Delta Galil Industries Ltd. 2020 Periodic Report March 9th 2021 1 Delta Galil Industries Ltd. 2020 Periodic Report Table of Contents: 1. Chapter A – Description of the Corporation’s Business 2. Chapter B – Board of Directors' Report on the State of Corporate Affairs 3. Chapter C – Financial Statements 4. Chapter D – Additional Information Regarding the Corporation 2 Delta Galil Industries Ltd. Chapter A Description of the Corporation's Business As of December 31 2020 3 TABLE OF CONTENTS Page Chapter A – Description of the General Development of the Corporation’s Business ..................... 7 1. The Corporation’s Activity and Description of the Development of its Business .................... 7 2. The Corporation’s Operating Segment ................................................................................... 11 3. Investments in the Corporation’s Equity and Transactions in its Shares ................................ 12 4. Distribution of Dividends ....................................................................................................... 12 Chapter B – Other Information .......................................................................................................... 13 5. Financial Information Regarding the Corporation’s Operating segments .............................. 13 6. General Environment and Impact of External Factors on the Corporation’s Activity ............ 13 Chapter C – Description of the Corporation's Business by Operating Segment ............................ 14 7. General Information on Operating segments: Delta U.S.A. and Global Upper Market .......... 14 8. Customers in Operating segments: Delta U.S.A and Global Upper Market ........................... 16 9. Marketing and Distribution in Operating Segments: Delta U.S.A. and Global Upper Market17 10. Backlog in Operating Segments: Delta U.S.A. and Global Upper Market ............................. 17 11. Competition in Operating Segments: Delta U.S.A. and Global Upper Market: ..................... 18 12. Production Capabilities in Operating Segments: Delta U.S.A. and Global Upper Market ..... 19 13. Intangible Assets in Operating Segments: Delta U.S.A. and Global Upper Market ............... 19 14. Raw Materials in the Operating Segments: Delta U.S.A. and Global Upper Market ............. 20 15. Working Capital in Operating Segments: Delta U.S.A. and Global Upper Market ................ 22 16. Restrictions and Supervision of the Corporation’s Activity in Operating Segments .............. 22 17. General Information on Operating Segments: Delta European Brands, Delta Premium Brands and Delta Israel ......................................................................................................................... 23 18. Customers in the Operating Segments: Delta European Brands, Delta Premium Brands and Delta Israel ............................................................................................................................... 27 19. Marketing and Distribution in the Operating Segments: Delta European Brands, Delta Premium Brands and Delta Israel ............................................................................................. 27 20. Backlog in Operating Segments: Delta European Brands, Delta Premium Brands, Delta Israel29 21. Competition in the Operating Segments: Delta European Brands, Delta Premium Brands and Delta Israel ............................................................................................................................... 30 22. Manufacturing Capabilities in the Operating Segments: Delta European Brands, Delta Premium Brands and Delta Israel ............................................................................................. 31 23. Intangible Assets in the Operating Segments: Delta European Brands, Delta Premium Brands and Delta Israel ......................................................................................................................... 31 4 24. Raw Materials and Vendors in the Operating Segments: Delta European Brands, Delta Premium Brands and Delta Israel ............................................................................................. 32 25. Working Capital in the Operating Segments: Delta European Brands, Delta Premium Brands and Delta Israel ......................................................................................................................... 32 26. Restrictions and Supervision of the Corporation’s Activity in Operating Segments: Delta European Brands, Delta Premium Brands and Delta Israel ...................................................... 33 Chapter D – Additional Information at the Corporate Level ........................................................... 35 27. General Information on the Operating Segments .................................................................... 35 28. Company’s Products ............................................................................................................... 35 29. Seasonality .............................................................................................................................. 35 30. Fixed Assets, Real Estate and Facilities.................................................................................. 36 31. Research and Development..................................................................................................... 42 32. Human Capital ........................................................................................................................ 43 33. operating Working Capital ...................................................................................................... 46 34. Financing ................................................................................................................................ 47 35. Taxation .................................................................................................................................. 48 36. Goals and Business Strategy ................................................................................................... 48 37. Financial Data on Geographic Regions .................................................................................. 50 38. Discussion of Risk Factors ..................................................................................................... 50 5 Introduction The Company, Delta Galil Industries Ltd., hereby submits a report describing the Corporation's business as of December 31st 2020, which reviews the description of the Corporation and the development of its business, as they occurred in 2020 (“the Reported Period”). The report was prepared in accordance with the Securities Regulations (Periodic and Immediate Reports), 1970. The materiality of the data included in this periodic report, including the description of material transactions, has been assessed from the Company’s point of view, while in some cases, additional descriptive information is given in order to provide a comprehensive picture of the matter being described. Glossary For the sake of convenience, in this periodic report, the following abbreviations shall be assigned the meaning listed alongside them: “The Company” or “Delta” Delta Galil Industries Ltd. “The Group” or “the Delta Group” Delta Galil Industries Ltd. and its subsidiaries “Delta USA” Delta Galil USA Inc. “Schiesser” Schiesser Group “Eminence” Eminence Group “Bogart” Bogart Group “Dollar” US dollar 6 Description of the Corporation’s Business Chapter A – Description of the General Development of the Corporation’s Business 1. The Corporation’s Activity and Description of the Development of its Business The following is information on the Corporation’s business, as of March 9th 2021. 1.1 The Company was incorporated in Israel in 1975 as a private company in accordance with the Companies Order. In 1982 the Company went public on the Tel Aviv Stock Exchange Ltd. On March 25th 1999, the Company issued American Depositary Shares (“ADS”) in such manner that each ADS represents a single ordinary Company share of 1 NIS par value. ADS may be traded on the U.S. OTC trading arena, or on the Tel Aviv Stock Exchange Ltd. (subject to their conversion to regular Company shares). On July 31st, 2020, trading in the Company's ADSs on the OTC Pink List was discontinued and the Company's ADS program was canceled. 1.2 On July 2018 the Company acquired the Eminence Group for € 123.3 million (~$ 144 million, as per the exchange rate at the time) net. Eminence Group operates in the field of intimate apparel for men, women and children under the Eminence, Athena and Liabel brands. The Group's headquarters and development, design and logistics centers are located in France. Eminence holds several subsidiaries throughout Europe (France, Italy, Spain, Belgium and Romania). 1.3 In July 2019 the Company acquired the Bogart Group, a vertical manufacturer engaged in development and marketing of intimate apparel, mainly brassieres and swimwear for private brands of leading customers in the upper market segment in the US and Europe. Bogart was established in 1993 and is one of the largest brassiere manufacturers in the world. Bogart Group holds a number of subsidiaries in the Far East (China, Thailand, Myanmar) and owns cutting and sewing factories for the manufacture of apparel products and the manufacture of raw materials (lace and pads) for self-use and for external customers. For details regarding the total acquisition cost, see Note 6 to the Financial Statements included in Part