximately
NIS 33,597 thousand (USD 7,799 thousand), or 24.5%, to approximately NIS
170,982 thousand (USD 39,689 thousand) from NIS 137,385 thousand (USD 31,891
thousand) for the year ended December 31, 2003. The growth of sales for
the year ended December 31, 2004 compared with the year ended December 31, 2003
is a result of marketing efforts taken by the Company including an extensive
promotional campaign in the electronic media under the name Willi-Food
followed by increased sales of new products. The Company continued to expand
its activities and its penetration into new fields, mainly frozen and chilled
products

Cost
of Sales. Cost of sales for the year ended
December 31, 2004, increased, to approximately NIS 130,292 thousand
(USD 30,245 thousand) or 76.20% of sales, from approximately NIS 110,160
thousand (USD 25,571 thousand) or 80.17% of sales, for the year ended
December 31, 2003.  The sharp
decrease in cost of sales as a percentage from the total sales for the year
ended December 31, 2004 compared to the same period in 2003 derives from a
change in Companys products mix, as well as an improvement of trade terms
mainly by achieving lower purchasing prices from Companys suppliers.

Gross
Profit. The results of sales and cost of sales, as
mentioned above, created a gross profit of approximately NIS 40,690 thousand
(USD 9,444 thousand), equal to 23.80% of the sales in the year ended December
31, 2004, increase of 49.5% in compare to approximately NIS 27,225 thousand
(USD 6,320 thousand), equal to 19.83% in the year ended December 31, 2003.  These results are due to efficiency in the
ratio between sales and cost of sales.

Sales
and Marketing Expenses. Sales and marketing expenses
for the year ended December 31, 2004 increased to approximately
NIS 15,632 thousand (USD 3,629 thousand) or 9.14 % of sales, from
approximately NIS 11,662 thousand (USD 2,707 thousand), or 8.49 % of
sales, for the year ended December 31, 2003. This increase in sales and
marketing expenses is mainly attributable to improving the selling
infrastructure, including promotional campaign cost of approximately NIS 2,000
thousand (USD 464 thousand), and recruiting more experienced employees and
management in the sales department, resulting in increased payroll expenses of
approximately NIS 1,403 thousand (USD 325 thousand).

General
and Administrative Expenses. General and
administrative expenses for the year ended December 31, 2004 increased to
approximately NIS 9,134 thousand (USD 2,121 thousand), or 5.34% of sales,
from approximately NIS 8,335 thousand (USD 1,935 thousand), or 6.07% of
sales, for the year ended December 31, 2003.

Operating
Income. Operating income for the year ended
December 31, 2004 increased by approximately NIS 8,696 thousand (USD
2,018 thousand), or 120%, to approximately NIS 15,924 thousand (USD
3,694 thousand), or 9.32% of sales, from approximately NIS 7,228 thousand
(USD 1,678 thousand), or 5.27% of sales, for the year ended December 31,
2003.

Financial
Income, Net. The financial income, net, for the year
ended December 31, 2004 was approximately NIS 1,121 thousand (USD 260
thousand) compared with approximately NIS 4,336 thousand (USD 1,007
thousand) for the year ended December 31, 2003.  The results in 2004 were affected by an increase in value of
securities and shares for trade in 2004 that was significantly lower then in
2003.

Income
before Taxes. Income before taxes for the year ended
December 31, 2004 increased by approximately NIS 5,414 thousand (USD
1,257 thousand), or 46.5%, to approximately NIS 17,079 thousand (USD 3,962
thousand) from NIS 11,665 thousand (USD 2,708 thousand) for the year ended
December 31, 2003.

Page 24

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Taxes
on Income. Taxes on income for the year ended December 31,
2004 increased to approximately NIS 5,886 thousand (USD 1,366 thousand)
from approximately NIS 2,889 thousand (USD 671 thousand) in the year ended
December 31, 2003.

Net
Income. Net income for the year ended
December 31, 2004 increased by approximately NIS 2,417 thousand (USD 560
thousand) or 27.5% to approximately NIS 11,193 thousand (USD 2,596 thousand),
or 6.55% of sales, from  approximately NIS 8,776 thousand (USD 2,036
thousand), equal to 6.39% of sales for the year ended December 31, 2003,
and approximately NIS 7,057 thousand (USD 1,638 thousand), equal to 5.48% of
sales for the year ended December 31, 2002.

Year Ended December 31, 2003 Compared
With Year Ended December 31, 2002

Sales.
Sales for the year ended December 31, 2003, increased by approximately
NIS 8,515 thousand (USD 1,977 thousand), or 6.6%, to
approximately NIS 137,385 thousand (USD 31,891 thousand) from NIS
128,870 thousand (USD 29,914 thousand) for the year ended
December 31, 2002. The growth of income for the year ended December 31,
2003 compared with the year ended December 31, 2002 is a result of marketing
efforts taken by the Company followed by new products penetrating, that despite
of real abrasion of prices in the industry, the severe economy situation, abrasion
of wages and disposable income and growth in unemployment rate. The Company
continued to enlarge its activities and its penetration into new fields, mainly
frozen and chilled products.

Cost
of Sales. Cost of sales for the year ended December 31,
2003, increased by approximately NIS 9,034 thousand (USD
2,097 thousand), or 8.9%, to approximately NIS 110,160 thousand
(USD 25,571 thousand) or 80.17% of sales, from approximately
NIS 101,126 thousand (USD 23,474 thousand) or 78.47% of sales, for the
year ended December 31, 2002.  The
increase in cost of sales as a percentage from the total sales for the year
ended December 31, 2003 compared to the same period in 2002 reflects the fall
in the price of food products due to the deepening recession in the Israeli
market, including the growth in unemployment and decreased purchasing power in
the Israeli market, as well as an increase in local competition.

Gross
Profit. The results of sales and cost of sales, as
mentioned above, created a gross profit of NIS 27,225 thousand (USD 6,320
thousand), equal to 19.83% of the sales, compared to 21.53% in 2002 and 22.60%
in 2001.  These results are due to
efficiency in the ratio between sales and cost of sales and reduction of sales
prices to customers due to market conditions and competition versus the
above-mentioned rise in the price of products.

Sales
and Marketing Expenses. Sales and marketing expenses
for the year ended December 31, 2003 increased to approximately
NIS 11,662 thousand (USD 2,707 thousand) or 8.49% of sales, from
approximately NIS 10,024 thousand (USD 2,327 thousand), or 7.78% of
sales, for the year ended December 31, 2002.  This increase in sales in mainly attributable to improving the
selling infrastructure, including increased advertising costs of approximately
NIS 576 thousand, (USD 134 thousand) and recruiting more experienced
employees and management in the sales department, resulting in increased
payroll expenses of approximately NIS 762 thousand (USD 177 thousand).

General
and Administrative Expenses. General and
administrative expenses for the year ended December 31, 2003 slightly
increased by approximately NIS 136 thousand (USD 32 thousand) to
approximately NIS 8,335 thousand (USD 1,935 thousand), or 6.07% of
sales, from approximately NIS 8,199 thousand (USD 1,903 thousand), or
6.36% of sales, for the year ended December 31, 2002.

Operating
Income. Operating income for the year ended
December 31, 2003 decreased by approximately NIS 2,293 thousand (USD
532 thousand), or 24.1%, to approximately NIS 7,228 thousand
(USD 1,678 thousand), or 5.27% of sales, from approximately
NIS 9,521 thousand (USD 2,210 thousand), or 7.39% of sales, for the
year ended December 31, 2002.

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Financial
Income (Expenses), Net. The financial income, net, for
the year ended December 31, 2003 was approximately NIS 4,336 thousand
(USD 1,007 thousand) compared with financial expenses, net, of
approximately NIS 239 thousand (USD 56 thousand) for the year ended
December 31, 2002.  The results in
2003 were affected by an increase in value of securities and shares for trade
in the Israeli and international financial markets that resulted from the
investment of cash surpluses in short term investments and an adjustment of the
shareholders equity due to a decrease of 1.9% in the CPI in 2003 compared with
an increase of 6.5% in the previous year.

Income
before Taxes. Income before taxes for the year ended
December 31, 2003 increased by approximately NIS 2,354 thousand
(USD 546 thousand), or 25.3%, to approximately NIS 11,665 
thousand (USD 2,708 thousand) from NIS 9,311 thousand (USD 2,161
thousand) for the year ended December 31, 2002.

Taxes
on Income. Taxes on income for the year ended
December 31, 2003 slightly increased to approximately
NIS 2,889 thousand (USD 671 thousand) from approximately
NIS 2,254 thousand (USD 523 thousand) in the year ended
December 31, 2002.

Net
Income. Net income for the year ended
December 31, 2003 was approximately NIS 8,776 thousand (USD 2,037
thousand), or 6.39% of sales, compared with the year ended December 31,
2002  approximately NIS 7,057 thousand (USD 1,638 thousand), equal
to 5.48% of sales, and approximately NIS 8,614 thousand (USD 2,000 thousand) in
the year ended December 31, 2001, equal to 6.49% of sales.

B.       
LIQUIDITY AND CAPITAL RESOURCES

Since
its inception, the Companys operations have been funded mainly through equity
and cash flows from operating activities, as well as by short-term indebtedness
provided by Israeli banks and loans from Willi-Food Investments Ltd., its
controlling shareholder. The Companys bank indebtedness is secured by certain
liens on its share capital, goodwill and certain other assets.

For
the year ended December 31, 2004, cash and cash equivalents increased from
approximately NIS 12.5 million (USD 2.9 million) to approximately
NIS 55.8 million (USD 13.0 million). For the year ended December 31,
2003, cash and cash equivalents decreased from approximately
NIS 27.2 million (USD 6.3 million) to approximately
NIS 12.5 million (USD 2.9 million).

During that year ended December 31, 2004, marketable securities decreased from
NIS 42.3 million (USD 9.8 million) to NIS 1.7 million (USD 0.4 million). For
the year ended December 31, 2003 cash and cash equivalents increased from
approximately NIS 21.1 million (USD 4.9 million) to approximately NIS 42.3
million (USD 9.8 million).

For
the year ended December 31, 2004, the Company utilized a cash flow for
operating activities of approximately NIS 18 thousand (USD
4 thousand), primarily as a result of net income of approximately
NIS 11.1 million (USD 2.6 million) and an offset by increase of
trade accounts receivables of approximately NIS 11.2 million (USD 2.6 million)
and inventory of approximately NIS 8.3 million (USD 1.9 million). For the year
ended December 31, 2003, the Company generated a positive cash flow from
operating activities of approximately NIS 5.4 million (USD
1.3 million), primarily as a result of net income of approximately
NIS 8.8 million (USD 2.0 million). For the year ended
December 31, 2002, the Company generated a positive cash flow from
operating activities of approximately NIS 9.2 million (USD
2.1 million) primarily as a result of net income of NIS 7.1 million (USD
1.6 million). During the year ended December 31, 2004, the Company
generated a NIS 40.4 million (USD 9.4 million) from investing
activities, mainly for the realization of marketable securities amounting to
NIS 41.0 million (USD 9.5 million). During the year ended December 31,
2003, the Company utilized NIS 19.1 million (USD 4.4 million)
for investing activities, mainly for the purchase of marketable securities
amounting to NIS 17.6 million (USD 4.1 million) and purchase of equipment
(mainly refrigeration trucks) for NIS 2.0 million (USD 0.47 million). During
the year ended December 31, 2002, the Company utilized approximately
NIS 6.6 million (USD 1.5 million) for investing activities, mainly due to
purchase of marketable securities amounting to NIS 5.8 million (USD 1.3
million) and purchase of property and equipment (mainly refrigeration trucks)
amounting to NIS 1.1 million (USD 0.25 million).

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During
the year ended December 31, 2004, the Company generated cash flow from
financing activities of NIS 3.0 million (USD 0.7 million). During the year
ended December 31, 2003, the Company utilized cash flow from financing
activities of NIS 1.0 million (USD 0.24 million)  mostly short term bank credit.
During the year ended December 31, 2002 the Company utilized cash flow
from financing activities of NIS 1.1 million (USD 0.25 million).

The
Companys cash requirements, net, during the years ended December 31,
2004, 2003 and 2002 were met primarily through its working capital. As of
December 31, 2004, the Company had working capital of approximately NIS 96.0
million (USD 22.3 million) compared with NIS 83.9 million (USD 19.5 million) as
of December 31, 2003 and with NIS 75.7 million (USD 17.6 million) as of
December 31, 2002.

The
Companys trade receivables increased to NIS 40.9 million (USD
9.5 million) as of December 31, 2004 from NIS 29.7 million
(USD 6.9 million) as of December 31, 2003.  The average volume of the Companys trade receivables days
outstanding were 85 days for 2004 compared with 84 days for 2003 and 64 days
for 2002. The Company believes that its present working capital is sufficient
for the Companys present requirements.

Impact of Inflation
and Devaluation on Results of Operations, Liabilities and Assets

The
rate of inflation in Israel during the last six years has been significantly
reduced compared to the situation of the Israeli economy before that. The rate
of devaluation which was low until 2002, has increased and the representative
rate of the U.S. dollar reached NIS 4.308 on December 31, 2004 compared with
4.379 on December 31, 2003, NIS 4.737 on December 31, 2002, and 4.416 on
December 31, 2001. The representative rate of the U.S. dollar on June 27, 2005
was NIS 4.541.

The
annual rates of inflation during the years ended December 31, 2000, 2001,
2002, 2003 and 2004 were approximately 0%, 1.4%, 6.5%, (1.9%) and 1.6%
respectively, while during such periods Israel effected devaluation of the
NIS against the U.S. Dollar of approximately  (2.7%), 9.3% 7.3%, (7.6%) and (1.6%) respectively. During each of
the years ended December 31, 2000, 2003 and 2004, the rate of inflation in
Israel exceeded the rate of devaluation of the NIS against the U.S.
dollar, while during each of the years ended December 31, 2001 and 2002
the rate of devaluation of the NIS against the U.S. dollar exceeded the
rate of inflation in Israel.

A
devaluation of the NIS in relation to the U.S. dollar will have the effect
of decreasing the U.S. dollar value of any assets of the Company which consist
of NIS or receivables payable in NIS. 
Such a devaluation would also have the effect of reducing the U.S.
dollar amount of any liabilities of the Company which are payable in
NIS (unless such payables are linked to the dollar). Conversely, any
increase in the value of the NIS in relation to the U.S. dollar will have
the effect of increasing the U.S. dollar value of any linked assets of the
Company and the U.S. dollar amount of any linked NIS liabilities of the
Company.

The
representative rate on December 31, 2004 was 4.308 per USD 1.00, equal to a
revaluation of 1.6% from the representative rate on December 31, 2003
which was NIS 4.379 per USD 1.00. The representative rate on December 31,
2003 was 4.379 per USD 1.00, equal to a revaluation of 7.6% from the
representative rate on December 31, 2002 which was NIS 4.737 per USD
1.00. The representative rate on December 31, 2002 was NIS 4.737 per USD 1.00, equal
to a devaluation of 7.3% from the representative rate at December 31, 2001
which was 4.416 per USD 1.00.  The
representative rate on December 31, 2001 was NIS 4.416 per USD 1.00, equal to a
devaluation of 9.3% from the representative
rate at December 31, 2000 which was 4.041 per USD 1.00. The
representative rate on December 31, 2000 was NIS 4.041 per USD 1.00,
equal to a revaluation of 2.7% from the representative rate at
December 31, 1999 which was 4.153 per USD 1.00.

Page 27

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The
dollar cost of the Companys operations in Israel is influenced by the extent
to which any increase in the rate of inflation in Israel over the rate of
inflation in the United States is offset by the devaluation of the NIS in
relation to the U.S. dollar.

The
Companys assets are not linked to the Israeli CPI or the U.S. dollar. However,
some of the Companys liabilities are linked to the Israeli CPI and various
foreign currencies. Consequently, inflation in Israel and currency fluctuations
will have a negative effect on the value to the Company of payments the Company
receives in NIS and on the Companys liabilities linked to foreign
currencies.

C.       RESEARCH
AND DEVELOPMENT, PATENTS AND LICENSES

Not
applicable.

D.       TREND
INFORMATION

During
the past three years, there has been an increase in the number of small private
supermarket stores that have opened in Israel, which has resulted in greater
price competition in the stores and in our business. The increased price
competition has resulted in an increase in our cost of sales as a percentage of
total sales and a decrease in our gross profit in 2003 from 2002 and from 2001.
During 2004 the Company initiated promotion campaigns to enlarge its sales and
expand the variety of customers.

According
to announcements published in the Israeli press, the annual retail Israeli food
market consists of approximately NIS 34,700 million (approximately USD 8,055
million), of which approximately 47% consists of sales of supermarket chains in
the organized market, 23% consists of sales of private supermarket chains and
30% is attributable to others.

E.       OFF-BALANCE
SHEET ARRANGEMENTS

Not
applicable.

F.       TABULAR
DISCLOSURE OF CONTRACTURAL OBLIGATIONS

The
following tables of the Companys material contractual obligations as of
December 31, 2004 and 2003, summarizes the aggregate effect that these
obligations are expected to have on our cash flows in the periods indicated:

2004

|                        |  |                        |  |                          |  |                |  |            |                          |                   |  |  |  |                       |  |  |  |  |   |  |  |  |  |   |  | 
|----------------------- |  | ---------------------- |  | ------------------------ |  | -------------- |  | ---------- | ------------------------ | ----------------- |  |  |  | --------------------- |  |  |  |  | - |  |  |  |  | - |  | 
|                        |  | Payments due by period | 
|                        |  |                        | 
|                        |  |                        | 
|Contractual Obligations |  | Total                  |  | Less than 1 year         |  | 22-3 years     |  | 44-5 years |                          | More than 5 years | 
|                        |  |                        |  |                          |  |                |  |            |                          |                   | 
|                        |  |                        |  |                          |  | (in thousands) |  |            |                          |                   | 
|                        |  |                        |  |                          |  |                |  |            |                          |                   |  |  |  |                       |  |  |  |  |   |  |  |  |  |   |  | 
|Property
  Leases       |  |                        |  | NIS 3,786
  (USD 879)    |  |                |  |            | NIS 1,852
  (USD 430)    |                   |  |  |  | NIS 1,934
  (USD 449) |  |  |  |  |  |  |  |  |  |  |  | 
|Open
  purchase orders  |  |                        |  | NIS 14,857
  (USD 3,449) |  |                |  |            | NIS 14,857
  (USD 3,449) |                   |  |  |  |                      |  |  |  |  |  |  |  |  |  |  |  | 
|Operating
  Leases      |  |                        |  | NIS 18,643              |  |                |  |            | NIS 16,709              |                   |  |  |  | NIS 1,934            |  |  |  |  |  |  |  |  |  |  |  | 
|Total                   |  |                        |  | (USD 4,328)              |  |                |  |            | (USD 3,879)              |                   |  |  |  | (USD 449)             |  |  |  |  |  |  |  |  |  |  |  | 

Page 28

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2003

|                     | Payments due by period
|-------------------- | ----------------------
|
|
|
|
|Property Leases      |                       
|                     |                       
|                     |                       
|Open purchase orders |                       
|                     |                       
|Operating Leases     |                       
|                     |                       
|Total                |                       

G.       SAFE
HARBOR

This
annual report contains certain forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995). When used in
this report, the words anticipate, believe, estimate, expect, intend
and similar expressions, as they relate to the Company or the management of the
Company, identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events, based on certain
assumptions and information currently available to management, all of which are
subject to certain risks and uncertainties including, among others, the
Companys ability to develop and introduce new products, any significant
deterioration in the Companys relationship with its key customers and
suppliers, the Companys ability to successfully integrate the operations of
the Companys subsidiaries with those of the Company, fluctuations in key
currency exchange rates, changes in the political and economic conditions in
Israel, and other factors which may be beyond the Companys control. Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results of operations may vary materially
from those described herein as anticipated, believed, estimated, expected or
intended.

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|        |                                           
|------- | ------------------------------------------
|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.       DIRECTORS
AND SENIOR MANAGEMENT

The
Directors, executive officers and key employees of the Company are as follows:

| |                     |     |                                                  
| | ------------------- | --- | -------------------------------------------------
| | Name                | Age | Position with the Company                        
| |                     |     |                                                  
| | Joseph Williger     | 48  | Chief Executive Officer and Director             
| |                     |     |                                                  
| | Zvi Williger        | 50  | Chief Operating Officer and Chairman of the Board
| |                     |     |                                                  
| | Rachel Bar-Ilan (1) | 47  | Director                                         
| |                     |     |                                                  
| | David Weiss (1)     | 58  | External Director                                
| |                     |     |                                                  
| | Shai Bazak (1)      | 37  | External Director                                
| |                     |     |                                                  
| | Gil Hochboim        | 35  | Chief Financial Officer                          

| |     |                                          
| | --- | -----------------------------------------
| |    
| | (1) | Members of the Companys Audit Committee.

The
Directors are elected at the annual general meeting of shareholders and hold
office until the next annual general meeting of shareholders, and until their
successors have been elected. Officers serve at the discretion of the Board,
subject to the terms of any agreement between officers and the Company.

The
business experience of each of the Directors, executive officers and key
employees of the Company is set forth below:

Joseph
Williger, age
48,has served as the Chief
Executive Officer (or general manager) and a Director of the Company since its
inception in January 1994. He has also served as a director of the Companys
subsidiaries, W.F.D. and Gold Frost, since November 1996 and April 2001,
respectively. Mr. Williger has also served as a director and as chairman of the
Board of Willi-Food Investments, the controlling shareholder of the Company,
since December 1992 and June 1994, respectively. Mr. Williger has served
as Director of Titanic, a company he owns together with Mr. Zvi Williger, since
April 1990. Mr. Williger received his academic education in economics from
Bar-Ilan University in Israel in 1983. Mr. Williger is the brother of Zvi
Williger, Chief Operating Officer and Chairman of the Board of Directors of the
Company.

Zvi
Williger, age
50,has served as the Chief
Operating Officer and Chairman of the Company since January 1997, and from
inception of the Company to January 1997 as a Director and Manager of Marketing
Development of the Company. Mr. Williger has also served as a director of the
Companys subsidiaries, W.F.D. and Gold Frost, since November 1996 and April
2001, respectively. Mr. Williger has also served as a director of Willi-Food
Investments since December 1992. Mr. Williger served as Director of
Titanic since April 1990. Mr. Williger attended Fresno University in
California. Zvi Williger is the brother of Joseph Williger, Chief Executive
Officer and a director of the Company.

Rachel
Bar-Ilanhas served
as Director of the Company since May 2001. Since 1999, Ms. Bar-Ilan managed the
marketing and application of medical laboratory instrumentation in medical
laboratories of Medtechnica Ltd., a company publicly traded on the Tel Aviv
Stock Exchange. From 1994 to 1999, Ms. Bar-Ilan has worked for Egentec Ltd.,
where she has been in charge of the marketing and application of medical
instrumentation in the chemical field. Ms. Bar Ilan received her degree in
Medical Science (MSc) from the Technion  Israel Institute of Technology in
Haifa, Israel.

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David
Weiss is a Certified Internal Auditor from the
Institute of Internal Auditors (New York) and has served as the General Manager
of Retail Initiation Forum Ltd. since 2002, and also as an external director
and chairman of the Audit Committee of Kish Air Conditioning Ltd  an Israeli
Company traded on the Tel Aviv Stock Exchange. From 1989 through 2002, he
served as vice president of administration for Club Market Marketing Chains
Ltd., a large Israeli supermarket chain. Between 1981 and 1989 he served as
deputy internal auditor at Solel Bone Ltd., an Israeli construction company,
and between 1970 and 1981 he served in the Israeli port authorities as an
internal auditor. Mr. Weiss has also served in the past as a director of Co-Op
Tzafon, New-Farm Ltd., Hamashbir Mazon Ltd., Hamashbir Latcharcan Ltd. and
April Ltd., Israeli companies engaged in selling food, cloths and
pharmaceuticals to the end-user. Mr. Weiss received his BA in Accounting from
Haifa University, Israel.

Shai
Bazakhas served as an external director since August
2003 and carries an MA Public Administration. He is a director manager of
C.P.M. Israel Investment Company Ltd., an investment company. From 1998 through
2000 he served as the Consul General of Israel to Florida and Puerto Rico. From
1996 through 1998 he was spokesperson and media affairs advisor to the Prime
Minister of Israel, Mr. Benjamin Netanyahu. From 1994 through 1996 he was the
spokesperson and media advisor to the Likud party chairman.

Gil
Hochboim has served as Chief Financial Officer of the
Company since August 2000. Mr. Hochboim also provides the Companys principle
shareholder, Willi-Food Investments Ltd., with certain financial services.
Between April 1995 and February 1998, Mr. Hochboim served as Deputy Comptroller
of Dan Hotels Corp. Ltd. and between March 1998 and August 2000, he served as
deputy manager of Hamenia Goods Transport Corp. Ltd. Mr. Hochboim is a
certified public accountant (Israel). He received his BA in Accounting and
Business Management from the College of Management, Tel-Aviv, Israel.

B.       COMPENSATION

Compensation of Directors And Officers

The
aggregate direct compensation paid by the Company to its Directors and officers
mentioned above as a group for the fiscal year 2004 was approximately
NIS 3.1 million (USD 0.72 million), excluding bonuses in an aggregate
amount of approximately NIS 1.9 million (USD 0.44 million) paid
to Messrs. Joseph and Zvi Williger, but including payments made to
non-executive Directors as mentioned below. During the fiscal year of 2003, the
aggregate direct compensation paid by the Company to its Directors and officers
as a group was approximately NIS 3.1 million (USD 0.72 million),
excluding bonuses in an aggregate amount of approximately
NIS 1.2 million (USD 0.28 million) paid to Messrs. Joseph and
Zvi Williger, but including payments made to non-executive Directors as
mentioned below.

Payments
to non-executive Directors in the aggregate amount of approximately
NIS 72 thousand (USD 17 thousand) were made for the fiscal year 2004.
In 2003, payments to non-executive Directors in the aggregate amount of approximately
NIS 56 thousand (USD 13 thousand) were made, and in 2002, payments to
non-executive Directors in the aggregate amount of approximately
NIS 46 thousand (USD 10 thousand) were made.

The
foregoing does not include amounts expended by the Company for motor vehicles
made available to its officers, expenses (including business travel,
professional and business association dues and expenses) reimbursed to officers
and other benefits commonly reimbursed and paid for by companies in Israel. The
Company provides motor vehicles to key employees and certain officers, at the
Companys expense.

See
also Item 7, Major Shareholders and Related Party Transactions  Related Party
Transactions.

Page 31

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Management Service Agreements

As
of June 1, 1998, the Company entered into management services agreements with
companies controlled by each of Messrs. Joseph and Zvi Williger, respectively
(collectively, the Williger Management Companies), pursuant to which Messrs.
Joseph and Zvi Williger are to provide management services on behalf of the
Williger Management Companies to the Company (the Management Services
Agreements).

The
Management Services Agreements were for a period of four years commencing on
June 1, 1998 (the Management Services Period), were automatically
renewed on June 1, 2002 for two years and were automatically renewed for an
additional period of two years in June 2004. The Company had the ability to
terminate the Management Services Agreements only upon six months notice prior
to the end of the Management Services Period or any extension thereof, as the
case may be. In the event the Company would have terminated any of the
Management Services Agreements prior to the expiration of the Management
Services Period or any extension thereof, for any reason whatsoever, it would
have been obligated to pay all amounts due under the respective Management
Services Agreements through the expiration of the Management Services Period or
any extension thereof, as the case may be.

Each
of the Management Services Agreements provides for monthly services fees equal
to USD 24,500 (excluding VAT) and an annual bonus at a rate of 3% of the
Companys pre-tax annual profits, if such profits are equal to or less than
NIS 3.0 million (approximately USD 0.7 million), or at a rate of
5% if such profits exceed such level. In the year ended December 31, 2004, the
Company paid an amount of NIS 4.5 million (approximately USD
1.05 million) pursuant to the Management Services Agreements. The
Management Services Agreements further provide that benefits in general,
including the social benefits of Messrs. Joseph or Zvi Williger, and income tax
payments, national insurance payments and other payments due by employees in
respect of their employment, are to be paid for at the sole expense of the
Williger Management Companies. The Williger Management Companies have
undertaken to indemnify the Company with respect to any claims against the
Company with respect to employer/employee relations. In addition, each of the
Management Services Agreements includes confidentiality and non-competition
provisions for the duration of the Management Services Period.

On
May 4, 2005 the Audit Committee and the Board of Directors of the Company decided
to amend the Management Services Agreements. Mr. Zvi Williger is considered,
for purpose of article 268 of the Israeli Companies Act 5759-1999 as the
controlling shareholder of the Company.

The
amendments were approved unanimously by the Audit Committee and the Board of
Directors and Messrs. Zvi Williger and Joseph Williger did not participate in
the meetings of the Audit Committee and the Board of Directors. These
amendments are subject to the approval of the Companys shareholders at the General
Meeting of Shareholders that will convene on July 20, 2005.

The
Management Services Agreements will be amended as follows:

|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The term of the Management Services Agreements were extended
  indefinitely, subject to clauses (2), (5) and (6) below.                                                                                   
|    |                                                                                                                                                                                                           
|(2) | Each of the parties to the Management Services Agreements may
  terminate the agreement at any time, and for any reason, by prior written
  notice, which will be delivered to the other party as follows:

| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | The Company may terminate the agreement at any time, and for any
  reason, by prior written notice of at least 18 months.
| |   |                                                                                                                          
| |  | Each Williger Management Company may terminate its agreement at any
  time, by prior written notice of at least 180 days.

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | The Company may waive receiving actual management services from the
  Williger Management Company during the prior notice period, but this will not
  eliminate its obligation to continue paying the Williger Management Company
  the management fees owed to the Williger Management Company until the
  termination of the prior notice period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(4) | If it is a Williger Management Company which terminates the
  Management Services Agreement, the Williger Management Company will be
  entitled to receive the management fees for a period of six (6) months, which
  shall begin after the prior notice period, whether or not it provides the
  Company with any management services during such 6-month period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(5) | In the event the Williger Management Company provides the management
  services to the Company without the presence of Messrs. Zvi Williger or
  Joseph Williger, as the case may be, and/or in the case of the death and/or
  permanent disability of Messrs. Zvi Williger or Joseph Williger, the Company
  will be entitled to terminate the Management Services Agreement immediately.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(6) | Both Messrs. Zvi Williger and Joseph Williger have agreed with the
  Company that if a liquidation order or receivership order is issued against a
  Williger Management Company which prevents the Williger Management Company
  from continuing to provide the management services according to the
  Management Services Agreement, they will immediately commence working for the
  Company in return for pay and social benefits costing the Company the same
  amount as the monthly management fees that the Company paid the Williger
  Management Company to that date, or alternatively, at their sole discretion,
  shall begin providing the Company with management services via another
  company owned and controlled by them under the conditions of the Management
  Services Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(7) | In addition, the Management Services Agreements contain provisions
  regarding the Company providing vehicles for the use of Messrs. Zvi Williger
  and Joseph Williger, and regarding full reimbursement (of an unlimited sum)
  of expenses incurred by Messrs. Zvi Williger and Joseph Williger while
  providing the management services to the Company, including reasonable
  lodging and travel expenses in Israel and abroad, phone expenses in their
  home and mobile phone expenses, including calls abroad related to providing
  the management services to the Company, subject to providing receipts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(8) | Messrs. Zvi Williger and Joseph Williger were previously employees of
  the Company and were, according to their original employment contracts,
  entitled to the abovementioned benefits that are now accorded to the Williger
  Management Companies. Furthermore, in 1998 the Audit Committee, the Board of
  Directors and the General Meeting of the Shareholders of the Company
  authorized changes in the terms of employment of Messrs. Zvi Williger and
  Joseph Williger such that they ceased being employees of the Company and
  began providing management services to the Company via the Williger
  Management Companies in return for receiving management fees equal to the
  cost of employing them by the Company prior to the change. However, an error
  occurred in the Management Services Agreements and the provisions detailed
  above in subsection (7) were omitted from the agreements, but these benefits
  were not taken into account when calculating the cost to the Company of
  employing Messrs. Zvi Williger and Joseph Williger prior to the
  abovementioned change, and therefore were not included in the management fees
  to which their management companies were entitled according to the Management
  Services Agreement. Despite the omission from the Management Services
  Agreement, the Company continued, in practice, to provide Messrs. Zvi
  Williger and Joseph Williger with vehicles for their use and reimburse them
  for their expenses according to subsection (7) above.

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In
August 2000, the Company entered into an employment agreement with Mr. Gil
Hochboim, pursuant to which Mr. Hochboim has agreed to serve as the Chief
Financial Officer of the Company. The agreement provides for a monthly salary
of NIS 22,000 (approximately USD 5,024). In addition to this salary, Mr.
Hochboim also receives the benefits customarily provided by the Company to its
senior employees, including bonuses and the use of a vehicle.

Allocation of Management Time and Interests

As
of April 1, 1997, the Company and Willi-Food Investments Ltd. entered into an
agreement pertaining to the allocation of corporate opportunities which may
arise from time to time. The agreement provides that Willi-Food Investments will
make available and provide a right of first refusal to the Company with regard
to any corporate opportunity offered to Willi-Food Investments Ltd. which
relates to the food business.

On
March 31, 2003, the Board of Directors of the Company authorized Willi-Food
Investments Ltd. to participate in an import license lottery, provided that
Willi-Food Investments Ltd. agrees that if it wins an import license it will:
(i) coordinate with the Company the items of merchandise to be imported using
the import license; (ii) in consideration for the transfer of the merchandise
that is imported using the import license, the Company will sell the
merchandise, retaining 20% of the selling price for itself and transferring the
balance, if any, to Willi-Food Investments Ltd. The Board of Directors of the
Company determined that this arrangement is not an extraordinary transaction.
In 2004, the amount retained by the Company pursuant to this arrangement was
NIS 453 thousand (USD 105 thousand).

Mr.
Joseph Williger serves as the chairman of the Board of Directors of Willi-Food
Investments Ltd. and Mr. Zvi Williger serves as a director and a general
manager of Willi-Food Investments Ltd. Messrs. Joseph and Zvi Williger own,
through companies under their control, approximately 18% and 40% of Willi-Food
Investments Ltd., respectively. Willi-Food Investments Ltd. is the controlling
shareholder of the Company. See Item 7: Major Shareholders and Related Party
Transactions.

Services to Willi-Food Investments Ltd.

The
Company has been providing certain services to Willi-Food Investments Ltd. on
an on-going basis since the Companys commencement of operations, including
office space and certain management, financial and administrative services. On
April 1, 1997, the Company entered into a service agreement with Willi-Food
Investments, which become effective as of May 19, 1997, the effective date
of the Companys initial public offering. Pursuant to this agreement,
Willi-Food Investments Ltd. is entitled to manage its operations from the
Companys executive offices in Yavne, including use of office facilities.

The
Company also agreed to provide Willi-Food Investments Ltd. with accounting and
secretarial services. In consideration for the use of the Companys facilities
and such other services, Willi-Food Investments Ltd. agreed to pay the Company
a monthly fee equal to NIS 5,350 (USD 1,240) plus VAT. This fee is payable
quarterly and is linked to the Israeli CPI. The agreement is for an unlimited
term, mutually terminable upon three months prior notice. The Company believes
that the fees for these services and the terms of such agreement are no less
favorable to it than could be obtained from an unaffiliated third party.

C.       BOARD
PRACTICES

Terms of Office

Directors
are elected by the shareholders at the annual general meeting of the
shareholders, except in certain cases where Directors (who are not External
Directors) are appointed by the Board of Directors, and their appointment is
later ratified at the first meeting of the shareholders thereafter. Except for
External Directors (as discussed below), Directors serve until the next annual
general meeting of the shareholders.

Page 34

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Alternate Directors

The
Articles of Association of the Company provide that any director may, by
written notice to the Company, appoint another person to serve as an alternate
director. Under the Israeli Companies Law, the directors of the Company cannot
appoint an incumbent director or an incumbent alternate director as an
alternate director. The term of appointment of an alternate director may be for
a specified period, or until notice is given of the termination of the
specified period or of the appointment. To the Companys knowledge, no director
currently intends to appoint any other person as an alternate director, except
if the director is unable to attend a meeting of the Board. A Director on a
Board Committee may appoint anyone to be his Alternate subject to the potential
alternate not being a member of such committee, and if the appointing Director
is an External Director then the alternate must be an External Director having
suitable financial and accountancy expertise or professional qualifications, as
those of the appointing director. Except for the foregoing regarding a
committee of the Board of Directors an External Director cannot appoint an
alternate director.

Audit Committee

Nasdaq Requirements

The
Companys Ordinary Shares are listed for quotation on the Nasdaq Small Cap
Market and we are subject to the rules of the Nasdaq Small Cap Market
applicable to listed companies. Under the current Nasdaq rules applicable to
the Company, a listed company is required to have an audit committee consisting
of at least three independent directors, all of whom are financially literate
and one of whom has accounting or related financial management expertise.
Rachel Bar-Ilan, Shai Bazak and David Weiss qualify as independent directors
under the current Nasdaq requirements, and are members of the Audit Committee.
The Company is a Controlled Company within the meaning of the Nasdaq rules
since more than 50% of its voting power is held by Willi-Food Investments Ltd.
As a Controlled Company, the Company is exempt from certain Nasdaq independence
requirements such as the requirement that a majority of the Board of Directors
be independent and the rules relating to independence of directors approving
nominations and executive compensation.

The
Audit Committee of the Board of Directors assists the board in fulfilling its
responsibility for oversight of the quality and integrity of our accounting,
auditing and financial reporting practices and financial statements and the
independence qualifications and performance of our independent auditors. The
Audit Committee also has the authority and responsibility to oversee our
independent auditors, to recommend for shareholder approval the appointment
and, where appropriate, replacement of our independent auditors and to pre-approve
audit engagement fees and all permitted non-audit services and fees.

External Directors under the Israeli
Companies Law

Under
the Israeli Companies Law, Israeli companies whose securities are publicly
traded are required to appoint at least two External Directors (the External
Directors) elected at a general meeting of a companys shareholders by a
prescribed majority intended to allow non-affiliates to influence such
election. The election of an External Director requires either a simple majority
of a companys shareholders attending and voting at the General Meeting, which
majority includes at least one-third of the Non-Controlling Shareholders
present and voting or that the votes against any External Director are less
than 1% of the total voting rights in the Company. A Controlling Shareholder
is defined in the Israeli Companies Law as a shareholder with the ability to
control the actions of the company, whether by majority ownership or otherwise,
and for the purpose of transactions with related parties, it may include a
shareholder who holds at least 25% of the voting rights in the Company,
provided that there is no other person who holds shares that have 50% or more
of the voting rights in the Company.

Page 35

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The
Israeli Companies Law details certain standards for the independence of
External Directors. They must be unaffiliated with the company on whose board
they serve and such companys principals. According to a recently adopted
amendment to the Israeli Companies Law, at least one of the External Directors
must have suitable financial and accountancy expertise and the rest of the
External Directors must have professional qualifications. The professional
qualifications and standards are to be determined in regulations, which have
not yet been adopted. According to the Israeli Companies Law, the External
Directors must be residents of Israel; however according to the Companies
Regulations (Relief for Public Companies whose Shares are Registered for Trade
Outside of Israel) 5760  2000 (the Relief Regulations), such requirement
does not apply to a Foreign Traded company. If all members of the board of
directors of a company are of the same sex, such company must appoint at least
one External Director of the opposite sex. The External Directors are entitled
to obtain all information relating to such companys management and assets and
to receive assistance, in special cases, from outside experts at the expense of
the company. The law imposes an obligation on these directors to act to convene
a meeting of a companys board of directors upon becoming aware of matters that
suggest infringements of law, neglect of good business practice or conduct by
an Officer, which may result in a breach of duty of such Officer. An Officer
is defined in the Israeli Companies Law as a director, managing director, chief
business manager, executive vice president, vice president, other manager
directly subordinate to the managing director and any other person assuming the
responsibilities of any of the foregoing positions without regard to such
persons title.

An
External Director shall be appointed for a period of three consecutive years
and may be re-appointed for one additional three-year period only. Under the
Israeli Companies Law, any committee of the board of directors to which the
board of directors has delegated its powers in whole or in part, must include
at least one External Director, and the audit committee must include all the
External Directors.

On
May 5, 2001 the Companys Board of Directors resolved, in accordance with the
Relief Regulations, that Messrs. Doron Rubin and L. Mark Zell shall act as
External Directors of the Company from that date for a three-year period. As of
August 2002 Mr. Doron Rubin no longer served as a director of the Company. The
Company appointed Mr. Shai Bazak as an External Director in August 2003. In May
2004, Mr. L. Marc Zell terminated his office. The Company appointed Mr. David
Weiss as an External Director, as a member of the Audit Committee and an audit
committee financial expert in August 2004.

Under
the Companies Law, Israeli companies whose securities are publicly traded are
also required to appoint an internal auditor, in accordance with the proposal
of the audit committee. The role of the internal controller is to examine, inter alia, whether the Companys actions
comply with the law, integrity and orderly business procedures. In November
1997, the Board of Directors of the Company, in accordance with the proposal of
the Companys audit committee, appointed Mr. Joshua Freund, CPA (Isr), as
internal auditor of the Company.

Approval of Certain Transactions under the
Israeli Companies Law

In
accordance with the Israeli Companies Law and the Companys Articles of Association,
the Company has agreed to indemnify and insure its directors and senior
officers against certain liabilities, which they may incur in connection with
the performance of their duties. Under the terms of such indemnification
provisions, the Company may, to the extent permitted by law, indemnify an
Officer for legal expenses incurred by him in connection with such
indemnification. Since the Israeli Companies Law has changed since the Company
agreed to the indemnification, it is necessary to completely restate the
Companys Articles of Association to reflect these changes and to provide for a
revised elimination of the potential liability of the Companys officers and a
revised indemnification for the Companys officers.

Page 36

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On
May 4, 2005, the Board of Directors and the Audit Committee of the Board of
Directors approved the complete restatement of the Companys Articles of
Association. The complete restatement of the Companys Articles of Association
was necessary in order to conform the Companys Articles of Association to the
revised provisions of the Israeli Companies Law. The complete restatement of
the Companys Articles of Association is available for review on the Companys
website at www.willi-food.co.il commencing on July 6, 2005. The complete
restatement of the Companys Articles of Association is subject to the approval
of the General Meeting of Shareholders that will convene on July 20, 2005.

On
May 4, 2005, the Board of Directors and Audit Committee of the Company voted to
approve the elimination of the potential liability to the Company of the
Companys Officers, including the Controlling Shareholders (as such terms are
defined in the Israeli Companies Law), which could arise from a breach of the
duty of care (except in connection with Distribution as such term is defined in
the Israeli Companies Law) owed to the Company by such persons in their
capacity as Officers, and to approve an irrevocable indemnification of the
Officers by the Company with respect to any liability or expense paid for by
the Officer or that the Officer may be obligated to pay for, with regard to the
matters set forth in the certificate attached as Exhibit A hereto. In light of
the changes to the Israeli Companies law, such indemnification provisions are
common in Israel. The elimination of the potential liability to the Company of
the Companys Officers and the irrevocable indemnification of the Officers by
the Company is subject to the approval of the Shareholders of the Company at
the General Meeting of Shareholders that will convene on July 20, 2005.

The
Israeli Companies Law requires disclosure by an Officer or by the Controlling
Shareholders of the Company to the Company in the event that an Officer has a
direct or indirect personal interest in transactions to which the Company
intends to be a party.

The
Israeli Companies Law requires that certain transactions, actions and
arrangements be approved, in certain cases, by the disinterested members of the
audit committee of a companys Board of Directors, and by the disinterested
members of the Board of Directors itself. In certain circumstances, approval of
the General Meeting of the Companys Shareholders is also required. All of the
External Directors must serve on the audit committee. The vote required by the
audit committee and the Board of Directors for approval of such matters, in
each case, is a majority of the disinterested directors participating in a duly
convened meeting.

Approval
by the audit committee and/or the board is required for such matters as:
(i) certain transactions to which the company intends to be a party and in
which an Officer, a controlling shareholder and/or certain other parties
(including affiliates of the aforementioned) have a direct or indirect personal
interest, (ii) actions or arrangements which could otherwise be deemed to
constitute a breach by an Officer of his or her fiduciary duty to the company,
(iii) arrangements with directors as to the term of their service, (iv)
arrangements with the controlling shareholder or its relatives as to the term
of their service and/or employment (v) indemnification and/or exemption
and/or insurance of Officers and/or holding such Officers harmless, and
(vi) certain transactions defined in the Israeli Companies Law as
extraordinary transactions (a transaction which is not in the ordinary course
of business or is not at market conditions, or a transaction which is likely to
have a material impact on the profitability, property or obligations of the company).

Arrangements
with directors regarding their service (including their indemnification and/or
insurance and/or their being exempt), extraordinary transactions between a
public company and controlling shareholders, a private placement as a result of
which a shareholder becomes a controlling shareholder, or a private placement
to a principal shareholder (a holder of 5% or more of a companys issued share
capital or voting rights) or due to which a shareholder will become a principal
shareholder of at least 20% of the voting rights in the Company before such
placement, the consideration for which is not in cash or not in traded
securities or not in fair market value and, in certain circumstances, the
matters enumerated above, may also require the Audit Committee and/or the Board
shareholder approval.

Page 37

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Directors
with respect to whom the foregoing matters are brought for Board of Directors
or Audit Committee approval are not entitled to be present during discussions
of, nor to participate in the vote for approval of, such matters at Board
and/or Audit Committee meetings, unless a majority of Audit Committee or Board
members, as the case may be, have a personal interest in such matter or the
matter involves non-extraordinary transactions between the company and either a
Director or a third party in which a Director has a personal interest. The
Companies Law further provides that in the event that a majority of board
members have a personal interest in such a matter, it also requires shareholder
approval.

D.       EMPLOYEES

For
information regarding the Companys employees see Item 4: Information on the
Company; Business Overview -- Employees.

E.       SHARE
OWNERSHIP

For
information regarding the share ownership of Directors and officers of the
Company see Item 7: Major Shareholders and Related Party Transactions.

Options

As
of June 27, 2005, there are no outstanding options to purchase ordinary shares
of the Company.

Employee Share Option Plan

In
May 1997, the Board of Directors of the Company adopted an employee share
option plan (the 1996 Plan), pursuant to which the Company granted
options to purchase 180,000 ordinary shares to employees, officers, Directors
and consultants of the Company and the subsidiary (including 160,000 options to
related parties).

Of
the above, options to purchase 130,000 ordinary shares were granted to Mr.
Joseph Williger and Mr. Zvi Williger at an exercise price equal to the nominal
value per share NIS 0.10. The options were exercisable as to 20% every
six-month anniversary from the date of grant, on a cumulative basis, during a
period of five years. These options were exercised in January 2000.

Options
to purchase 35,000 ordinary shares were held by the Companys officers and
Directors (as a group) and options to purchase 15,000 ordinary shares were held
by other employees. The options, granted as of the effective date of the
Companys initial public offering under the Companys 1996 Share Option Plan,
are generally exercisable during a five-year period commencing on the 24th
anniversary from the date of grant, at an exercise price equal to the initial
public offering price per share - USD 4.10 per share, which is equal to the
fair market value of the shares on the date of the grant. On April 2004, Zvi
Williger and Joseph Williger exercised 15,000 options each at an exercise price
of USD 4.1 per share. The 1996 Plan was terminated on May 2004, and the
remaining 20,000 options expired unexercised.

Page 38

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|        |                                                  
|------- | -------------------------------------------------
|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.       MAJOR
SHAREHOLDERS

The
following table sets forth, as of June 27, 2005, the number of Ordinary Shares
beneficially owned by (i) each shareholder known to the Company to own
more than 5% of the Ordinary Shares and (ii) all directors and officers as
a group:

|                                                    |  |                                               |  |                                   |        |  |  |  |       |   | 
|--------------------------------------------------- |  | --------------------------------------------- |  | --------------------------------- | ------ |  |  |  | ----- | - | 
|Name and Address                                    |  | Number ofOrdinary Shares
  Beneficially Owned |  | Percentage of
  Ordinary
  Shares |       
|                                                    |  |                                               |  |                                   |       
|Willi-Food
  Investments Ltd. (1)                   |  |                                               |  | 6,231,415                         | (3)    |  |  |  | 72.33 | % | 
|                                                    |  |                                               |  |                                   |        |  |  |  |       |   | 
|Joseph
  Williger (1)                               |  |                                               |  | 6,231,415                         | (2)(3) |  |  |  | 72.33 | % | 
|                                                    |  |                                               |  |                                   |        |  |  |  |       |   | 
|Zvi
  Williger (1)                                  |  |                                               |  | 6,231,415                         | (2)(3) |  |  |  | 72.33 | % | 
|                                                    |  |                                               |  |                                   |        |  |  |  |       |   | 
|All
  directors and officers as a group (2 persons) |  |                                               |  | 6,231,415                         | (2)(3) |  |  |  | 72.33 | % | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Willi-Food
  Investments Ltd.s securities are traded on the Tel Aviv Stock Exchange. The
  principal executive offices of Willi-Food Investments Ltd. are located at 3
  Nahal Snir St., Northern Industrial Zone, Yavne, 81224 Israel.  The business address of each of Messrs.
  Joseph Williger and Zvi Williger is c/o the Company, 3 Nahal Snir St.,
  Northern Industrial Zone, Yavne, 81224 Israel.                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(2) | Includes 6,231,415  Ordinary Shares owned by Willi-Food  Investments Ltd. Messrs. Zvi Williger and Joseph
Williger  serve as directors and executive  officers of Willi-Food  Investments  Ltd. and of the Company.
Under  Israeli  law,  Mr.  Zvi  Williger  is  deemed  to be the  controlling  shareholder  of  Willi-Food
Investments Ltd. and has the ability to control the Companys management and policies,  including matters
requiring  shareholder  approval  such as the  election of  directors.  Under  Israeli  law,  Mr.  Joseph
Williger,  who owns  approximately  18% of the Ordinary  Shares of  Willi-Food  Investments  Ltd., is not
deemed to be a member of a group with Mr. Zvi Williger or a controlling shareholder of the Company.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(3) | In connection with Willi-Food Investments Ltd.s second public offering on the Tel Aviv Stock Exchange in October 1997,
1,700,000 of the Ordinary Shares of the Company held by Willi-Food Investments Ltd. have been pledged in favor of The Trust
Company of the Invested Bank (Israel) as collateral to secure Willi-Food Investments Ltd.s obligations and indebtedness to
holders of its debentures, which are publicly traded on the Tel Aviv Stock Exchange.  These debentures had an aggregate
principal amount of NIS 2.8 million (approximately USD 0.6 million) at June 27, 2005.                                                                                                                                                                  

All
of the shareholders of the Company (including Willi-Food Investments Ltd.) have
the same number of votes for each ordinary share held.  Accordingly, Willi-Food Investments Ltd.
does not have voting rights that are different from those of the Companys
other shareholders. The Company believes that 2,383,585 Ordinary Shares
(approximately 27.67% of its outstanding Ordinary Shares) are held by persons
who are not officers, directors or the owners of 10% of the Companys
outstanding Ordinary Shares.

Page 39

---

---



B.       RELATED
PARTY TRANSACTIONS

In
April 1997, the Company entered into employment agreements with each of Mr. Zvi
Williger and Mr. Joseph Williger (related parties), pursuant to which Mr. Zvi
Williger agrees to serve as Chairman of the Board of Directors and Chief
Operating Officer of the Company and Mr. Joseph Williger agrees to serve as a
director and Chief Executive Officer of the Company.  Pursuant to the agreements, each of the above-mentioned related
parties shall devote the substantial portion of his time to his work in
the Company.

The
employment agreements were for a period of four years commencing April 1997,
and are automatically renewed in April 2001 for an additional two years and are
automatically renewable for additional terms of two years each unless either
party notifies the other, six months prior to the expiration of the employment
period, of his intention not to renew the agreement.  If the Company terminates the agreements prior to the expiration
of the employment period, it was required to pay to each of the above-mentioned
related parties all amounts due to it under the agreements through the end of
the employment period.

The
employment agreements provide for each of the above-mentioned related parties
monthly remuneration, in NIS, equal to USD 17,500 and an annual bonus for the
1997 fiscal year and thereafter of 3% of the Companys pre-tax annual profits
(if such profits are equal to or less then NIS 3 million, approximately
USD 0.7 million), or 5% (if such profits exceed this level).  The agreements also provide for managers
insurance, paid annual vacation, paid annual sick leave, social security, study
fund, the use of a motor vehicle and reimbursement of expenses. In addition,
the agreements include confidentiality undertakings and non-competition
provisions.

In
June 1998 the Company entered into management service agreements with the
above-mentioned related parties through Williger Management Companies. These
agreements replaced the agreements entered into in April 1997.  The agreements are for a period of four
years commencing June 1998, were renewed in June 2002 for two years and were
automatically renewed in June 2004 for an additional period of two years.  The management fees are USD 24,500 a month
to each of the Williger Management Companies. In addition, according to the
agreements, each of the Williger Management Companies is entitled to an annual
bonus as provided in the employment agreements for the year 1998 and
thereafter, as described above.

On
May 4, 2005, the Audit Committee and the Board of the Company, resolved to
amend the provisions of the two above-mentioned agreements. The amendments are
subject to the approval by the shareholders of the Company at the General
Meeting of Shareholders that will convene on July 20, 2005. Please refer to
Item 6: Directors, Senior Management and Employees; Compensation  Management
Service Agreements for more detail regarding the amendments.

On
April 1, 1997, the Company entered into an agreement with Willi-Food
Investments Ltd., its parent company, pursuant to which the Company may lease
office facilities and provide administrative services to its parent Company for
a monthly charge of NIS 4,500 (USD 1,023) from June 1997 linked to the
Israeli CPI of June 1997.  See Item 6:
Directors, Senior Management and Employees - Compensation of Directors and
Officers and Management Services Agreements.

Regarding
lease agreements with related parties  see Item 4: Information on the Company
-- Property plants and equipment.

C.       INTERESTS
OF EXPERTS AND COUNSEL

Not
applicable.

Page
40

---

---



|        |                        
|------- | -----------------------
|ITEM 8. | FINANCIAL
  INFORMATION

A.       CONSOLIDATED
STATEMENTS AND OTHER FINANCIAL INFORMATION

The
financial statements required by this item are found at the end of this report,
beginning on page F-1.

Dividend Policy

The
Company has never declared or paid cash dividends on its ordinary shares, and
does not currently anticipate paying cash dividends in the foreseeable future.
The Company intends to retain future earnings, if any, to finance its
operations and expansion strategy.  However, if such be declared, nonresidents
of Israel who have purchased ordinary shares of the Company will be able to
receive dividends and any amounts payable upon the dissolution, liquidation or
winding up of the affairs of the Company, as well as the proceeds of any sale
in Israel of the ordinary shares to an Israeli resident, freely repatriable in
certain non-Israeli currencies (including dollars) at the rate of exchange
prevailing at the time of conversion, pursuant to a general permit issued by
the Controller of Foreign Currency at the Bank of Israel under the Currency
Control Law, 1978, as amended in May 1998, provided that Israeli income tax had
been paid on such amounts by the Company.

Neither
the Memorandum of Association or Articles of Association of the Company nor the
laws of the State of Israel restrict in any way the ownership or voting of
ordinary shares by non-residents of Israel, except with respect to citizens of countries
which are in a state of war with Israel.

Guarantees and Pledges

The
Company guarantees, without limitation as to amount and for an unlimited period
of time, 50% of the obligations of its wholly-owned subsidiary, Willi Frozen,
both to Bank Leumi LeIsrael Ltd. and to the United Mizrahi Bank Ltd. As of
December 31, 2004, Willi Frozen (previously Fanny Food Importing and
Distribution (1996) Limited) had no obligations to such banks.

The
Company also guarantees, without limitation as to amount and for an unlimited
period of time, the obligations of its wholly-owned subsidiary, W.F.D., to the
United Mizrahi Bank Ltd. As of December 31, 2004, W.F.D. had no
obligations to United Mizrahi Bank Ltd.

The
Company also guarantees, without limitation as to amount and for an unlimited
period of time, the obligations of its wholly-owned subsidiary, Gold Frost,
both to bank Leumi LeIsrael Ltd. and to the United Mizrahi Bank Ltd. As of
December 31, 2003, Gold Frost had no obligations to such banks.

Pursuant
to a debenture issued to each of Bank Leumi LeIsrael, Bank Mizrahi Ltd. and
Bank Hapoalim Ltd., the Company has pledged all of its assets (including its
outstanding share capital and good will of the Company) in favor of such banks
to secure its obligations or those obligations incurred by the Company jointly
with third parties, including obligations with respect to letters of credit
with the Companys suppliers.  Bank
Leumi LeIsrael, Bank Mizrahi Ltd. and Bank Hapoalim Ltd. have agreed among
them that the pledges subject to such debentures shall rank pari passu.

The
Companys executive offices are leased from affiliated parties on terms no less
favorable to it than could be obtained from an unaffiliated third party.  See Item 4: Information on the
Company.

Page 41

---

---



B.       SIGNIFICANT
CHANGES

We
are not aware of any significant changes bearing upon our financial condition
since the date of the audited consolidated financial statements included in
this annual report.

Legal Proceedings

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | A lawsuit was filed
  against the Company in January 2004 by the State of Israel, alleging the
  engagement in storage activities of refrigerated food without a license. The
  Company has reached an understanding with the States attorney that if  by
  March 15, 2005  it discontinues this activity the State would withdraw its
  charge. The Company has since complied with this understanding and it is
  therefore expected that the State will withdraw the charge.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|2. | A lawsuit was filed in
  December 2001 against 29 importers/producers of food products, including the
  Company, for an amount totaling NIS 500 million ($116 million). Concurrently,
  the plaintiffs filed a request for an exemption from the court fee. Following
  the courts rejection of the plaintiffs request for the noted fee exemption
  and their failure to pay it the court dismissed the case.In January 2004 the
  abovementioned plaintiffs filed a new lawsuit against the 29 noted
  importers/producers for NIS 1 billion ($232 million). Again, a request was
  made concurrently for an exemption from the court fee. The Companys legal
  counsel believes that the plaintiff do not stand a reasonable chance for
  prevailing and until the fee issue is settled this matter should not be regarded
  as a real claim.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3. | A lawsuit was filed
  against the Company and a subsidiary in respect of their marketing and
  distribution of products manufactured by Arla. The plaintiffs allege that the
  defendants marketed products bearing a commercial tag in which the plaintiffs
  have rights. The plaintiffs request a court injunction prohibiting the
  Company and its subsidiary from marketing these products as well as an
  indemnification of NIS 100 thousand (USD 23 thousand). Concurrently, a
  counter claim was filed by Arla, alleging misrepresentation, breach of
  fiduciary duties, exceeding authorization and breach of its rights in an
  intellectual property On March, 2005 the court decided, in a temporary order,
  that the intellectual property rights of the above mentioned tags belong
  apparently to Arla, forbad the market products under those tags and
  instructed the plaintiff to collect products which were signed by those tags
  or commercial name from distributors. The Company committed itself to
  compensate the plaintiff regarding every damage derived from the temporary
  order. This Courts decision limit probability that the lawsuit will be
  filled against the Company. It is impossible to quantify the damage to the
  plaintiffs due to the temporary order or to evaluate the Companys exposure,
  but the Company believes that it may be insignificant.

There
are several other suits against the Company, however their sums are immaterial
even if the plaintiffs win the suits.

Other
than as stated above, there are no pending or, to the Companys knowledge,
threatened legal proceedings, the outcome of which, in the Companys view,
would have a material adverse affect on the Companys consolidated financial
position.

For
information concerning taxes to which stockholders in the United States may be
subject, see Item 10: Additional Information  Taxes.

Page 42

---

---



|        |                        
|------- | -----------------------
|ITEM 9. | THE OFFER
  AND LISTING

A.       OFFER
AND LISTING DETAILS

The
Companys ordinary shares have been traded in the Nasdaq Stock Market (Small
Cap) under the symbol WILCF since May 19, 1997.  The warrants that were issued as part of the Companys initial
public offering in May 1997 expired in May 2000.

The
following table sets forth for the periods indicated the closing representative
high and low bid quotations of the Companys ordinary shares as reported by
Nasdaq and adjusted according to the split by bonus share which took place on
December 2004. The bid quotations are expressed in United States dollars and are
not adjusted for retail mark-up, mark-down or commissions and do not
necessarily represent actual transactions.

|                        |                 |          |  |                 |  |  |  |  |  | 
|----------------------- | --------------- | -------- |  | --------------- |  |  |  |  |  | 
|                        | Calendar Period |          |  | Ordinary Shares | 
|                        |                 |          |  |                 | 
|                        | High            | Low     
|                        |                 |          |  |                 |  | 
|                        |                 |          |  |                 |  | 
|2005                    |                 |         
|                        |                 |         
|First
  Quarter         | 8-15/32         | 3-22/36 
|                        |                 |         
|Second
  Quarter*       | 6-13/128        | 4-45/128
|                        |                 |         
|2004                    |                 |         
|                        |                 |         
|First
  Quarter         | 1-63/64         | 1-63/64 
|                        |                 |         
|Second
  Quarter        | 2-11/16         | 1-29/32 
|                        |                 |         
|Third
  Quarter         | 2-11/16         | 1-19/128
|                        |                 |         
|Fourth
  Quarter        | 4-3/64          | 2-71/128
|                        |                 |         
|2003                    |                 |         
|                        |                 |         
|First
  Quarter         | 31/32           | 11/16   
|                        |                 |         
|Second
  Quarter        | 7/8             | 5/8     
|                        |                 |         
|Third
  Quarter         | 1-21/64         | 127/128 
|                        |                 |         
|Fourth
  Quarter        | 1-101/128       | 25/64   
|                        |                 |         
|2002                    |                 |         
|                        |                 |         
|First
  Quarter         | 2               | 1-1/4   
|                        |                 |         
|Second
  Quarter        | 1-21/64         | 1-1/32  
|                        |                 |         
|Third
  Quarter         | 1-13/64         | 1-1/4   
|                        |                 |         
|Fourth
  Quarter        | 1-1/4           | 59/128  
|                        |                 |         
|*
  Until June 15, 2005 |                 |         



The
high and low bid quotations for the Companys ordinary shares were 5-21/64 and
4-45/128 in May 2005, 6-13/128 and 4-87/128 in April 2005, 8-7/128 and 6-3/128
in March 2005, 8-15/32 and 4-101/128 in February 2005, 5-15/16 and 3-22/36 in
January 2005.

The
high and low bid quotations for the Companys ordinary shares were 4-3/64 and
1-19/128 in 2004; 1-101/128 and 5/8 in 2003; 2 and 59/128 in 2002;

Page 43

---

---



B.       PLAN
OF DISTRIBUTION

Not
applicable.

C.       MARKETS

In
May 1997, our ordinary shares began trading on the Nasdaq Small Cap Market
under the symbol WILCF.

D.       SELLING
SHAREHOLDERS

Not
applicable.

E.       DILUTION

Not
applicable.

F.       EXPENSES
ON THE ISSUE

Not
applicable.

Page 44

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---



|         |                       
|-------- | ----------------------
|ITEM 10. | ADDITIONAL INFORMATION

A.       SHARE
CAPITAL

Not
applicable.

B.       MEMORANDUM
AND ARTICLES OF ASSOCIATION

For
information with respect to the Memorandum and Articles of Association see Item
6.

C.       MATERIAL
CONTRACTS

For
information with respect to the Companys Material Contracts see Item 4 and
Item 7.

D.       EXCHANGE
CONTROLS

There are
currently no Israeli currency control restrictions on payments of dividends or
other distributions with respect to our ordinary shares or the proceeds from
the sale of our ordinary shares, except for the obligation of Israeli residents
to file reports with the Bank of Israel regarding certain transactions.
However, legislation remains in effect, pursuant to which currency controls can
be imposed by administrative action at any time and from time to time.

E.       TAXATION

The
following is a summary of the material current tax laws of the State of Israel
as they relate to the Company and its shareholders. The Israeli government
implemented the recommendations, which concern certain tax reforms: a tax of
1015% on gains from securities, savings, deposits and other investments
(beginning January 2003); a personal tax system which will replace the
territorial tax concept; a gradual reduction in the income tax rates (in 2008 a
maximum 49% including payments to social security); a 25% tax on gains from
mutual funds; a 2550% on allocation of options to employees.

Such
reforms may effect changes with respect to individual and/or company tax rates
and capital taxation. To the extent that the following discussion describes
legislation that remains subject to judicial or administrative interpretation,
there can be no assurance that the views expressed herein will be consistent
with any such interpretation in the future. This discussion is not intended and
should not be construed as legal or professional tax advice, and does not cover
all possible tax considerations.

General Corporate Tax Structure

In
general, Israeli companies are subject to company tax at a rate of 35%
(supposed to be reduced to 34% in 2005, to 32% in 2006, to 30% in 2007 and
finally to 25% according to an announcement made lately by the Ministry of
Finance) of taxable income.

Since
the tax year 1993, the regular rate of company tax to which Israeli companies
were subject decreased by 1% each year until 1996 (i.e., from 39% in 1993 down
to 36% in January 1, 1996). In 2004 the companys tax was decreased to
35%.

Page 45

---

---



Taxation under Inflationary Conditions

Taxation
under the Income Tax Law (Adjustment for Inflation), 1985 (the Adjustment for
Inflation Law) was designed to neutralize the erosion of capital investments
in businesses and to prevent tax benefits resulting from the deduction of
inflationary financial expenses. The law applies a supplementary set of
inflationary adjustments to the normal taxable profit computed according to
regular historic cost principles.

The
Adjustment for Inflation Law introduced a special tax adjustment for the
preservation of equity based on changes in the Israeli CPI whereby certain
corporate assets are classified broadly into fixed (inflation resistant) assets
and non-fixed assets. Where shareholders equity, as defined in the Adjustment
for Inflation Law, exceeds the depreciated cost of fixed assets, a tax
deduction, which takes into account the effect of inflationary change on such
excess, is allowed (up to a ceiling of 70% of taxable income for companies in
any single tax year, with the unused portion permitted to be carried forward on
a linked basis with no ceiling). If the depreciated cost of fixed assets
exceeds shareholders equity, then such excess multiplied by the annual
inflation charge is added to taxable income.

Furthermore,
subject to certain limitations, depreciations on fixed assets and losses
carried forward are adjusted for inflation based on changes in the Israeli CPI
(from the beginning of the 1982 fiscal year, and as of the 1985 fiscal year,
with respect to equipment).

Capital Gains Tax and Taxation of
Non-Residents

Israeli
law imposes a capital gains tax on the sale of capital assets, including
securities held by the Company and shares of the Company sold by holders
thereof. The law distinguishes between the Real Gain and the Inflationary
Surplus, computed on the basis of the increase in the Israeli CPI between the
date of purchase and the date of sale.

Inflationary
Surplus accumulated until December 31, 1993 is taxed at a rate of 10% for
residents of Israel (reduced to no tax for non-residents if calculated
according to the exchange rate of the dollar instead of the Israeli CPI), while
the Real Gain is added to ordinary income which is taxed at the applicable
ordinary rates for individuals and 35% for corporations, while Inflationary
Surplus accumulated from and after December 31, 1993 is exempt from any
capital gains tax.

Under
the provisions of the Convention between the Government of the State of Israel
and the Government of the United States of America with Respect to Taxes on
Income (the US-Israel Tax Treaty) which became effective as of January 1,
1995, capital gains realized by a US shareholder with respect to a disposition
of ordinary shares will be exempt from Israeli capital gains tax, provided such
shareholder holds less than 10% of the voting stock of the Company at any time
during the 12-month period preceding such disposition. Israeli capital gains
tax may also be applicable to purchasers of ordinary shares who are not
residents of Israel or the United States, subject to the provisions of any
applicable tax treaties.

Non-residents
of Israel are subject to income tax on income derived from sources in Israel.
On the distribution of dividends other than bonus shares (stock dividends),
income tax is withheld at source at the rate of 25%, unless a different rate is
provided in a treaty between Israel and the shareholders country of residence.
Under the US-Israel Tax Treaty, the maximum tax on dividends paid to a holder
of ordinary shares who is a resident of the United States, will be 25%.

Page 46

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---



F.       DIVIDENDS
AND PAYING AGENTS

Not
applicable.

G.       STATEMENTS
BY EXPERTS

Not
applicable.

H.       DOCUMENTS
ON DISPLAY

We are
subject to the informational requirements of the Securities Exchange Act of
1934, as amended, applicable to foreign private issuers and fulfill the obligation
with respect to such requirements by filing reports with the Securities and
Exchange Commission. You may read and copy any document we file with the
Securities and Exchange Commission without charge at the Securities and
Exchange Commissions public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such material may be obtained by mail from
the Public Reference Branch of the Securities and Exchange Commission at such
address, at prescribed rates. Please call the Securities and Exchange
Commission at l-800-SEC-0330 for further information on the public reference
room.

As a
foreign private issuer, we are exempt from the rules under the Exchange Act
prescribing the furnishing and content of proxy statements, and our officers,
Directors and principal shareholders are exempt from the reporting and
short-swing profit recovery provisions contained in Section 16 of the
Exchange Act. In addition, we are not required under the Exchange Act to file
periodic reports and financial statements with the Securities and Exchange
Commission as frequently or as promptly as United States companies whose
securities are registered under the Exchange Act.

|                                |                                                             
|------------------------------- | ------------------------------------------------------------
|I.       SUBSIDIARY
INFORMATION
|                               
|Not
applicable.                
|                               
|ITEM 11.                        | QUANTITATIVE AND QUALITATIVE DISCLOSURES
  ABOUT MARKET RISK
|                               
|Not
applicable.                
|                               
|ITEM 12.                        | DESCRIPTION OF SECURITIES OTHER THAN EQUITY
  SECURITIES    
|                               
|Not
applicable.                

Page 47

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---



PART II

|                |                                                                               
|--------------- | ------------------------------------------------------------------------------
|ITEM 13.        | DEFAULTS, DIVIDEND ARREARAGES AND
  DELINQUENCIES                             
|               
|Not
applicable.
|               
|ITEM 14.        | MATERIAL MODIFICATIONS TO THE RIGHTS OF
  SECURITY HOLDERS AND USE OF PROCEEDS
|               
|Not
applicable.
|               
|ITEM 15.        | CONTROLS AND PROCEDURES                                                       

(a)
Disclosure Controls and Procedures.

Our
Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, are
responsible for establishing and maintaining our disclosure controls and
procedures. These controls and procedures were designed to ensure that
information required to be disclosed in the reports that we file under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the
SEC. We evaluated these disclosure controls and procedures under the supervision
of our CEO and CFO as of December 31, 2004. Based on this evaluation, our CEO
and CFO concluded that our disclosure controls and procedures are effective in
timely alerting them to information required to be disclosed in our periodic
reports to the SEC.

(b)
Internal Control Over Financial Reporting.

There
were no changes in the Companys internal control over financial reporting that
occurred during the year ended December 31, 2004 that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.

|            |                                 
|----------- | --------------------------------
|ITEM 16.    | [RESERVED]                      
|            |                                 
|ITEM 16A.  | AUDIT COMMITTEE FINANCIAL EXPERT

The
Companys Board of Directors has determined that David Weiss is the audit
committee financial expert for the Company, as such term is defined in Item
16A of Form 20-F. Mr. Weiss serves on the Companys Audit Committee of the
Board of Directors.

|            |               
|----------- | --------------
|ITEM 16B.  | CODE OF ETHICS

On
June 23, 2004 the Companys Board of Directors adopted a Code of Ethics for the
Company that applies to all Directors, officers and other employees of the
Company. A copy of the Code of Ethics is available for review on the Companys
website at www.willi-food.co.il.

Page 48

---

---



|            |                                       
|----------- | --------------------------------------
|ITEM 16C.  | PRINCIPAL ACCOUNTANT FEES AND SERVICES

Brightman
Almagor & Co., independent certified public accountants and a Member Firm
of Deloitte Touche Tohmatsu, have served as our independent public accountants
for the year ended December 31, 2004, for which audited financial statements
appear in this annual report on Form 20-F.

Brightman
Almagor & Co charged the Company NIS 185 thousand (USD 42 thousand) for
audit fees in 2004, and NIS 150 thousand (USD 34 thousand) for audit fees in
2003. There were no audit-related fees, tax fees or other fees billed to the
Company in those years.

|                |                                                                        
|--------------- | -----------------------------------------------------------------------
|ITEM 16D.      | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES             
|               
|Not
applicable.
|               
|ITEM 16E.      | PURCHASES OF EQUITY SECURITIES BY THE COMPANY AND AFFILIATED PURCHASERS
|               
|Not
applicable.

Page 49

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---



PART III

|                                                                                                                  |                     
|----------------------------------------------------------------------------------------------------------------- | --------------------
|ITEM 17.                                                                                                          | FINANCIAL STATEMENTS
|                                                                                                                 
|The
financial statements required by this item are found at the end of this annual
report, beginning on page F1.

|         |           
|-------- | ----------
|ITEM 18. | [RESERVED]

Page 50

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---



|         |         
|-------- | --------
|ITEM 19. | EXHIBITS

|               |  |                                                                                                                                        
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                            
|               |  |                                                                                                                                        
|1.1           |  | Memorandum of Association of the Company, as amended (1)                                                                               
|               |  |                                                                                                                                        
|1.2            |  | Articles of Association of the Company, as amended(1)                                                                                  
|               |  |                                                                                                                                        
|2.1            |  | Specimen of Certificate for ordinary shares (2)                                                                                        
|               |  |                                                                                                                                        
|4.1            |  | Form of Employment Agreement with Mr. Zvi Williger (2)                                                                                 
|               |  |                                                                                                                                        
|4.2            |  | Form of Employment Agreement with Mr. Joseph Williger (2)                                                                              
|               |  |                                                                                                                                        
|4.3            |  | Share Option Plan (2)                                                                                                                  
|               |  |                                                                                                                                        
|4.4            |  | Management Agreement between Registrant and Yossi Willi Management
  Investments Ltd., dated June 1, 1998 (3)                          
|               |  |                                                                                                                                        
|4.5            |  | Management Agreement between the Company and Zvi Israel and Partners
  Ltd., dated June 1, 1998 (3)                                    
|               |  |                                                                                                                                        
|4.6            |  | Lease of Companys premises with Titanic Food Ltd., dated November
  23, 1998 (3)                                                      
|               |  |                                                                                                                                        
|4.7            |  | Services Agreement between the Company and Willi-Food Investments
  Ltd., dated April 1, 1997 (3)                                      
|               |  |                                                                                                                                        
|8              |  | Subsidiaries of the Company (2)                                                                                                        
|               |  |                                                                                                                                        
|11             |  | Code of Ethics (4)                                                                                                                     
|               |  |                                                                                                                                        
|12.1           |  | Certification of CEO of the Company pursuant to Rule 13a-14(a), as
  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
|               |  |                                                                                                                                        
|12.2           |  | Certification of CFO of the Company pursuant to Rule 13a-14(a), as
  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
|               |  |                                                                                                                                        
|13.1           |  | Certification of CEO of the Company pursuant to Rule 13a-14(b), as
  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
|               |  |                                                                                                                                        
|13.2           |  | Certification of CFO of the Company pursuant to Rule 13a-14(b), as
  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

---

|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|   | English translations from Hebrew original.                                                                             
|    |                                                                                                                        
|(1) | Incorporated by Reference to the Registrants Annual Report on Form
  20-F for the Fiscal year ended December 31, 1997.
|    |                                                                                                                        
|(2) | Incorporated by reference to the Companys Registration Statement on
  Form F-1, File No. 333-6314.                    
|    |                                                                                                                        
|(3) | Incorporated by reference to the Companys Annual Report on Form 20-F
  for the fiscal year ended December 31, 2001.   
|    |                                                                                                                        
|(4) | Incorporated by reference to the Companys Annual Report on Form 20-F
  for the fiscal year ended December 31, 2003.   
|    |                                                                                                                        
|*   | Filed Herewith                                                                                                         

Page 51

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31,
2004

---

---



G. WILLI-FOOD
INTERNATIONAL LTD.

Contents

|                                     |               
|------------------------------------ | --------------
|                                     | Page          
|                                     |               
|                                     |               
|Independent auditors
  report       | F  2         
|                                     |               
|Consolidated financial statements:   |               
|                                     |               
|Balance sheets                       | F  3         
|                                     |               
|Statements of
  operations           | F  4         
|                                     |               
|Statements of
  shareholders equity | F  5         
|                                     |               
|Statements of
  cash flows           | F  6  F  7 
|                                     |               
|Notes to the
  financial statements  | F  8  F  21

---

---



INDEPENDENT AUDITORS REPORT
TO THE SHAREHOLDERS OF
G. WILLI-FOODS INTERNATIONAL LTD,

We have audited the accompanying consolidated balance sheets of G.
Willi-Food International Ltd. (the Company) and its subsidiaries at December
31, 2004 and 2003 and the related consolidated statements of operations,
shareholders equity and cash flows for each of the three years in the period
ended December 31, 2004. These financial statements are the responsibility of
the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Company and its subsidiaries at December 31, 2004 and 2003 and their
consolidated results of operations and their consolidated cash flows for each
of the three years in the period ended December 31, 2004, in conformity with
Israeli generally accepted accounting principles. Such accounting principles,
as applicable to these financial statements, are, in all material respects,
substantially identical to U.S. generally accepted accounting principles,
except as indicated in Note 13.

Brightman Almagor & Co.
Certified Public Accountants 
A member firm of Deloitte Touche Tomhatsu

Tel-Aviv, IsraelMarch 9, 2005

F  2

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

CONSOLIDATED BALANCE
SHEETS

|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | - | ------- | -------------- | ------- | ---------- | ----------- | ------- |  |  | ------ | 
|                                                                                                                                                                               |  |      |   |         | December 31,   |        
|                                                                                                                                                                               |  |      |   |         |                |        
|                                                                                                                                                                               |  | Note |   | 2 0 0 4 |                | 2 0 0 3 |            | 2 0 0 4 (*) |        
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |        
|                                                                                                                                                                               |  |      |   |         | NIS            |         | US dollars |            
|                                                                                                                                                                               |  |      |   |         |                |         |            |            
|                                                                                                                                                                               |  |      |   |         | (in thousands) |        
|                                                                                                                                                                               |  |      |   |         |                |        
|ASSETS                                                                                                                                                                         |  |      |   |         |                |         |            |             |         |  |  |        | 
|Current assets                                                                                                                                                                 |  |      |   |         |                |         |            |             |         |  |  |        | 
|Cash and cash equivalents                                                                                                                                                      |  |      |   |         |                | 55,831  |            |             | 12,463  |  |  | 12,960 | 
|Marketable securities                                                                                                                                                          |  |      |   |         |                | 1,694   |            |             | 42,298  |  |  | 393    | 
|Trade accounts receivable                                                                                                                                                      |  |      |   |         |                | 40,887  |            |             | 29,674  |  |  | 9,492  | 
|Receivables and other current
  assets                                                                                                                                         |  |      | 3 |         |                | 1,211   |            |             | 2,902   |  |  | 281    | 
|Inventories                                                                                                                                                                    |  |      |   |         |                | 27,139  |            |             | 18,823  |  |  | 6,301  | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|Total current assets                                                                                                                                                           |  |      |   |         |                | 126,762 |            |             | 106,160 |  |  | 29,427 | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|Fixed assets                                                                                                                                                                   |  |      | 4 |         |                |         |            |             |         |  |  |        | 
|Cost                                                                                                                                                                           |  |      |   |         |                | 8,590   |            |             | 8,038   |  |  | 1,994  | 
|Less: accumulated depreciation
  and amortization                                                                                                                              |  |      |   |         |                | 5,554   |            |             | 4,640   |  |  | 1,289  | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|                                                                                                                                                                               |  |      |   |         |                | 3,036   |            |             | 3,398   |  |  | 705    | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|Other assets, net                                                                                                                                                              |  |      | 5 |         |                | 63      |            |             | 61      |  |  | 15     | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|                                                                                                                                                                               |  |      |   |         |                | 129,861 |            |             | 109,619 |  |  | 30,147 | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|LIABILITIES
  AND SHAREHOLDERS EQUITY                                                                                                                                         |  |      |   |         |                |         |            |             |         |  |  |        | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|Current liabilities                                                                                                                                                            |  |      |   |         |                |         |            |             |         |  |  |        | 
|Short-term bank borrowings                                                                                                                                                     |  |      |   |         |                | 2,489   |            |             | 45      |  |  | 578    | 
|Trade accounts payable                                                                                                                                                         |  |      |   |         |                | 19,066  |            |             | 16,110  |  |  | 4,426  | 
|Due to related parties                                                                                                                                                         |  |      |   |         |                | 2,557   |            |             | 1,348   |  |  | 595    | 
|Payables and other current
  liabilities                                                                                                                                       |  |      | 6 |         |                | 6,664   |            |             | 4,796   |  |  | 1,547  | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|Total current liabilities                                                                                                                                                      |  |      |   |         |                | 30,776  |            |             | 22,299  |  |  | 7,146  | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|Long-term liabilities                                                                                                                                                          |  |      |   |         |                |         |            |             |         |  |  |        | 
|Accrued severance pay, net                                                                                                                                                     |  |      | 7 |         |                | 185     |            |             | 170     |  |  | 43     | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|Total long-term liabilities                                                                                                                                                    |  |      |   |         |                | 185     |            |             | 170     |  |  | 43     | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|Commitments and contingent liabilities                                                                                                                                         |  |      | 8 |         |                |         |            |             |         |  |  |        | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|Shareholders equity                                                                                                                                                           |  |      | 9 |         |                |         |            |             |         |  |  |        | 
|Share capital:                                                                                                                                                                 |  |      |   |         |                |         |            |             |         |  |  |        | 
|Ordinary shares NIS 0.10 par
  value (authorized  50,000,000 shares, issued and outstanding  8,615,000
  shares at December 31, 2004; 8,555,000 shares at December 31, 2003) |  |      |   |         |                | 1,502   |            |             | 514     |  |  | 349    | 
|Additional paid-in capital                                                                                                                                                     |  |      |   |         |                | 19,704  |            |             | 19,704  |  |  | 4,574  | 
|Retained earnings                                                                                                                                                              |  |      |   |         |                | 77,694  |            |             | 66,932  |  |  | 18,035 | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|                                                                                                                                                                               |  |      |   |         |                | 98,900  |            |             | 87,150  |  |  | 22,958 | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 
|                                                                                                                                                                               |  |      |   |         |                | 129,861 |            |             | 109,619 |  |  | 30,147 | 
|                                                                                                                                                                               |  |      |   |         |                |         |            |             |         |  |  |        | 

|    |                                          
|--- | -----------------------------------------
|(*) | Convenience translation into U.S. dollars

The accompanying notes are an
integral part of the financial statements.

F  3

---

---



G. WILLI-FOOD
INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|------------------------------------------ |  | ---- | -- | ------- | ------------------------------------- | --------- | ---------- | ------- | --------- | ----------- |  | --------- | - |  | --------- | 
|                                           |  |      |    |         | Year ended December
31,               |          
|                                           |  |      |    |         |                                       |          
|                                           |  | Note |    | 2 0 0 4 |                                       | 2 0 0 3   |            | 2 0 0 2 |           | 2 0 0 4 (*) | 
|                                           |  |      |    |         |                                       |           |            |         |           |             | 
|                                           |  |      |    |         | NIS                                   |           | US dollars |        
|                                           |  |      |    |         |                                       |           |            |        
|                                           |  |      |    |         | (in thousands, except for share
data) |          
|                                           |  |      |    |         |                                       |          
|                                           |  |      |    |         |                                       |          
|Sales                                      |  |      | 12 |         |                                       | 170,982   |            |         | 137,385   |             |  | 128,870   |   |  | 39,689    | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Cost of sales                              |  |      | 12 |         |                                       | 130,292   |            |         | 110,160   |             |  | 101,126   |   |  | 30,245    | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Gross profit                               |  |      |    |         |                                       | 40,690    |            |         | 27,225    |             |  | 27,744    |   |  | 9,444     | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Operating expenses:                        |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Sales and marketing                        |  |      |    |         |                                       | 15,632    |            |         | 11,662    |             |  | 10,024    |   |  | 3,629     | 
|General and administrative                 |  |      |    |         |                                       | 9,134     |            |         | 8,335     |             |  | 8,199     |   |  | 2,121     | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Total operating expenses                   |  |      |    |         |                                       | 24,766    |            |         | 19,997    |             |  | 18,223    |   |  | 5,750     | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Operating
  income                         |  |      |    |         |                                       | 15,924    |            |         | 7,228     |             |  | 9,521     |   |  | 3,694     | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Financing income (expenses), net           |  |      | 12 |         |                                       | 1,121     |            |         | 4,336     |             |  | (239      | ) |  | 260       | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Other income, net                          |  |      |    |         |                                       | 34        |            |         | 101       |             |  | 29        |   |  | 8         | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Pre-tax
  income                           |  |      |    |         |                                       | 17,079    |            |         | 11,665    |             |  | 9,311     |   |  | 3,962     | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Income taxes                               |  |      | 10 |         |                                       | 5,886     |            |         | 2,889     |             |  | 2,254     |   |  | 1,366     | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Net income                                 |  |      |    |         |                                       | 11,193    |            |         | 8,776     |             |  | 7,057     |   |  | 2,596     | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Earnings per share (EPS)                   |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Basic                                      |  |      |    |         |                                       | 1.3       |            |         | 1.03      |             |  | 0.82      |   |  | 0.30      | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Fully diluted                              |  |      |    |         |                                       | 1.3       |            |         | 1.03      |             |  | 0.82      |   |  | 0.30      | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Shares used in computation of basic EPS    |  |      |    |         |                                       | 8,600,000 |            |         | 8,555,000 |             |  | 8,555,000 |   |  | 8,600,000 | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 
|Shares used in computing fully diluted EPS |  |      |    |         |                                       | 8,600,000 |            |         | 8,555,000 |             |  | 8,555,000 |   |  | 8,600,000 | 
|                                           |  |      |    |         |                                       |           |            |         |           |             |  |           |   |  |           | 

(*)  Convenience translation into U.S. dollars

The accompanying notes are an
integral part of the financial statements.

F  4

---

---



G. WILLI-FOOD
INTERNATIONAL LTD.

STATEMENTS OF SHAREHOLDERS
EQUITY

|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|--------------------------- |  | ------------------------------- | --------- | ------------ | -------------- | -------------------------------- |  | -------------------- | ------ | --------------------------- |  | ------ | - |  | ------ | 
|                            |  | Number of 
  ordinary 
  shares |           | Sharecapital |                | Additional 
  paid-in 
  capital |  | Retained 
  earnings |        | Totalshareholders
  equity | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             | 
|                            |  |                                 |           |              | NIS            |                                 
|                            |  |                                 |           |              |                |                                 
|                            |  |                                 |           |              | (in thousands) |                                 
|                            |  |                                 |           |              |                |                                 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|Balance  January 1, 2002   |  |                                 | 8,555,000 |              |                | 514                              |  |                      | 19,704 |                             |  | 51,099 |   |  | 71,317 | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|Net income for the year     |  |                                 |          |              |                |                                 |  |                      |       |                             |  | 7,057  |   |  | 7,057  | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|Balance  December 31, 2002 |  |                                 | 8,555,000 |              |                | 514                              |  |                      | 19,704 |                             |  | 58,156 |   |  | 78,374 | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|Net income for the year     |  |                                 |          |              |                |                                 |  |                      |       |                             |  | 8,776  |   |  | 8,776  | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|Balance  December 31, 2003 |  |                                 | 8,555,000 |              |                | 514                              |  |                      | 19,704 |                             |  | 66,932 |   |  | 87,150 | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|Exercise of stock options   |  |                                 | 60,000    |              |                | 557                              |  |                      |       |                             |  |       |   |  | 557    | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|Share dividend              |  |                                 |          |              |                | 431                              |  |                      |       |                             |  | (431   | ) |  |       | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|Net income for the year     |  |                                 |          |              |                |                                 |  |                      |       |                             |  | 11,193 |   |  | 11,193 | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 
|Balance  December 31, 2004 |  |                                 | 8,615,000 |              |                | 1,502                            |  |                      | 19,704 |                             |  | 77,694 |   |  | 98,900 | 
|                            |  |                                 |           |              |                |                                  |  |                      |        |                             |  |        |   |  |        | 

The accompanying notes are an
integral part of the financial statements.

F  5

---

---



G. WILLI-FOOD
INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                                    |  |                         |         |            |  |         |   |             |        |   |  |        |  
|----------------------------------------------------------------------------------- |  | ----------------------- | ------- | ---------- |  | ------- | - | ----------- | ------ | - |  | ------ | -
|                                                                                    |  | Year ended December
31, |        
|                                                                                    |  |                         |        
|                                                                                    |  | 2 0 0 4                 |         | 2 0 0 3    |  | 2 0 0 2 |   | 2 0 0 4 (*) |       
|                                                                                    |  |                         |         |            |  |         |   |             |       
|                                                                                    |  | NIS                     |         | US dollars | 
|                                                                                    |  |                         |         |            | 
|                                                                                    |  | (in thousands)          |        
|                                                                                    |  |                         |        
|                                                                                    |  |                         |        
|CASH FLOWS 
  OPERATING ACTIVITIES                                                 |  |                         |         |            |  |         |   |             |        |   |  |        |  
|                                                                                    |  |                         |         |            |  |         |   |             |        |   |  |        |  
|Net income                                                                          |  |                         | 11,193  |            |  | 8,776   |   |             | 7,057  |   |  | 2,596  |  
|                                                                                    |  |                         |         |            |  |         |   |             |        |   |  |        |  
|Adjustments
  to reconcile net income to net cash provided by operating activities: |  |                         |         |            |  |         |   |             |        |   |  |        |  
|                                                                                    |  |                         |         |            |  |         |   |             |        |   |  |        |  
|Depreciation and amortization                                                       |  |                         | 1,056   |            |  | 956     |   |             | 906    |   |  | 246    |  
|Deferred income taxes                                                               |  |                         | (689    | )          |  | 355     |   |             | (101   | ) |  | (160   | )
|Gain on disposition of fixed
  assets                                               |  |                         | (35     | )          |  | (97     | ) |             | (29    | ) |  | (8     | )
|Unrealized gain on marketable
  securities                                          |  |                         | (440    | )          |  | (3,547  | ) |             | (545   | ) |  | (102   | )
|                                                                                    |  |                         |         |            |  |         |   |             |        |   |  |        |  
|Changes in
  assets and liabilities:                                                |  |                         |         |            |  |         |   |             |        |   |  |        |  
|                                                                                    |  |                         |         |            |  |         |   |             |        |   |  |        |  
|Decrease (increase) in:                                                             |  |                         |         |            |  |         |   |             |        |   |  |        |  
|Trade accounts receivable                                                           |  |                         | (11,213 | )          |  | (5,562  | ) |             | (285   | ) |  | (2,602 | )
|Receivables and other current
  assets                                              |  |                         | 1,789   |            |  | 264     |   |             | 1,883  |   |  | 416    |  
|Inventory                                                                           |  |                         | (8,316  | )          |  | (2,518  | ) |             | 3,864  |   |  | (1,930 | )
|Increase in:                                                                        |  |                         |         |            |  |         |   |             |        |   |  |        |  
|Trade accounts payable                                                              |  |                         | 2,956   |            |  | 4,959   |   |             | (3,886 | ) |  | 686    |  
|Payables and other current
  liabilities                                            |  |                         | 3,666   |            |  | 1,840   |   |             | 290    |   |  | 851    |  
|Accrued severance pay, net                                                          |  |                         | 15      |            |  | 7       |   |             | 3      |   |  | 3      |  
|                                                                                    |  |                         |         |            |  |         |   |             |        |   |  |        |  
|                                                                                    |  |                         |         |            |  |         |   |             |        |   |  |        |  
|Net cash
  provided by (used in) operating activities                               |  |                         | (18     | )          |  | 5,433   |   |             | 9,157  |   |  | (4     | )
|                                                                                    |  |                         |         |            |  |         |   |             |        |   |  |        |  

(*)  Convenience translation into U.S. dollars

The accompanying notes are an
integral part of the financial statements.

F  6

---

---



G. WILLI-FOOD
INTERNATIONAL LTD.

CONSOLIDATED
STATEMENTS OF CASH FLOWS

(Continued)

|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|------------------------------------------------------------------ |  | ----------------------- | ------ | ------- |  | ------- | - | ----------- | ------ | - |  | ------ | -
|                                                                   |  | Year ended December
31, |       
|                                                                   |  |                         |       
|                                                                   |  | 2 0 0 4                 |        | 2 0 0 3 |  | 2 0 0 2 |   | 2 0 0 4 (*) |       
|                                                                   |  |                         |        |         |  |         |   |             |       
|                                                                   |  | NIS                     |        | NIS     |  | NIS     |   | US dollars  |       
|                                                                   |  |                         |        |         |  |         |   |             |       
|                                                                   |  | (in thousands)          |       
|                                                                   |  |                         |       
|CASH FLOWS  INVESTING ACTIVITIES                                  |  |                         |        |         |  |         |   |             |        |   |  |        |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|Proceeds from realization (purchase) of marketable securities, net |  |                         | 41,044 |         |  | (17,607 | ) |             | (5,805 | ) |  | 9,527  |  
|Additions to fixed assets                                          |  |                         | (694   | )       |  | (2,030  | ) |             | (1,091 | ) |  | (161   | )
|Proceeds on disposition of fixed assets                            |  |                         | 35     |         |  | 573     |   |             | 257    |   |  | 8      |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|Net cash
  provided by (used in) investing activities              |  |                         | 40,385 |         |  | (19,064 | ) |             | (6,639 | ) |  | 9,374  |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|CASH FLOWS  FINANCING ACTIVITIES                                  |  |                         |        |         |  |         |   |             |        |   |  |        |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|Receipt of loans                                                   |  |                         |       |         |  |        |   |             | 98     |   |  |       |  
|Repayment of loans                                                 |  |                         | (45    | )       |  | (53     | ) |             |       |   |  | (10    | )
|Short-term bank borrowings, net                                    |  |                         | 2,489  |         |  | (1,008  | ) |             | (1,244 | ) |  | 578    |  
|Proceeds from stock options exercise                               |  |                         | 557    |         |  |        |   |             |       |   |  | 129    |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|Net cash
  provided by (used in) financing activities              |  |                         | 3,001  |         |  | (1,061  | ) |             | (1,146 | ) |  | 697    |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|Net change in cash and cash
  equivalents                          |  |                         | 43,368 |         |  | (14,692 | ) |             | 1,372  |   |  | 10,067 |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|Cash and cash equivalents at beginning of year                     |  |                         | 12,463 |         |  | 27,155  |   |             | 25,783 |   |  | 2,893  |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|Cash and cash equivalents at
  end of year                         |  |                         | 55,831 |         |  | 12,463  |   |             | 27,155 |   |  | 12,960 |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|Supplemental cash flow information:                                |  |                         |        |         |  |         |   |             |        |   |  |        |  
|                                                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|Cash paid during the period for:                                   |  |                         |        |         |  |         |   |             |        |   |  |        |  
|Interest                                                           |  |                         | 10     |         |  | 50      |   |             | 54     |   |  | 2      |  
|Taxes                                                              |  |                         | 2,664  |         |  | 2,985   |   |             | 3,355  |   |  | 618    |  

(*) Convenience translation into U.S. dollars

The accompanying notes are an
integral part of the financial statements.

F  7

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---------- | ------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1    | GENERAL                        
|           |                                
|           | A.                              | G.
  Willi-Food International Ltd. (the Company) was incorporated in Israel in
  January 1994 and is engaged in one operating segment: import, marketing and
  distribution of food products in the country.                                                                                                                                                                                                                                                   
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|           |                                 | The
  Company is a subsidiary of Willi-Food Investments Ltd. (the parent
  company). The shares of the parent company are registered for trade on the
  Tel-Aviv Stock Exchange.                                                                                                                                                                                                                                                                               
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|NOTE 2    | SIGNIFICANT ACCOUNTING POLICIES
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|           | A.                              | Accounting principles                                                                                                                                                                                                                                                                                                                                                                                                                                            
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           |                                 | The
  consolidated financial statements have been prepared in conformity with
  accounting principles generally accepted in Israel. As applicable to these
  financial statements, these accounting principles are substantially identical
  to U.S. GAAP, except as indicated in Note 13.                                                                                                                                                                       
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|           | B.                              | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|           |                                 | The preparation of the
  financial statements in conformity with generally accepted accounting
  principles requires management to make estimates and assumptions that affect
  the reported amounts of assets and liabilities and disclosure of contingent
  assets and liabilities at the date of the financial statements and the
  reported amounts of revenues and expenses during the reporting period. Actual
  results could differ from those estimates.
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|           | C.                              | Ceasing
  the adjustment of financial statements and financial reporting in reported
  amounts                                                                                                                                                                                                                                                                                                                                                                 
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|           |                                 | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Definitions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Adjusted amount  nominal, historical amount that was adjusted
  by the consumer-price index (CPI) of December 2003, in accordance with Opinion No. 36 of the
  Institute of Certified Public Accountants in Israel.                                                                                                                                                                                                                                                                                                                 
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Reported amount  an adjusted amount plus a nominal increment
  added subsequent to December 31, 2003 and net of amounts subsequently
  deducted.                                                                                                                                                                                                                                                                                                                                                                                    
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           |                                 | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Accounting
  Standard No.12 (Cessation of Financial Statement Adjustment) went into
  effect on January 1, 2004, following which the Company ceased the adjustment
  of its financial statements based on the changes in the general purchasing
  power of the Israeli currency. Starting in 2004 the Companys financial
  statements are prepared in reported amounts. The data included in the
  financial statements relating to dates and periods up to, and including,
  December 31, 2003, are stated in adjusted amounts.
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           |                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | The reported and/or adjusted amounts of non-monetary items reflect
  their cost in terms of reported amounts or those adjusted to the changes in the CPI up to December 2003 and they do not
  necessarily reflect their market value or value to the business.                                                                                                                                                                                                                                                                      

F  8

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|           |                                         |                                                                                                      |                                                                                          |                                                                                                                                                                                                                |                                                                                                                                                                                                                                           
|---------- | --------------------------------------- | ---------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 2    | SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|           |                                        
|           | C.                                      | Ceasingthe adjustment of
  financial statements and financial reporting in reported amounts(Cont.)
|           |                                         |                                                                                                     
|           |                                         | (3)                                                                                                  | Method
  for determining reported amounts in the 2004 annual financial statements:    
|           |                                         |                                                                                                      |                                                                                         
|           |                                         |                                                                                                      | Balance
  sheet:                                                                        
|           |                                         |                                                                                                      |                                                                                         
|           |                                         |                                                                                                      |                                                                                         | Monetary items (those
  whose balance-sheet amounts reflect updated or realizable value on the
  balance-sheet date) have been included at their nominal values at the
  balance-sheet date.                  
|           |                                         |                                                                                                      |                                                                                         | Non-monetary items have
  been included based on their adjusted amount plus nominal amounts added, and
  less any amounts deducted, in the reported period.                                                   
|           |                                         |                                                                                                      |                                                                                         | Investments in investees
  and minority interest in subsidiaries have been included on the basis of
  these companies financial statements in reported amounts.                                            
|           |                                         |                                                                                                      |                                                                                          |                                                                                                                                                                                                               
|           |                                         |                                                                                                      | Statement
  of operations:                                                              
|           |                                         |                                                                                                      |                                                                                         
|           |                                         |                                                                                                      |                                                                                         | Income and expenses,
  including financing, have been included at their nominal values.                                                                                                                       
|           |                                         |                                                                                                      |                                                                                         | Income and expenses
  stemming from non-monetary items (mainly depreciation and changes in
  inventory) have been computed concurrently with the determination of their
  corresponding balance-sheet amounts.
|           |                                         |                                                                                                      |                                                                                         | The Companys share and
  minority interest on the results of the investees have been determined on the
  basis of these companies financial statements in reported amounts.                               
|           |                                         |                                                                                                      |                                                                                          |                                                                                                                                                                                                               
|           |                                         | (4)                                                                                                  | Method
  for determining adjusted amounts in prior years annual financial statements:
|           |                                         |                                                                                                      |                                                                                         
|           |                                         |                                                                                                      | a)                                                                                       | Balance sheet                                                                                                                                                                                                 
|           |                                         |                                                                                                      |                                                                                          |                                                                                                                                                                                                               
|           |                                         |                                                                                                      |                                                                                          |                                                                                                                                                                                                               | Non-monetary items (those
  whose balance-sheet amounts reflect historical values or values at
  acquisition or creation) have been adjusted by the changes in the CPI from
  acquisition or creation date up to the CPI of December 2003.
|           |                                         |                                                                                                      |                                                                                          |                                                                                                                                                                                                                |                                                                                                                                                                                                                                           
|           |                                         |                                                                                                      |                                                                                          |                                                                                                                                                                                                               | Monetary items (those
  whose balance-sheet amounts reflect updated or realizable values on the
  balance-sheet date are presented in the adjusted balance sheet at December
  31, 2003 at their nominal values at that date.             

F  9

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|           |                                         |                                                                                                                                                                                                                                                      |                                                                                                  |                          |                                                                                                                                                                                                                                                                           
|---------- | --------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 2    | SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|           |                                        
|           | C.                                      | Ceasingtheadjustment of
  financial statements and financial reporting in reported amounts(Cont.)                                                                                                                                                 
|           |                                         |                                                                                                                                                                                                                                                     
|           |                                         | (4)                                                                                                                                                                                                                                                  | Method for determining
  adjusted amounts in prior years annual financial statements (Cont.):
|           |                                         |                                                                                                                                                                                                                                                      |                                                                                                 
|           |                                         |                                                                                                                                                                                                                                                      | b)                                                                                               | Statement of operations:
|           |                                         |                                                                                                                                                                                                                                                      |                                                                                                  |                         
|           |                                         |                                                                                                                                                                                                                                                      |                                                                                                  |                         | Income and expenses
  reflecting transactions, other than financing, have been adjusted by the
  changes in the CPI from payment/transaction date up to December 2003, with
  the erosion of the monetary balances relating to those transactions included
  in financing.
|           |                                         |                                                                                                                                                                                                                                                      |                                                                                                  |                          |                                                                                                                                                                                                                                                                           
|           |                                         |                                                                                                                                                                                                                                                      |                                                                                                  |                         | Income and expenses
  stemming from non-monetary items (mainly depreciation and changes in inventory)
  have been adjusted concurrently with the corresponding balance-sheet items.                                                                                       
|           |                                         |                                                                                                                                                                                                                                                      |                                                                                                  |                          |                                                                                                                                                                                                                                                                           
|           |                                         |                                                                                                                                                                                                                                                      |                                                                                                  |                         | Financing income and
  expenses reflect real income and expense items, after having given
  consideration to the erosion of monetary items during the year.                                                                                                               
|           |                                         |                                                                                                                                                                                                                                                      |                                                                                                  |                          |                                                                                                                                                                                                                                                                           
|           | D.                                      | Exchange rates and linkage                                                                                                                                                                                                                          
|           |                                         |                                                                                                                                                                                                                                                     
|           |                                         | Assets and liabilities in,
  or linked to, foreign currency are included on the basis of the
  representative exchange rate prevailing at the applicable balance sheet date.
  Representative rates of exchange for the U.S. dollar were as follows:

| |                     |  |  |             | 
| | ------------------- |  |  | ----------- | 
| | December 31, 2004   |  |  |  NIS 4.308 | 
| | December
  31, 2003 |  |  |  NIS 4.379 | 
| | December
  31, 2002 |  |  |  NIS 4.737 | 

| |    |                                                                                                                                                                                                                                                                                                                                                            
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | CPI-linked balances are
  stated using the specific index to which the balances are linked.                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                            
| | E. | Convenience translation                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                            
| |    | The adjusted financial
  statements as of December 31, 2004 and for the year then ended have been
  translated into United States dollars using the representative exchange rate
  at December 31, 2004 as published by the Bank of Israel (US$ 1.00 = NIS
  4.308). The translation was made solely for the convenience of readers
  in the United States.

F  10

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|           |                                         |                                                                                                                                                                                                                          
|---------- | --------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 2    | SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|           |                                        
|           | E.                                      | Convenience translation (Cont.)                                                                                                                                                                                          
|           |                                         |                                                                                                                                                                                                                          
|           |                                         | It should not be construed
  that the translated dollar figures actually represent, or could be converted
  into, US dollars.                                                                                            
|           |                                         |                                                                                                                                                                                                                          
|           | F.                                      | Principles of consolidation                                                                                                                                                                                              
|           |                                         |                                                                                                                                                                                                                          
|           |                                         | The consolidated financial
  statements include the financial statements of the Company and its wholly
  owned subsidiaries. All significant inter-company transactions and balances
  are eliminated upon consolidation.
|           |                                         |                                                                                                                                                                                                                          
|           | G.                                      | Cash equivalents                                                                                                                                                                                                         
|           |                                         |                                                                                                                                                                                                                          
|           |                                         | Cash equivalents include
  short-term, highly liquid investments that are readily convertible into cash
  with original maturities of three months or less.                                                              
|           |                                         |                                                                                                                                                                                                                          
|           | H.                                      | Marketable securities                                                                                                                                                                                                    
|           |                                         |                                                                                                                                                                                                                          
|           |                                         | Marketable securities are
  classified as trading and are stated at market value.                                                                                                                                      
|           |                                         |                                                                                                                                                                                                                          
|           | I.                                      | Allowance for doubtful accounts                                                                                                                                                                                          
|           |                                         |                                                                                                                                                                                                                          
|           |                                         | The allowance has been
  computed on the basis of specific accounts receivable.                                                                                                                                          
|           |                                         |                                                                                                                                                                                                                          
|           | J.                                      | Inventories                                                                                                                                                                                                              
|           |                                         |                                                                                                                                                                                                                          
|           |                                         | Inventories are stated at
  the lower of cost or market value. Cost is determined by the
  first-in-first-out method.                                                                                                  
|           |                                         |                                                                                                                                                                                                                          
|           | K.                                      | Fixed assets                                                                                                                                                                                                             
|           |                                         |                                                                                                                                                                                                                          
|           |                                         | Fixed assets are stated at
  cost, with depreciation computed by the straight-line method over the assets
  estimated useful lives, as follows:                                                                         

| |                                      |  |       |        | 
| | ------------------------------------ |  | ----- | ------ | 
| |                                      |  | Years |       
| |                                      |  |       |       
| | Motor
  vehicles                     |  |       | 56.7  | 
| | Office
  furniture and equipment     |  |       | 6.716 | 
| | Computers
  and peripheral equipment |  |       | 35    | 

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Leasehold improvements are
  amortized by the straight-line method over the shorter of the term of the
  lease, or the estimated useful life of the improvements.                                                                                                                                                                                                                                                                                            
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | The Company periodically
  assesses the recoverability of the carrying amount of its fixed assets based
  on expected undiscounted cash flows. If an assets carrying amount is not
  expected to be recoverable, the Company recognizes an impairment loss based
  upon the difference between the carrying amount and the fair value of such
  assets, in accordance with SFAS No.144 (Accounting for the Impairment or
  Disposal of Long-Lived Assets).

F  11

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---------- | --------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 2    | SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           | L.                                      | Deferred income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                         | Deferred income taxes are
  provided for temporary differences between the assets and liabilities, as
  measured in the financial statements, and for tax purposes at the tax rates
  expected to be in force when these differences reverse, in accordance with
  SFAS No. 109 (Accounting for Income Taxes).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           | M.                                      | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                         | The Company recognizes
  revenue upon the shipment of its products to the customer provided that
  persuasive evidence of an arrangement exists, title has transferred, the
  price is fixed, collection of resulting receivables is probable and there are
  no remaining significant obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                         | The Company grants its
  customers a right to return the products, with the corresponding provision
  recorded for the estimated future product returns, based on the Companys
  experience.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           | N.                                      | Customer incentives                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                         | The Company is obligated
  to pay incentives to certain customers based on the volume of sales in excess
  of a certain amount. The incentive is computed as a percentage of the annual
  volume and is generally paid at the beginning of each year in respect of the
  previous year. In accordance with Emerging Issues Task Force (EITF) No. 01-9,
  Accounting for Consideration Given by a Supplier to a Customer (Including a
  Reseller of the Vendors Products), the Company presents its revenues as net
  of such incentives, calculated based on the volume of sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           | O.                                      | Earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                         | Basic and fully diluted
  net earnings per share have been computed in accordance with Opinion No. 55
  of the Institute of Certified Public Accountants in Israel (ICPAS), which, as
  it relates to these financial statements, is consistent with SFAS No. 128
  (Earnings per Share), using the weighted average number of ordinary shares
  outstanding. Basic earnings per share are computed by using the weighted
  average number of shares outstanding. Fully diluted earnings per share are
  computed by using the weighted average number of outstanding shares adjusted
  for the incremental shares attributed to outstanding options to purchase
  ordinary shares. A total of 50,000 incremental shares were excluded from
  the calculation of fully diluted earning per share for 2003 and 2002. During
  2004, 30,000 of the above were exercised where the remaining 20,000 expired.
  Accordingly, the former were included in the calculation for basic and fully
  diluted earning per share and the latter were excluded from it (see Note 9).
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           | P.                                      | Impact of recently-issued accounting standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                         | In November 2004 the FASB
  issued SFAS No. 151, Inventory Costs, an Amendment of ARB No. 43, Chapter
  4. SFAS No. 151 amends the guidance in ARB 43, Chapter 4, Inventory
  Pricing, which provides guidance on the allocation of certain costs to
  inventory. SFAS 151 clarifies that abnormal amounts of idle facility expense,
  freight, handling costs, and wasted material (spoilage) should be recognized
  as current-period charges. In addition, SFAS 151 requires that allocation of
  fixed production overheads to the costs of conversion be based on the normal
  capacity of the production facilities. The provisions of this statement are
  effective for inventory costs incurred during fiscal years beginning after
  June 2005. The provisions of this statement shall be applied prospectively.
  The Company is assessing the impact of the adoption of this Standard, and
  currently estimates that its adoption is not expected to have a material
  effect on the Companys financial position and results of operations.            

F  12

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|---------- | --------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 2    | SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           | P.                                      | Impact of recently-issued accounting standards (Cont.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |                                         | In December 2004, the FASB
  issued SFAS No. 123 (revised 2004) Share Based Payments (SFAS 123(R)).
  This Statement is a revision of FASB Statement No. 123, Accounting for
  Stock-Based Compensation, which supersedes APB Opinion No. 25, Accounting
  for Stock Issued to Employees and its authoritative interpretations. SFAS
  123(R) establishes standards for the accounting for transactions in which an
  entity exchanges its equity instruments for goods or services; focuses
  primarily on accounting for transactions in which an entity obtains employee
  and directors services in share-based payment transactions; and does not
  change the accounting guidance for share-based payment transactions with
  parties other than employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |                                         | SFAS 123(R) eliminates the
  alternative to use APB 25s intrinsic value method of accounting that was
  provided in SFAS 123 as originally issued and requires to measure the cost of
  employee services received in exchange for an award of equity instruments
  based on the grant-date fair value of the award. The fair-value-based method
  in this Statement is similar to the fair-value-based method in SFAS 123 in
  most respects. The costs associated with the awards will be recognized over
  the period during which an employee is required to provide service in
  exchange for the award  the requisite service period (usually the vesting
  period). The grant-date fair value of employee share options and similar
  instruments will be estimated using option-pricing models adjusted for the
  unique characteristics of those instruments (unless observable market prices
  for the same or similar instruments are available). If an equity award is
  modified after the grant date, incremental compensation cost will be
  recognized in an amount equal to the excess of the fair value of the modified
  award over the fair value of the original award immediately before the
  modification.
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |                                         | The provisions of SFAS
  123(R) apply to all awards to be granted by the Company after June 30, 2005
  and to awards modified, repurchased, or cancelled after that date. When
  initially applying the provisions of SFAS 123(R), in the third quarter of
  2005, the Company will be required to elect between using either the
  modified prospective method or the modified retrospective method. Under
  the modified prospective method, the Company is required to recognize
  compensation cost for all awards granted after the adoption of SFAS 123(R)
  and for the unvested portion of previously granted awards that are
  outstanding on that date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |                                         | Under the modified
  retrospective method, the Company is required to restate its previously
  issued financial statements to recognize the amounts previously calculated
  and reported on a pro forma basis, as if the original provisions of SFAS 123
  had been adopted. Under both methods, it is permitted to use either a
  straight line or an accelerated method to amortize the cost as an expense for
  awards with graded vesting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |                                         | Management has recently
  commenced identifying the potential future impact of applying the provisions
  of SFAS 123(R), including each of its proposed transition methods, yet is
  currently unable to fully quantify the effect of this Standard on the
  Companys future financial position and results of operations. Nonetheless,
  it is expected that the adoption of SFAS 123(R) will increase the
  stock-based-award expenses the Company is to record in the future in
  comparison to the expenses recorded under the guidance currently applied by
  the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|           |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |                                         | In December 2004, the FASB
  issued SFAS No. 153, Exchanges of Nonmonetary Assets an amendment of APB No.
  29. This Statement amends Opinion 29 to eliminate the exception for
  nonmonetary exchanges of similar productive assets and replaces it with a
  general exception for exchanges of nonmonetary assets that do not have
  commercial substance. The Statement specifies that a nonmonetary exchange has
  commercial substance if the future cash flows of the entity are expected to
  change significantly as a result of the exchange. This Statement is effective
  for nonmonetary asset exchanges occurring in fiscal periods beginning after
  June 15, 2005. Earlier application is permitted for nonmonetary asset
  exchanges occurring in fiscal periods beginning after the date this Statement
  is issued. Retroactive application is not permitted.                                                                                                                                                                                                                                                                                                                                                   

F  13

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|           |                                     
|---------- | ------------------------------------
|NOTE 3    | RECEIVABLES AND OTHER CURRENT ASSETS

| |                         |  |                  |       |         |  |               |  |  |     | 
| | ----------------------- |  | ---------------- | ----- | ------- |  | ------------- |  |  | --- | 
| |                         |  | December
  31,   |      
| |                         |  |                  |      
| |                         |  | 2 0 0 4          |       | 2 0 0 3 |  | 2 0 0 4
  (*) | 
| |                         |  |                  |       |         |  |               | 
| |                         |  | NIS              |       | NIS     |  | US dollars    | 
| |                         |  |                  |       |         |  |               | 
| |                         |  | (in
  thousands) |      
| |                         |  |                  |      
| |                         |  |                  |       |         |  |               |  |  |     | 
| | Tax
  authorities       |  |                  |      |         |  | 1,906         |  |  |    | 
| | Deferred
  income taxes |  |                  | 98    |         |  |              |  |  | 23  | 
| | Advances
  to suppliers |  |                  | 740   |         |  | 581           |  |  | 172 | 
| | Value-added
  tax       |  |                  | 72    |         |  | 168           |  |  | 17  | 
| | Prepaid
  expenses      |  |                  | 261   |         |  | 207           |  |  | 61  | 
| | Accrued
  interest      |  |                  | 40    |         |  | 40            |  |  | 8   | 
| |                         |  |                  |       |         |  |               |  |  |     | 
| |                         |  |                  | 1,211 |         |  | 2,902         |  |  | 281 | 
| |                         |  |                  |       |         |  |               |  |  |    

|           |                                                
|---------- | -----------------------------------------------
|           | (*) Convenience
  translation into U.S. dollars
|           |                                                
|NOTE 4    | FIXED ASSETS                                   
|           |                                                
|           | Comprised as follows:                          

| |                                              |  |                  |       |         |  |               |  |  |       | 
| | -------------------------------------------- |  | ---------------- | ----- | ------- |  | ------------- |  |  | ----- | 
| |                                              |  | December
  31,   |      
| |                                              |  |                  |      
| |                                              |  | 2 0 0 4          |       | 2 0 0 3 |  | 2 0 0 2
  (*) | 
| |                                              |  |                  |       |         |  |               | 
| |                                              |  | NIS              |       | NIS     |  | US dollars    | 
| |                                              |  |                  |       |         |  |               | 
| |                                              |  | (in
  thousands) |      
| |                                              |  |                  |      
| | Cost:                                        |  |                  |       |         |  |               |  |  |       | 
| | Motor vehicles                               |  |                  | 6,168 |         |  | 5,741         |  |  | 1,431 | 
| | Computers and peripheral equipment           |  |                  | 1,345 |         |  | 1,243         |  |  | 312   | 
| | Office furniture and equipment               |  |                  | 766   |         |  | 743           |  |  | 178   | 
| | Leasehold improvements                       |  |                  | 311   |         |  | 311           |  |  | 73    | 
| |                                              |  |                  |       |         |  |               |  |  |       | 
| |                                              |  |                  | 8,590 |         |  | 8,038         |  |  | 1994  | 
| |                                              |  |                  |       |         |  |               |  |  |       | 
| |                                              |  |                  |       |         |  |               |  |  |       | 
| | Accumulated
  depreciation and amortization: |  |                  |       |         |  |               |  |  |       | 
| | Motor vehicles                               |  |                  | 3,685 |         |  | 3,022         |  |  | 855   | 
| | Computers and peripheral equipment           |  |                  | 1,123 |         |  | 985           |  |  | 261   | 
| | Office furniture and equipment               |  |                  | 516   |         |  | 442           |  |  | 120   | 
| | Leasehold improvements                       |  |                  | 230   |         |  | 191           |  |  | 53    | 
| |                                              |  |                  |       |         |  |               |  |  |       | 
| |                                              |  |                  | 5,554 |         |  | 4,640         |  |  | 1,289 | 
| |                                              |  |                  |       |         |  |               |  |  |      

|           |                                                                                                            
|---------- | -----------------------------------------------------------------------------------------------------------
|           | (*)
  Convenience translation into U.S. dollars                                                            
|           |                                                                                                            
|NOTE 5    | OTHER ASSETS, NET                                                                                          
|           |                                                                                                            
|           | As of
  December 31, 2004 and 2003 the Companys other assets consisted solely of
  deferred income taxes.
|           |                                                                                                            
|NOTE 6    | PAYABLES AND OTHER CURRENT LIABILITIES                                                                     
|           |                                                                                                            
|           | Comprised as follows:                                                                                      

| |                           |  |                  |       |            |  |               |  |  |       | 
| | ------------------------- |  | ---------------- | ----- | ---------- |  | ------------- |  |  | ----- | 
| |                           |  | December
  31,   |      
| |                           |  |                  |      
| |                           |  | 2 0 0 4          |       | 2 0 0 3    |  | 2 0 0 4
  (*) | 
| |                           |  |                  |       |            |  |               | 
| |                           |  | NIS              |       | US dollars | 
| |                           |  |                  |       |            | 
| |                           |  | (in
  thousands) |      
| |                           |  |                  |      
| |                           |  |                  |       |            |  |               |  |  |       | 
| | Customer
  advances       |  |                  | 613   |            |  | 1,421         |  |  | 142   | 
| | Accrued
  expenses        |  |                  | 1,015 |            |  | 1,306         |  |  | 236   | 
| | Payroll-related
  amounts |  |                  | 760   |            |  | 693           |  |  | 176   | 
| | Deferred
  income taxes   |  |                  |      |            |  | 589           |  |  |      | 
| | Tax
  authorities         |  |                  | 4,276 |            |  | 729           |  |  | 993   | 
| | Other                     |  |                  |      |            |  | 58            |  |  |      | 
| |                           |  |                  |       |            |  |               |  |  |       | 
| |                           |  |                  | 6,664 |            |  | 4,796         |  |  | 1,547 | 
| |                           |  |                  |       |            |  |               |  |  |      

| |                                                
| | -----------------------------------------------
| | (*) Convenience
  translation into U.S. dollars

F  14

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|           |                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 7    | ACCRUED SEVERANCE PAY, NET                                                                                                                                                                                                                                                                                                                                
|           |                                                                                                                                                                                                                                                                                                                                                           
|           | The
  Companys obligation for severance pay is calculated in accordance with the
  Israeli Severance Pay Law, 1963, and is based on the most recent monthly
  salary and the length of employment in the Company. The obligation is covered
  by a balance-sheet accrual and by amounts funded with insurance policies not
  under the Companys custody.
|           |                                                                                                                                                                                                                                                                                                                                                           
|           | Severance
  pay expenses for 2004, 2003 and 2002 were NIS 306 thousand ($71 thousand),
  NIS 271 thousand and NIS 216 thousand, respectively.                                                                                                                                                                                                             
|           |                                                                                                                                                                                                                                                                                                                                                           
|           | The
  total value of the insurance policies at December 31, 2004 and 2003 and 2003
  was NIS 560 thousand ($130 thousand), NIS 488 thousand and NIS 399 thousand,
  respectively.                                                                                                                                                                         
|           |                                                                                                                                                                                                                                                                                                                                                           
|           | The
  Company has no liability for pension expenses to its employees.                                                                                                                                                                                                                                                                                     
|           |                                                                                                                                                                                                                                                                                                                                                           
|NOTE 8    | COMMITMENTS AND CONTINGENT LIABILITIES                                                                                                                                                                                                                                                                                                                    
|           |                                                                                                                                                                                                                                                                                                                                                           
|           | A.                                                                                                                                                                                                                                                                                                                                                         | Contingent liabilities and guarantees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|           |                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                                                                                                                                                                                                                                                                                                                                            | The Company is
  contingently liable in respect of documentary letters of credit from banks
  and suppliers credit guaranteed by banks for the import of food products
  totaling, at December 31, 2004, NIS 14,857 thousand ($3.4 million).                                                                                                                                                                                                                                                                                                                            
|           |                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           | B.                                                                                                                                                                                                                                                                                                                                                         | Credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|           |                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                                                                                                                                                                                                                                                                                                                                            | Financial
  instruments that potentially subject the Company to credit risk consist
  principally of trade receivables. A major portion of the Companys sales was
  to a limited number of customers (see Note 12A). The Company, which generally
  does not require security from those customers, maintains an allowance for
  doubtful accounts, based upon factors regarding the credit risk of specific
  customers, historical trends and other information, which management believes
  adequately covers all anticipated losses in respect of trade receivables.
|           |                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           | C.                                                                                                                                                                                                                                                                                                                                                         | Supply of products                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|           |                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                                                                                                                                                                                                                                                                                                                                            | As of December 31, 2004,
  the Company was not dependent on any given supplier in respect of all its
  products. However, termination of the Companys business relationships with
  certain suppliers and/or a material adverse change in the terms at which it
  purchases products from certain suppliers may have a material adverse effect
  on the Companys financial results. There can be no assurance that
  alternative source of supply, if required, will be readily available nor can
  there be any assurance as to purchase terms.                       
|           |                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           | D.                                                                                                                                                                                                                                                                                                                                                         | Fair value of financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           |                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                                                                                                                                                                                                                                                                                                                                            | The
  financial instruments of the Company consist mainly of cash and cash
  equivalents, current accounts receivable, short-term borrowings, accounts
  payable and accruals.                                                                                                                                                                                                                                                                                                                                                                                           
|          
|           |                                                                                                                                                                                                                                                                                                                                                            | In
  view of their nature, the fair value of the financial instruments, included
  in working capital, is usually identical or close to their book value.                                                                                                                                                                                                                                                                                                                                                                                                                

F  15

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|           |                                                |                                                                                                                                                                                                                                                                                                                                
|---------- | ---------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 8    | COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|           |                                               
|           | E.                                             | Lease commitments                                                                                                                                                                                                                                                                                                              
|           |                                                |                                                                                                                                                                                                                                                                                                                                
|           |                                                | The premises of the
  Company and its subsidiaries are rented under various operating lease
  agreements with related parties for various periods through 2006 (including
  renewal options). Future aggregate minimum annual rental payments, pursuant
  to existing lease commitments in effect on December 31, 2004, follow:

| |                       |  |                  |       |                  |  |     | 
| | --------------------- |  | ---------------- | ----- | ---------------- |  | --- | 
| |                       |  | NIS              |       | US dollars
  (*) | 
| |                       |  |                  |       |                  | 
| |                       |  | (in
  thousands) |      
| |                       |  |                  |      
| |                       |  |                  |       |                  |  |     | 
| | 2005                  |  |                  | 1,852 |                  |  | 430 | 
| | 2006
  and thereafter |  |                  | 1,934 |                  |  | 449 | 
| |                       |  |                  |       |                  |  |     | 
| |                       |  |                  | 3,786 |                  |  | 879 | 
| |                       |  |                  |       |                  |  |    

| |    |                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | (*) Convenience
  translation into U.S. dollars                                                                                                  
| |    |                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Total rent expenses for
  2004, 2003 and 2002 were NIS 1,833 thousand ($425 thousand), NIS 1,837
  thousand and NIS 1,932 thousand, respectively.
| |    |                                                                                                                                                  
| | F. | Claims                                                                                                                                           
| |    |                                                                                                                                                  
| |    | 1.                                                                                                                                                | A lawsuit was filed
  against the Company in January 2004 by the State of Israel, alleging the
  operation of storage of refrigerated food without a license. The Company has
  reached an understanding with the States attorney that if by March 15, 2005,
  it discontinues this activity the State would withdraw its charge. The
  Company has since complied with this understanding and it is therefore
  expected that the State will withdraw the charge.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | 2.                                                                                                                                                | A lawsuit was filed in
  December 2001 against 29 importers/producers of food products, including the
  Company, for an amount totaling NIS 500 million ($116 million). Concurrently,
  the plaintiffs filed a request for an exemption from the court fee. Following
  the courts rejection of the plaintiffs request for the fee exemption and
  their failure to pay it, the court dismissed the case.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                   | In January 2004 the
  abovementioned plaintiffs filed a new lawsuit against the 29 noted importers/producers
  for NIS 1 billion ($232 million). Again, a request was made concurrently for
  an exemption from the court fee. The Companys legal counsel believes that
  the plaintiff do not stand a reasonable chance for prevailing and until the
  fee issue is settled this matter should not be regarded as a real claim.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | 3.                                                                                                                                                | A lawsuit was filed
  against the Company and a subsidiary in respect of their marketing and
  distribution of products manufactured by Arla. The plaintiffs allege that the
  defendants marketed products bearing a commercial tag in which the plaintiffs
  have rights. The plaintiffs request a court injunction prohibiting the
  Company and its subsidiary from marketing these products as well as an
  indemnification of NIS 100 thousand. Concurrently, a counter claim was filed
  by Arla, alleging misrepresentation, breach of fiduciary duties, exceeding
  authorization and breach of its rights in an intellectual property. Since
  negotiations between the parties is currently underway, it was agreed that
  the 30 days available for filing the defense motions by the Company and its
  subsidiary would begin on the date when the plaintiffs attorney informs the
  two companies in writing on the outcome of the negotiations. The Companys
  legal counsel believes that, at this stage, it is not possible to assess the
  outcome of the proceedings.

F  16

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                            
|---------- | ---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 8    | COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|           |                                               
|           | G.                                             | Liens                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                            
|           |                                                | The Company has registered
  fixed and floating liens in favor of banks on its assets and insurance rights
  and a fixed lien, unlimited in amount, on its share capital and goodwill.                                                                                                                                                                                                                                                    
|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           | H.                                             | Related parties                                                                                                                                                                                                                                                                                                                                                                                                                           
|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           |                                                | As of June 1, 1998, the
  Company entered into certain management services agreements with certain
  companies controlled by each of Messrs. Joseph and Zvi Williger, respectively
  (collectively, the Williger Management Companies), pursuant to which
  Messrs. Joseph and Zvi Williger are to provide management services on behalf
  of the Williger Management Companies to the Company (the Management Services
  Agreements).
|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           |                                                | The Management Services
  Agreements were for a period of four years commencing on June 1, 1998
  (the Management Services Period), were automatically renewed on June 1,
  2002 for two years and were automatically renewed for an additional period of
  two years in June 2004.                                                                                                                                                     
|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           |                                                | 1.                                                                                                                                                                                                                                                                                                                                                                                                                                         | Each
  of the Management Services Agreements provides for monthly services fees
  equal to USD 24,500 (excluding VAT) and an annual bonus at a rate of 3% of
  the Companys pre-tax annual profits, if such profits are equal to or less
  than NIS 3.0 millions (approximately USD 0.7 millions), or at
  a rate of 5% if such profits exceed such level.
|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                            
|           |                                                | 2.                                                                                                                                                                                                                                                                                                                                                                                                                                         | On
  April 1, 1997, the Company entered into an agreement to provide the parent
  company administrative services pursuant to which the Company may provide
  office facilities leased by the parent company for a monthly fee of NIS 5,350
  ($1,242) from June 1997 linked to the Israeli CPI of June 1997.                                              
|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                            
|           |                                                | 3.                                                                                                                                                                                                                                                                                                                                                                                                                                         | Lease
  agreement with related parties  see E above.                                                                                                                                                                                                                                                                                                      
|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                            
|NOTE 9    | SHAREHOLDERS EQUITY                          
|           |                                               
|           | A.                                             | The
  Companys shares are traded on the NASDAQ.                                                                                                                                                                                                                                                                                                                                                                                          
|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           | B.                                             | As of
  December 31, 2003, 50,000 stock options were outstanding and exercisable, at
  an exercise price of $4.1 per share. In April 2004, 30,000 of the above were
  exercised, by related parties, for a total consideration of NIS 557 thousand.
  The remaining 20,000 stock options expired in May 2004.                                                                                                                             
|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           | C.                                             | In
  December 2004, the Company declared a share dividend of 1 ordinary share for
  each outstanding ordinary share (an aggregate of 4,307,500 ordinary shares).                                                                                                                                                                                                                                                                          
|          
|           |                                                | All shares and per share
  amounts in the financial statements have been retroactively restated to
  reflect the aforementioned share dividend for all periods presented.                                                                                                                                                                                                                                                                 
|           |                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           | D.                                             | In February 2005, the
  Companys authorized share capital was increased by 40,000,000 shares of NIS
  0.1 par value, from 10,000,000 to 50,000,000 shares.                                                                                                                                                                                                                                                                               

F  17

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|            |                                                                                                                                                                                                                                    
|----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 10    | INCOME TAXES                                                                                                                                                                                                                       
|            |                                                                                                                                                                                                                                    
|            | Taxation under various laws                                                                                                                                                                                                        
|            |                                                                                                                                                                                                                                    
|            | The
  Company is assessed under the provisions of the Income Tax Law (Inflationary
  Adjustments), 1985, pursuant to which the results for tax purposes are
  measured in real terms in accordance with changes in the Israeli CPI.
|            |                                                                                                                                                                                                                                    
|            | Provision for income taxes  consolidated:                                                                                                                                                                                         

| |                           |  |                           |       |            |  |         |   |               |       |   |  |       |  
| | ------------------------- |  | ------------------------- | ----- | ---------- |  | ------- | - | ------------- | ----- | - |  | ----- | -
| |                           |  | Year ended
  December 31, |      
| |                           |  |                           |      
| |                           |  | 2 0 0 4                   |       | 2 0 0 3    |  | 2 0 0 2 |   | 2 0 0 4
  (*) |      
| |                           |  |                           |       |            |  |         |   |               |      
| |                           |  | NIS                       |       | US dollars | 
| |                           |  |                           |       |            | 
| |                           |  | (in
  thousands)          |      
| |                           |  |                           |      
| |                           |  |                           |       |            |  |         |   |               |       |   |  |       |  
| | Current
  taxes           |  |                           | 6,575 |            |  | 2,562   |   |               | 2,246 |   |  | 1,526 |  
| | Erosion
  of tax advances |  |                           |      |            |  | (29     | ) |               | 109   |   |  |      |  
| | Deferred
  income taxes   |  |                           | (689  | )          |  | 356     |   |               | (101  | ) |  | (160  | )
| |                           |  |                           |       |            |  |         |   |               |       |   |  |       |  
| |                           |  |                           | 5,886 |            |  | 2,889   |   |               | 2,254 |   |  | 1,366 |  
| |                           |  |                           |       |            |  |         |   |               |       |   |  |       |  

| |                      
| | ---------------------
| | Deferred income taxes
| |                      
| | Composition:         

| |                                             |  |                  |     |            |  |               |   |  |    | 
| | ------------------------------------------- |  | ---------------- | --- | ---------- |  | ------------- | - |  | -- | 
| |                                             |  | December
  31,   |    
| |                                             |  |                  |    
| |                                             |  | 2 0 0 4          |     | 2 0 0 3    |  | 2 0 0 4
  (*) |  
| |                                             |  |                  |     |            |  |               |  
| |                                             |  | NIS              |     | US dollars | 
| |                                             |  |                  |     |            | 
| |                                             |  | (in
  thousands) |    
| |                                             |  |                  |    
|
| | Included
  in other assets:                 |  |                  |     |            |  |               |   |  |    | 
| | Accrued severance pay                       |  |                  | 63  |            |  | 61            |   |  | 15 | 
| |                                             |  |                  |     |            |  |               |   |  |    | 
| | Included
  in current assets (liabilities): |  |                  |     |            |  |               |   |  |    | 
| | Marketable securities                       |  |                  | 49  |            |  | (656          | ) |  | 11 | 
| | Inventory                                   |  |                  |    |            |  | 11            |   |  |   | 
| | Accrued vacation pay                        |  |                  | 47  |            |  | 56            |   |  | 11 | 
| | Allowance for doubtful accounts             |  |                  | 2   |            |  |              |   |  | 1  | 
| |                                             |  |                  |     |            |  |               |   |  |    | 
| |                                             |  |                  | 161 |            |  | (528          | ) |  | 38 | 
| |                                             |  |                  |     |            |  |               |   |  |   

| |                                                
| | -----------------------------------------------
| | (*) Convenience
  translation into U.S. dollars

F  18

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|            |                                                                                                                                                                                                                     
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 10    | INCOME (TAXES ON Cont.)                                                                                                                                                                                             
|            |                                                                                                                                                                                                                     
|            | Reconciliation                                                                                                                                                                                                      
|            |                                                                                                                                                                                                                     
|            | The following is a
  reconciliation of the income taxes assuming that all income is taxed at the
  ordinary statutory corporate tax rate in Israel and the actual taxes on
  income, in the statement of operations:

| |                                                                                                                     |  |                           |        |         |  |         |   |                |        |   |  |       |  
| | ------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------ | ------- |  | ------- | - | -------------- | ------ | - |  | ----- | -
| |                                                                                                                     |  | Year ended
  December 31, |       
| |                                                                                                                     |  |                           |       
| |                                                                                                                     |  | 2 0 0 4                   |        | 2 0 0 3 |  | 2 0 0 2 |   | 2 0 0 4
  (*)  |       
| |                                                                                                                     |  |                           |        |         |  |         |   |                |       
| |                                                                                                                     |  |                           |        | NIS     |  |         |   | U.S.
  dollars |       
| |                                                                                                                     |  |                           |       
| |                                                                                                                     |  | (in thousands)            |       
| |                                                                                                                     |  |                           |       
| | Income before taxes on income                                                                                       |  |                           | 17,079 |         |  | 11,665  |   |                | 9,311  |   |  | 3,964 |  
| |                                                                                                                     |  |                           |        |         |  |         |   |                |        |   |  |       |  
| | Statutory
  tax rates                                                                                               |  |                           | 35     | %       |  | 36      | % |                | 36     | % |  | 35    | %
| |                                                                                                                     |  |                           |        |         |  |         |   |                |        |   |  |       |  
| |                                                                                                                     |  |                           |        |         |  |         |   |                |        |   |  |       |  
| | Provision computed by ordinary rates                                                                                |  |                           | 5,978  |         |  | 4,199   |   |                | 3,352  |   |  | 1,388 |  
| |                                                                                                                     |  |                           |        |         |  |         |   |                |        |   |  |       |  
| |                                                                                                                     |  |                           |        |         |  |         |   |                |        |   |  |       |  
| | Increase (decrease) in provision due to:                                                                            |  |                           |        |         |  |         |   |                |        |   |  |       |  
| | Tax-exempt income                                                                                                   |  |                           | (16    | )       |  | (53     | ) |                | (255   | ) |  | (4    | )
| | Erosion of tax prepayments                                                                                          |  |                           |       |         |  | (18     | ) |                | 70     |   |  |      |  
| | Non-deductible expenses                                                                                             |  |                           | 30     |         |  | 22      |   |                | 42     |   |  | 7     |  
| | Utilization of tax loss carryforwards for
  which deferred taxes were not previously recorded                       |  |                           |       |         |  | (750    | ) |                | (909   | ) |  |       |  
| |                                                                                                                     |  |                           |        |         |  |         |   |                |        |   |  |       |  
| | Effect of decrease in tax rate on deferred
  taxes assets                                                           |  |                           | (15    | )       |  |        |   |                |       |   |  | (3    | )
| | Differences in the definition of Capital
  and non-monetary items for tax purposes and financial reporting purposes |  |                           | (263   | )       |  | (402    | ) |                |       |   |  | (61   | )
| |                                                                                                                     |  |                           |        |         |  |         |   |                |        |   |  |       |  
| | Other                                                                                                               |  |                           | 172    |         |  | (109    | ) |                | (46    | ) |  | 39    |  
| |                                                                                                                     |  |                           |        |         |  |         |   |                |        |   |  |       |  
| |                                                                                                                     |  |                           | (92    | )       |  | (1,310  | ) |                | (1,098 | ) |  | (21   | )
| |                                                                                                                     |  |                           |        |         |  |         |   |                |        |   |  |       |  
| |                                                                                                                     |  |                           | 5,886  |         |  | 2,889   |   |                | 2,254  |   |  | 1,366 |  
| |                                                                                                                     |  |                           |        |         |  |         |   |                |        |   |  |       |  

| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Tax assessments                                                                   
| |                                                                                   
| | The Company has not yet been assessed for income tax purposes since its inception.

|            |                                   |                              
|----------- | --------------------------------- | -----------------------------
|NOTE 11    | TRANSACTIONS WITH RELATED PARTIES
|            |                                   |                              
|            | A.                                | Balances with related parties

| |  |                                                          |  |                  |       |            |  |               |  |  |     | 
| |  | -------------------------------------------------------- |  | ---------------- | ----- | ---------- |  | ------------- |  |  | --- | 
| |  |                                                          |  | December
  31,   |      
| |  |                                                          |  |                  |      
| |  |                                                          |  | 2 0 0 4          |       | 2 0 0 3    |  | 2 0 0 4
  (*) | 
| |  |                                                          |  |                  |       |            |  |               | 
| |  |                                                          |  | NIS              |       | US dollars | 
| |  |                                                          |  |                  |       |            | 
| |  |                                                          |  | (in
  thousands) |      
| |  |                                                          |  |                  |      
| |  |                                                          |  |                  |       |            |  |               |  |  |     | 
| |  | Due to
  managers (shareholders in the
  parent company) |  |                  | 1,929 |            |  | 1,324         |  |  | 448 | 
| |  | Parent
  company                                         |  |                  | 628   |            |  | 24            |  |  | 146 | 

| |     |                                            
| | --- | -------------------------------------------
| | (*) | Convenience
  translation into U.S. dollars

F  19

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|            |                                           |                                  
|----------- | ----------------------------------------- | ---------------------------------
|NOTE 11    | TRANSACTIONS WITH RELATED PARTIES (Cont.)
|            |                                           |                                  
|            | B.                                        | Transactions with related parties

| |  |                             |  |                           |       |            |  |         |   |               |       |   |  |       |  
| |  | --------------------------- |  | ------------------------- | ----- | ---------- |  | ------- | - | ------------- | ----- | - |  | ----- | -
| |  |                             |  | Year ended
  December 31, |      
| |  |                             |  |                           |      
| |  |                             |  | 2 0 0 4                   |       | 2 0 0 3    |  | 2 0 0 2 |   | 2 0 0 4
  (*) |      
| |  |                             |  |                           |       |            |  |         |   |               |      
| |  |                             |  | NIS                       |       | US dollars | 
| |  |                             |  |                           |       |            | 
| |  |                             |  | (in
  thousands)          |      
| |  |                             |  |                           |      
| |  |                             |  |                           |       |            |  |         |   |               |       |   |  |       |  
| |  | Management
  fees           |  |                           | 4,531 |            |  | 3,822   |   |               | 3,794 |   |  | 1,051 |  
| |  | Rent
  expenses             |  |                           | 1,833 |            |  | 1,837   |   |               | 1,815 |   |  | 425   |  
| |  | Participation
  in expenses |  |                           | (64   | )          |  | (64     | ) |               | (63   | ) |  | (15   | )

|            |                                                                               |                                  
|----------- | ----------------------------------------------------------------------------- | ---------------------------------
|            | For
  other transactions with related parties, see Note 9.                   
|            |                                                                               |                                  
|NOTE 12    | SELECTED CONSOLIDATED STATEMENTS OF OPERATIONS DATA                          
|            |                                                                               |                                  
|            | A.                                                                            | Classification of major customers
|            |                                                                               |                                  
|            | Percentage of revenues
  from customers constituting 10% or more of revenues:

| |              |  |                           |    |         |  |         |  |  |    | 
| | ------------ |  | ------------------------- | -- | ------- |  | ------- |  |  | -- | 
| |              |  | Year ended
  December 31, |   
| |              |  |                           |   
| |              |  | 2 0 0 4                   |    | 2 0 0 3 |  | 2 0 0 2 | 
| |              |  |                           |    |         |  |         | 
| |              |  | %                         |   
| |              |  |                           |   
| |              |  |                           |    |         |  |         |  |  |    | 
| | Customer
  A |  |                           | 22 |         |  | 18      |  |  | 27 | 
| | Customer
  B |  |                           | 6  |         |  | 14      |  |  | 8  | 
| | Customer
  C |  |                           | 11 |         |  | 7       |  |  | 6  | 

| |    |              
| | -- | -------------
| | B. | Cost of sales

| |                                   |  |                           |         |            |  |         |   |               |         |  |  |        |  
| | --------------------------------- |  | ------------------------- | ------- | ---------- |  | ------- | - | ------------- | ------- |  |  | ------ | -
| |                                   |  | Year ended
  December 31, |        
| |                                   |  |                           |        
| |                                   |  | 2 0 0 4                   |         | 2 0 0 3    |  | 2 0 0 2 |   | 2 0 0 4
  (*) |        
| |                                   |  |                           |         |            |  |         |   |               |        
| |                                   |  | NIS                       |         | US dollars | 
| |                                   |  |                           |         |            | 
| |                                   |  | (in
  thousands)          |        
| |                                   |  |                           |        
| |                                   |  |                           |         |            |  |         |   |               |         |  |  |        |  
| | Purchases                         |  |                           | 132,192 |            |  | 106,284 |   |               | 92,112  |  |  | 30,685 |  
| | Decrease (increase) in  inventory |  |                           | (8,316  | )          |  | (1,312  | ) |               | 3,865   |  |  | (1,930 | )
| | Transportation and rent           |  |                           | 4,872   |            |  | 3,952   |   |               | 3,831   |  |  | 1,131  |  
| | Other                             |  |                           | 1,544   |            |  | 1,236   |   |               | 1,318   |  |  | 358    |  
| |                                   |  |                           |         |            |  |         |   |               |         |  |  |        |  
| |                                   |  |                           | 130,292 |            |  | 110,160 |   |               | 101,126 |  |  | 30,244 |  
| |                                   |  |                           |         |            |  |         |   |               |         |  |  |        |  

| |     |                                            
| | --- | -------------------------------------------
| | (*) | Convenience
  translation into U.S. dollars

F  20

---

---



G. WILLI-FOOD INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

|            |                                                             |                                 
|----------- | ----------------------------------------------------------- | --------------------------------
|NOTE 12    | SELECTED CONSOLIDATED STATEMENTS OF OPERATIONS DATA (Cont.)
|            |                                                             |                                 
|            | C.                                                          | Financial income (expenses), net

| |                                                      |  |                           |       |            |  |         |   |               |      |   |  |      |  
| | ---------------------------------------------------- |  | ------------------------- | ----- | ---------- |  | ------- | - | ------------- | ---- | - |  | ---- | -
| |                                                      |  | Year ended
  December 31, |      
| |                                                      |  |                           |      
| |                                                      |  | 2 0 0 4                   |       | 2 0 0 3    |  | 2 0 0 2 |   | 2 0 0 4
  (*) |     
| |                                                      |  |                           |       |            |  |         |   |               |     
| |                                                      |  | NIS                       |       | US dollars | 
| |                                                      |  |                           |       |            | 
| |                                                      |  | (in
  thousands)          |      
| |                                                      |  |                           |      
| |                                                      |  |                           |       |            |  |         |   |               |      |   |  |      |  
| | Financing expenses:                                  |  |                           |       |            |  |         |   |               |      |   |  |      |  
| | Interest and charges on short-term borrowings        |  |                           | (776  | )          |  | (678    | ) |               | (298 | ) |  | (180 | )
| | Inflationary erosion of the Israeli currency         |  |                           |      |            |  | (83     | ) |               | (105 | ) |  |     |  
| |                                                      |  |                           |       |            |  |         |   |               |      |   |  |      |  
| |                                                      |  |                           | (776  | )          |  | (761    | ) |               | (403 | ) |  | (180 | )
| |                                                      |  |                           |       |            |  |         |   |               |      |   |  |      |  
| | Financing income:                                    |  |                           |       |            |  |         |   |               |      |   |  |      |  
| | Interest income (expenses)                           |  |                           | 1,457 |            |  | 1,551   |   |               | (703 | ) |  | 338  |  
| | Realized gains on derivative financial
  instruments |  |                           |      |            |  |        |   |               | 323  |   |  |     |  
| | Gain from marketable securities                      |  |                           | 440   |            |  | 3,546   |   |               | 544  |   |  | 102  |  
| |                                                      |  |                           |       |            |  |         |   |               |      |   |  |      |  
| |                                                      |  |                           | 1,897 |            |  | 5,097   |   |               | 164  |   |  | 440  |  
| |                                                      |  |                           |       |            |  |         |   |               |      |   |  |      |  
| | Financing income (expenses), net                     |  |                           | 1,121 |            |  | 4,336   |   |               | (239 | ) |  | 260  |  
| |                                                      |  |                           |       |            |  |         |   |               |      |   |  |      |  

|            |                                           |                                                                                                                                                                                                                                                                                                                                                                                                            
|----------- | ----------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 13    | DIFFERENCES BETWEEN ISRAELI AND U.S. GAAP
|            |                                           |                                                                                                                                                                                                                                                                                                                                                                                                            
|            | A.                                        | In accordance with Israeli
  GAAP, the Companys financial statements are denominated in reported
  amounts (also see Note 3). Such accounting principle is considered a more
  meaningful presentation than financial reporting based on nominal historical
  cost. Accordingly, the Company is not required to eliminate the effect of
  historic price level changes in a reconciliation to U.S. GAAP.
|            |                                           |                                                                                                                                                                                                                                                                                                                                                                                                            
|            | B.                                        | In accordance with U.S.
  GAAP, SFAS No. 115, changes in trading securities should be presented in the
  statement of cash flows as part of the operating activities. The following
  table provides a reconciliation of the Statements of Cash flows for 2004,
  2003 and 2002 in accordance with U.S. GAAP:                                                                                              

|                                         |  |                           |         |            |  |         |   |               |        |   |  |        |  
|---------------------------------------- |  | ------------------------- | ------- | ---------- |  | ------- | - | ------------- | ------ | - |  | ------ | -
|                                         |  | Year ended
  December 31, |        
|                                         |  |                           |        
|                                         |  | 2 0 0 4                   |         | 2 0 0 3    |  | 2 0 0 2 |   | 2 0 0 4
  (*) |       
|                                         |  |                           |         |            |  |         |   |               |       
|                                         |  | NIS                       |         | US dollars | 
|                                         |  |                           |         |            | 
|                                         |  | (in
  thousands)          |        
|                                         |  |                           |        
|                                         |  |                           |         |            |  |         |   |               |        |   |  |        |  
|Net cash
  provided by operating         |  |                           |         |            |  |         |   |               |        |   |  |        |  
|activities before adjustment             |  |                           | (18     | )          |  | 5,433   |   |               | 9,157  |   |  | (4     | )
|Adjustment                               |  |                           | 41,044  |            |  | (17,607 | ) |               | (5,805 | ) |  | 9,527  |  
|                                         |  |                           |         |            |  |         |   |               |        |   |  |        |  
|Net cash
  provided by (used in)         |  |                           |         |            |  |         |   |               |        |   |  |        |  
|operating activities after
  adjustment  |  |                           | 41,026  |            |  | (12,174 | ) |               | 3,352  |   |  | 9,523  |  
|                                         |  |                           |         |            |  |         |   |               |        |   |  |        |  
|Net cash
  used in                       |  |                           |         |            |  |         |   |               |        |   |  |        |  
|investing activities
  before adjustment |  |                           | 40,385  |            |  | (19,064 | ) |               | (6,639 | ) |  | 9,374  |  
|Adjustment                               |  |                           | (41,044 | )          |  | 17,607  |   |               | 5,805  |   |  | (9,527 | )
|                                         |  |                           |         |            |  |         |   |               |        |   |  |        |  
|Net cash
  used in investing             |  |                           |         |            |  |         |   |               |        |   |  |        |  
|activities after
  adjustment            |  |                           | (659    | )          |  | (1,457  | ) |               | (834   | ) |  | (153   | )
|                                         |  |                           |         |            |  |         |   |               |        |   |  |        |  

| |     |                                            
| | --- | -------------------------------------------
| | (*) | Convenience
  translation into U.S. dollars

F  21

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SIGNATURES

Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the
registrant certifies that it meets all of the requirements for filing on Form
20-F and has duly caused this Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                    |                                    |                    
|------------------- | ---------------------------------- | -------------------
|                    | G.
  WILLI-FOOD INTERNATIONAL LTD.
|                    |                                   
|                    | By:                                | /s/ Joseph Williger
|                    |                                   
|                    | Joseph Williger                   
|                    | Chief Executive Officer           
|Date: June 30, 2005 |                                   

Page  52

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EXHIBIT INDEX

|                 |      |             |                                                                                                                                          
|---------------- | ---- | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
  Number |      | Description
|                 |      |             |                                                                                                                                          
|                 |      |             |                                                                                                                                          
|                | 1.1  |             | Memorandum of Association
  of the Company, as amended (1)                                                                               
|                 |      |             |                                                                                                                                          
|                 | 1.2  |             | Articles of Association of
  the Company, as amended (1)                                                                                 
|                 |      |             |                                                                                                                                          
|                 | 2.1  |             | Specimen of Certificate
  for ordinary shares (2)                                                                                        
|                 |      |             |                                                                                                                                          
|                 | 4.1  |             | Form of Employment
  Agreement with Mr. Zvi Williger (2)                                                                                 
|                 |      |             |                                                                                                                                          
|                 | 4.2  |             | Form of Employment
  Agreement with Mr. Joseph Williger (2)                                                                              
|                 |      |             |                                                                                                                                          
|                 | 4.3  |             | Share Option Plan (2)                                                                                                                    
|                 |      |             |                                                                                                                                          
|                 | 4.4  |             | Management Agreement
  between Registrant and Yossi Willi Management Investments Ltd., dated June 1,
  1998 (3)                          
|                 |      |             |                                                                                                                                          
|                 | 4.5  |             | Management Agreement
  between the Company and Zvi Israel and Partners Ltd., dated June 1, 1998 (3)                                      
|                 |      |             |                                                                                                                                          
|                 | 4.6  |             | Lease of Companys
  premises with Titanic Food Ltd., dated November 23, 1998 (3)                                                        
|                 |      |             |                                                                                                                                          
|                 | 4.7  |             | Services Agreement between
  the Company and Willifood Investments Ltd., dated April 1, 1997 (3)                                         
|                 |      |             |                                                                                                                                          
|                 | 8    |             | Subsidiaries of the Company
  (2)                                                                                                        
|                 |      |             |                                                                                                                                          
|                 | 11   |             | Code of Ethics (4)                                                                                                                       
|                 |      |             |                                                                                                                                          
|                 | 12.1 |             | Certification of CEO of
  the Company pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of
  the Sarbanes-Oxley Act of 2002*
|                 |      |             |                                                                                                                                          
|                 | 12.2 |             | Certification of CFO of
  the Company pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of
  the Sarbanes-Oxley Act of 2002*
|                 |      |             |                                                                                                                                          
|                 | 13.1 |             | Certification of CEO of
  the Company pursuant to Rule 13a-14(b), as adopted pursuant to Section 906 of
  the Sarbanes-Oxley Act of 2002*
|                 |      |             |                                                                                                                                          
|                 | 13.2 |             | Certification of CFO of
  the Company pursuant to Rule 13a-14(b), as adopted pursuant to Section 906 of
  the Sarbanes-Oxley Act of 2002*



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| |     |                                                                                                                          
| | --- | -------------------------------------------------------------------------------------------------------------------------
| |    | English translations from
  Hebrew original.                                                                             
| |     |                                                                                                                          
| | (1) | Incorporated by Reference
  to the Registrants Annual Report on Form 20-F for the Fiscal year ended
  December 31, 1997.
| |     |                                                                                                                          
| | (2) | Incorporated by reference
  to the Companys Registration Statement on Form F-1, File No. 333-6314.                      
| |     |                                                                                                                          
| | (3) | Incorporated by reference
  to the Companys Annual Report on Form 20-F for the fiscal year ended
  December 31, 2001.   
| |     |                                                                                                                          
| | (4) | Incorporated
  by reference to the Companys Annual Report on Form 20-F for the fiscal year
  ended December 31, 2003.   
| |     |                                                                                                                          
| | *   | Filed herewith.                                                                                                          



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