o
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Title of each class
|
Name of each exchange on which registered
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Ordinary Shares, NIS 0.1 Par Value
|
NASDAQ Global Select Market
|
Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
x
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U.S. GAAP
o
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International Financial Reporting Standards as issued by the International Accounting Standards Board
x
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Other
o
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Page
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3
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3
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3
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3
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3
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4
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4
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4
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19
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19
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21
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71
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71
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71
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71
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71
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84
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104
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105
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105
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105
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105
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105
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107
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107
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112
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112
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112
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112
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114
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119
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119
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119
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127
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127
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127
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128
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128
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128
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128
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129
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Year Ended December 31, | ||||||||||||||||||||||||
|
2008
|
2009
|
2010
|
2011
|
2012
|
2012
|
||||||||||||||||||
|
(NIS in millions, except share
and per share data)
|
($ in millions, except share and per share data)
|
||||||||||||||||||||||
Revenues
|
1,106 | 1,173 | 8,657 | 11,373 | 10,278 | 2,753 | ||||||||||||||||||
Depreciation and amortization
|
112 | 98 | 2,294 | 2,984 | 2,367 | 634 | ||||||||||||||||||
Salaries
|
161 | 158 | 1,488 | 2,114 | 1,984 | 531 | ||||||||||||||||||
General and operating expenses
|
694 | 749 | 3,640 | 4,462 | 3,995 | 1,070 | ||||||||||||||||||
Other operating expenses
|
7 | 2 | 5 | 326 | (11 | ) | (3 | ) | ||||||||||||||||
Operating income
|
132 | 166 | 1,230 | 1,487 | 1,943 | 521 | ||||||||||||||||||
Finance expense
|
65 | 49 | 600 | 983 | 915 | 245 | ||||||||||||||||||
Finance income
|
(8 | ) | (85 | ) | (313 | ) | (485 | ) | (562 | ) | (151 | ) | ||||||||||||
Income after financing expenses (income), net
|
75 | 202 | 943 | 989 | 1,590 | 427 | ||||||||||||||||||
Share of losses in equity-accounted
investee
|
– | – | 235 | 216 | 245 | 66 | ||||||||||||||||||
Income before income tax
|
75 | 202 | 708 | 773 | 1,345 | 361 | ||||||||||||||||||
Income tax
|
22 | 55 | 385 | 653 | 555 | 149 | ||||||||||||||||||
Net income for the year
|
53 | 147 | 323 | 120 | 790 | 212 | ||||||||||||||||||
Income (loss) attributable to:
|
||||||||||||||||||||||||
Owners of the company
|
53 | 147 | (140 | ) | (219 | ) | 45 | 12 | ||||||||||||||||
Non-controlling interests
|
– | – | 463 | 339 | 745 | 200 | ||||||||||||||||||
Net income for the year
|
53 | 147 | 323 | 120 | 790 | 212 | ||||||||||||||||||
Basic earnings (loss) per share.
|
2.08 | 5.81 | (4.83 | ) | (7.34 | ) | 1.52 | 0.41 | ||||||||||||||||
Diluted earnings (loss) per share
|
2.08 | 5.81 | (4.93 | ) | (7.38 | ) | 1.49 | 0.40 |
Year Ended December 31,
|
||||||||||||||||||||||||
|
2008
|
2009
|
2010
|
2011
|
2012
|
2012
|
||||||||||||||||||
|
(NIS in millions)
|
($ in millions)
|
||||||||||||||||||||||
Cash and cash equivalents
|
61 | 940 | 383 | 1,369 | 757 | 203 | ||||||||||||||||||
Total assets
|
1,581 | 2,410 | 24,034 | 24,909 | 22,627 | 6,061 | ||||||||||||||||||
Total current liabilities
|
477 | 1,146 | 4,157 | 4,660 | 4,768 | 1,277 | ||||||||||||||||||
Non-current liabilities
|
384 | 342 | 11,534 | 15,246 | 13,518 | 3,621 |
Period
|
|
Average
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
|
3.586
|
|
Year ended December 31, 2009
|
|
|
3.923
|
|
Year ended December 31, 2010
|
|
|
3.732
|
|
Year ended December 31, 2011
|
|
|
3.579
|
|
Year ended December 31, 2012
|
|
|
3.733
|
|
Period
|
|
High
|
|
|
Low
|
|
||
|
|
|
|
|
|
|
|
|
November 2012
|
|
|
3.952
|
3.810
|
|
|||
December 2012
|
|
|
3.835
|
3.726
|
|
|||
January 2013
|
|
|
3.791
|
3.714
|
|
|||
February 2013
|
|
|
3.733
|
3.663
|
|
|||
March 2013
|
|
|
3.733
|
3.637
|
|
|||
April 2013 (through April 21)
|
|
|
3.633
|
3.618
|
|
·
|
Cross officerships, directorships and share ownership
. The ownership interests of our directors in the ordinary shares of Internet Gold could create, or appear to create, conflicts of interest when directors and executive officers are faced with decisions that could have different implications for the two companies. For example, these decisions could relate to the nature, quality and cost of services rendered to us by Internet Gold and Eurocom Communications, disagreements over the desirability of a potential acquisition opportunity or employee retention or recruiting. In addition, Internet Gold may take an opportunity for itself or preclude us from taking advantage of a corporate opportunity; and
|
·
|
Intercompany transactions
. From time to time, Internet Gold, Eurocom Communications or other companies within the Eurocom group may enter into transactions with us or our subsidiaries or other affiliates. Although the terms of any such transactions will be established based upon negotiations between employees of such companies and us and, when appropriate, subject to the approval of our independent directors or a committee of disinterested directors and in some instances a vote of shareholders, the terms of any such transactions may not be as favorable to us or our subsidiaries or affiliates as may otherwise be obtained in arm’s-length negotiations with unaffiliated third parties. For more information about intercompany transactions, see Item 7B. “
Major Shareholders and Related Party Transactions - Related Party Transactions.
”
|
|
●
|
Quarterly variations in our operating results;
|
|
●
|
Global economic conditions;
|
|
●
|
Price movements in the market price of Bezeq’s ordinary shares;
|
|
●
|
Operating results that vary from the expectations of securities analysts and investors;
|
|
●
|
Changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;
|
|
●
|
Regulatory changes that impact pricing of services and competition in Bezeq’s markets;
|
|
●
|
Changes in market valuations of other communications companies;
|
|
●
|
Announcements of technological innovations or new services by Bezeq or its competitors;
|
|
●
|
Announcements by Bezeq or its competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
|
|
●
|
Changes in the status of Bezeq’s intellectual property rights;
|
|
●
|
Announcements by third parties of significant claims or proceedings against us or Bezeq;
|
|
●
|
Additions or departures of key personnel;
|
|
●
|
Future sales of our ordinary shares; and
|
|
●
|
Stock market price and volume fluctuations.
|
On an outstanding basis
|
With full dilution
|
|||||||||||
Shareholders
|
At
December 31, 2012
|
At
March
31, 2013
|
at April 22,
2013 (1)
|
|||||||||
B Communications (2).
|
30.97
|
%
|
30.97
|
%
|
30.19
|
%
|
||||||
Public
|
69.03
|
%
|
69.03
|
%
|
69.81
|
%
|
(1)
|
Full dilution calculation assumes that all outstanding options are exercised pursuant to the Stock Appreciation Rights mechanism of the 2007 Stock Option Plan for Managers and Senior Employees in the Bezeq Group and the 2007 Employee Stock Option Plan in the Bezeq Group. This assumption is theoretical as under the terms of the plans the offerees who exercise their options will not receive the number of shares underlying them, but as a cashless exercise they will receive the number of shares that reflect the financial benefit embodied in the options.
|
(2)
|
Including shares held directly by us and shares held through SP2, our wholly owned subsidiary.
|
|
●
|
At least 19% of each of the means of control of SP2 must be held by an Israeli Party at all times; or
|
|
●
|
At least 19% of the rights to vote at the general meeting of shareholders of SP2 and the rights to appoint directors of SP2 must be held by an Israeli Party at all times; and
|
|
●
|
The right to appoint at least one-fifth of the directors of Bezeq and Bezeq’s subsidiaries and not less than one director of each such company will be held by an Israeli Party at all times, provided that the percentage of the Israeli Party’s direct or indirect shareholdings in Bezeq is not less than 3% of any of the means of control of Bezeq. Indirect shareholdings will be calculated as the product of the Israeli Party’s lowest rate of holdings in each of the means of control in SP2, multiplied by the percentage of the holdings of the parties to the control permit in each of the means of control in Bezeq.
|
·
|
Preservation of leadership status in an environment of intensifying competition (leader in service and strengthening of perceived values – innovative products, reliability, proximity to the customer);
|
·
|
Encourage the recruitment of new customers and enhance existing customer loyalty;
|
·
|
Creation of new sources of income by launching new services and products; and
|
·
|
Ongoing adaptation of the organization to the competitive environment and maintaining operational excellence.
|
·
|
Increase revenues from data services by focusing on a target audience, increased marketing of mobile devices, cellular modems (NetStick) and smartphones;
|
·
|
Market supplemental value-added services to Internet surfing including anti-virus solutions, backup and data storage, and music and video services;
|
·
|
Increase data transfer speeds and maintain the our reputation as the leading carrier with the fastest network in Israel;
|
·
|
Continue the recruitment and retention of customers;
|
·
|
Increase customer satisfaction;
|
·
|
Constantly improve its network infrastructures; and
|
·
|
Continue to streamline its operations.
|
·
|
continue its leadership in the Internet access market while continuing to realize the potential inherent in the migration to the new generation of infrastructure networks;
|
·
|
Expand its range of cloud-based solutions;
|
·
|
Strengthen its status as one of the leading Information Communications Technology, or ICT, players in Israel; and
|
·
|
Increase customer satisfaction by intensifying and expanding service offerings (automated services, social networks, etc.).
|
·
|
Invest
considerable effort in marketing and sales;
|
·
|
Develop a marketing strategy designed to attract new subscribers;
|
·
|
Retain existing customers;
|
·
|
Continue to improve the array of services offered to subscribers;
|
·
|
Create differentiation and innovation in its broadcast content and expand the range of content relative to HOT’s content;
|
·
|
Increase the amount of content purchased by each subscriber and expand DBS's value-added services; and
|
·
|
Invest in the development and integration of advanced technologies and new services.
|
|
●
|
Bezeq domestic fixed-line communications
- Primarily includes Bezeq’s operation as a domestic operator, including fixed-line telephony services, Internet services, transmission services and data communications.
|
|
●
|
Pelephone Communications Ltd.
- Provides cellular mobile services (cellular communications), marketing of end-user equipment, installation, operation and maintenance of cellular communications equipment and systems.
|
|
●
|
Bezeq International Ltd.
- Bezeq International is an Internet service provider, or ISP, and also provides international communications services and NEP services.
|
|
●
|
D.B.S. Satellite Services (1998) Ltd
. - Provides multi-channel broadcast and value added services via satellite.
|
·
|
Owners of universal fixed-line access infrastructures, who provide retail services, including Bezeq, will be obligated to sell wholesale services to holders of telecommunications licenses, including Bitstream access, lease of access segments, dark fibers, tubes and transmission services, on a non-discriminatory basis and with no discounts for size. In this regard, a procedure was established for negotiating an agreement for these services and as soon as such agreement is signed, the infrastructure owner will publish a “shelf offering” for the sale of the services based on the agreement and which also includes additional services as the Ministry of Communications determines from time to time. In certain circumstances, the Minister of Communications has the power to stipulate conditions or prices for the services. The infrastructure owners must submit to the relevant license owners the distribution of their existing infrastructures, with exceptions to be defined.
|
·
|
Upon publication of such “shelf offering,” other entities may also purchase wholesale services on the same terms from the infrastructure owner. Under this procedure, Bezeq will be able to provide wholesale telephony services to its subsidiaries that are not supplied over a broadband network, provided that these services are also available to everyone and without discrimination.
|
·
|
Within nine months of publication of the “shelf offering,” the Minister of Communications will eliminate the structural separation between the infrastructure provider who published the aforementioned offering and the international call providers and ISPs, changing it to an accounting separation, unless the Minister believes that this will adversely affect competition or the public interest. As a result, Bezeq will be able to offer subsidized plans. If the wholesale market develops and the degree of competition allows, the Minister of Communications will consider an easing or cancellation of the structural separation between an infrastructure provider and a cellular operator who has an interest in such provider.
|
·
|
The Minister of Communications will review the subject of the unbundling of broadcast services included in the joint bundles, which also include Bezeq services (fixed or mobile) or broadband access services. The structural separation between the infrastructure providers and multi-channel television sector will be eliminated by granting suppliers without nation-wide fixed-line infrastructure a reasonable possibility to provide a basic television service package over the Internet.
|
·
|
If a wholesale market does not develop in an approved manner (based on indices to be defined for this purpose) within 24 months of the publication of the policy document, the Minister of Communications will take action to implement structural separation between the infrastructure and the services provided by general domestic carrier license holders.
|
·
|
Within six months of publication of the "Shelf Offering," the Minister of Communications is required to take action to change the method of oversight of Bezeq's prices so that prices will be controlled by fixing a maximum price.
|
·
|
Within nine months of publication of the "Shelf Offering," the Ministry of Communications is required to formulate regulations aimed at increasing the investment in and upgrade of fixed-line communications infrastructures in Israel.
|
|
●
|
separating infrastructure and service providers
;
|
|
●
|
granting new licenses and encouraging new and innovative technologies
; and
|
|
●
|
mandating number portability
. Number portability exists in the fixed-line and cellular telephony market, enabling customers to immediately switch between various communication operators without changing their telephone number. Bezeq believes that number portability has significantly increased the churn rate in its fixed-line telephony services.
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|||
Revenues (NIS millions)
|
|
|
5,263
|
|
|
|
4,648
|
|
|
|
4,630
|
|
Operating profit (NIS millions)
|
|
|
2,043
|
|
|
|
1,695
|
|
|
|
1,923
|
|
Depreciation and amortization (NIS millions)
|
|
|
690
|
|
|
|
688
|
|
|
|
730
|
|
Operating profit before depreciation and amortization (NIS millions)
|
|
|
2,733
|
|
|
|
2,383
|
|
|
|
2,653
|
|
Net profit (NIS millions)
|
|
|
1,426
|
|
|
|
1,102
|
|
|
|
1,194
|
|
Cash flow from operating activities (NIS millions)
|
|
|
2,140
|
|
|
|
2,106
|
|
|
|
2,009
|
|
Payments for investments in property, plant and equipment and intangible assets (NIS millions)
|
|
|
1,032
|
|
|
|
1,165
|
|
|
|
958
|
|
Proceeds from the sale of property, plant and equipment and intangible assets (NIS millions)
|
|
|
132
|
|
|
|
228
|
|
|
|
300
|
|
Free cash flow (in NIS millions) (1)
|
|
|
1,240
|
|
|
|
1,169
|
|
|
|
1,351
|
|
Number of active subscriber lines at the end of the period (2) (in thousands)
|
|
|
2,366
|
|
|
|
2,367
|
|
|
|
2,268
|
|
Average monthly revenue per line (NIS) (3)
|
|
|
81
|
|
|
|
76
|
|
|
|
73
|
|
Number of outgoing minutes (in millions)
|
|
|
10,699
|
|
|
|
9,758
|
|
|
|
8,691
|
|
Number of incoming minutes (in millions)
|
|
|
6,547
|
|
|
|
6,240
|
|
|
|
6,225
|
|
Number of Internet subscribers at the end of the period(2) (in thousands)
|
|
|
1,066
|
|
|
|
1,111
|
|
|
|
1,169
|
|
Percentage of subscribers using NGN services out of total Internet subscribers
|
|
|
34
|
%
|
|
|
51
|
%
|
|
|
62
|
%
|
Average monthly revenue per Internet subscriber (NIS)
|
|
|
75
|
|
|
|
80
|
|
|
|
81
|
|
Average bandwidth per Internet subscriber (Mbps)
|
|
|
4.3
|
|
|
|
6.7
|
|
|
|
9.6
|
|
Churn rate (4)
|
|
|
12.6
|
%
|
|
|
11.6
|
%
|
|
|
15.3
|
%
|
(1)
|
Cash from operating activities less purchase of property, plant and equipment and intangible assets, net.
|
(2)
|
Inactive subscribers are subscribers whose Bezeq lines have been physically disconnected (except for a subscriber during (roughly) the first three months of the collection process).
|
(3)
|
Excluding revenues from transmission and data communication, Internet services, services to communications operators and contract and other works, calculated according to average lines for the period.
|
(4)
|
Number of telephony subscribers who left Bezeq fixed-line services during the period, divided by the average number of registered subscribers in the period.
|
|
●
|
Limitations on the transfer and acquisition of means of control, which includes a ban on holding 5% or more of means of control of a certain kind without the prior written approval of the Ministers.
|
|
●
|
Transfer or acquisition of control in Bezeq requires the approval of the Ministers by means of a Control Permit. The Control Permit establishes the minimum holding percentage in each of the means of control in Bezeq by the holder of the Control Permit where a transfer of shares or an issuance of shares by Bezeq, as a result of which the percentage of ownership of the Control Permit holder falls below the minimum percentage, is prohibited without the prior approval of the Ministers, subject to permitted exceptions (including, an issuance to the public under a prospectus, or sale or private placement to institutional investors).
|
|
●
|
Holdings not approved in compliance with the Communications Order will be considered “exceptional holdings” and any exercise of a right by virtue of exceptional holdings will not be valid. The Communications Order also contains provisions authorizing the Ministers and Bezeq to apply to the courts with an enforced sale of exceptional holdings.
|
|
●
|
A duty to report to the Ministers upon demand is imposed on Bezeq with respect to any information on matters relating to provision of an essential service.
|
|
●
|
75% of the members of the Board of Directors of Bezeq must be Israeli citizens and residents who have security clearance from the General Security Service.
|
|
●
|
The Chairman of the Board of Directors of Bezeq, the external directors (within the meaning of the Israeli Companies Law), the chief executive officer, the deputy chief executive officer and other office-holders in Bezeq as listed in the Communications Order, must be Israeli citizens and residents and have a security clearance appropriate to their functions.
|
|
●
|
Nationality requirements are established for the controlling shareholder in Bezeq: an individual must be an Israeli Entity (as defined in the Communications Order); a corporation must be incorporated of Israel, the center of its business must be in Israel, and an Israeli Entity must hold at least 19% of the means of control of such company.
|
|
●
|
The approval of the Ministers is required for the grant of rights in certain assets of Bezeq (switches, cable network, transmission network and data bases and banks). In addition, the grant of rights in means of control in the subsidiaries of Bezeq, including allotment of more than 25% of the shares in a subsidiary, requires the approval of the Ministers.
|
|
●
|
Provisions were established for the protection of computerized systems and the purchase of hardware and software.
|
|
●
|
Certain actions of Bezeq require the approval of the Minister of Communications, including voluntary liquidation, a settlement or arrangement between Bezeq and its creditors, a change or reorganization of the structure of Bezeq and a merger or split of Bezeq.
|
|
●
|
The Minister of Communications granted Bezeq immunity from liability from certain types of damages listed in the Communications Law. In addition, the Communications Law contains exceptions to criminal and civil liability for an act done in fulfillment of a directive to provide services to the security forces.
|
|
●
|
The service packages must be able to be unbundled so that a service included in a package will be offered separately and on the same terms; and
|
|
●
|
At the time a request for approval of a service packages is submitted, there must be a group of services in similar format being marketed to a private subscriber as a package by a license-holder who is not a subsidiary of Bezeq, or there is a group that includes license-holders who provide a private subscriber with all the services included in the joint service packages.
|
|
●
|
Scope of license
- Bezeq must provide its services to all on equal terms for each type of service, irrespective of the location or unique cost. The license is unlimited in time; the Minister may modify or cancel the license or make it contingent; the license and any part of it cannot be transferred, no charge can be imposed on it, nor can it be subject to attachment.
|
|
●
|
Principles of structural separation
-
Bezeq must operate under the principles of structural separation. In order to comply with this requirement, Bezeq employs various compliance procedures and provides its employees with training sessions and periodic refresher courses on the relevant procedures. On July 3, 2012, Bezeq's license was amended to permit the offer to business subscribers of joint service bundles with its subsidiaries, subject to the approval by the Ministry of Communications and subject to the other limitations set forth in Bezeq’s license.
|
|
●
|
Marketing joint service bundles -
Bezeq may request permission to market joint service bundles, subject to certain limitations.
|
|
●
|
Tariffs –
If Bezeq provides a service or package of services for which no tariff is set under the Communications Law, it must be offered at a reasonable price to all, without discrimination and at a uniform tariff.
|
|
●
|
Operations of networks and service standards -
Bezeq is required to maintain and operate its network and provide its services at all times, including at times of emergency, in an orderly and proper manner commensurate with the technical requirements and the nature of the service, and to work towards improving its services. The license includes an appendix, “Service Standards for the Subscriber”, which is to be amended after Bezeq provides the Ministry with data. Bezeq submitted its proposal for an amendment to the appendix, adapting it to the current state of affairs and the licenses of other operators, but the amendment has not yet been adopted.
|
|
●
|
Interconnect and use -
Bezeq is required to provide interconnect services to other public switching networks and to provide the option of use of such services by other license holders Bezeq has a duty to provide infrastructure services to other license holders on reasonable and equal terms and must refrain from providing preferable terms to its affiliates.
|
|
●
|
Security arrangements -
Provisions have been made for the operation of Bezeq's network in times of emergency. Bezeq is required to design and operate its network in a manner that will prevent its collapse in an emergency. Bezeq provides special services to the defense forces and is required to provide telecommunications services and maintain terminal equipment infrastructure for the security forces in Israel and abroad, as provided in its agreements with the defense forces. Bezeq is required to appoint a security officer and to comply fully with the security instructions contained with the applicable provisions in its license.
|
|
●
|
Supervision and reporting –
The license imposes on Bezeq extensive reporting requirements to the Ministry of Communications. In addition, the Director General of the Ministry of Communications has the authority to enter the facilities and offices used by Bezeq and to seize documents.
|
|
●
|
Miscellaneous –
|
|
o
|
The Carrier License includes limitations on the acquisition, maintenance and transfer of means of control pursuant to the Communications Order, as well as on cross-ownership, which are mainly a ban on cross-holdings by entities with an interest in another material domestic carrier, and limitations on cross-holdings by entities with Carrier Licenses or general licenses in the same segment of operation.
|
|
o
|
Bezeq is required to prepare a draft of any agreements it plans to offer to subscribers and to submit them for the review by the Director General upon demand. The Director General has the authority to instruct that changes be made. Bezeq is in the process of preparing such an agreement.
|
|
o
|
Pursuant to the requirement of the license, Bezeq submitted to the Director General a $10 million bank guarantee to secure its fulfillment of the terms of the license and to indemnify the State of Israel against any loss it may incur due to violations. The Minister may declare the guarantee or part of it forfeit based on the terms of the license.
|
|
o
|
The Director General has the power to impose a monetary sanction for violation of any of the terms of the license.
|
|
o
|
During a calendar year, Bezeq may invest up to 25% of its annual income in activities not connected with the provision of its services (the income of its subsidiaries is not considered income for this purpose). The Minister of Communications is authorized to grant a variance from that percentage.
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|||
|
|
(in NIS millions)
|
|
|||||||||
Revenues from fixed-line telephony
|
|
|
3,160
|
|
|
|
2,393
|
|
|
|
2,254
|
|
Percentage out of total Bezeq Group revenues
|
|
|
60.04
|
%
|
|
|
51.49
|
%
|
|
|
48.68
|
%
|
Revenues from Internet infrastructure services
|
|
|
977
|
|
|
|
1,092
|
|
|
|
1,166
|
|
Percentage out of total Bezeq Group revenues
|
|
|
18.56
|
%
|
|
|
23.49
|
%
|
|
|
25.18
|
%
|
Revenues from transmission and data communication services
|
|
|
882
|
|
|
|
931
|
|
|
|
976
|
|
Percentage out of total Bezeq Group revenues
|
|
|
16.76
|
%
|
|
|
20.03
|
%
|
|
|
21.07
|
%
|
Revenues from other services
|
|
|
244
|
|
|
|
232
|
|
|
|
234
|
|
Percentage out of total Bezeq Group revenues
|
|
|
4.64
|
%
|
|
|
4.99
|
%
|
|
|
5.07
|
%
|
Total revenues from domestic fixed-line communications services segment
|
|
|
5,263
|
|
|
|
4,648
|
|
|
|
4,630
|
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|||
|
|
(in NIS millions)
|
||||||||||
Revenues from private customers
|
|
|
3,128
|
|
|
|
2,777
|
2,716
|
|
|||
Revenues from business customers
|
|
|
2,134
|
|
|
|
1,871
|
1,914
|
|
|||
Total revenues
|
|
|
5,263
|
|
|
|
4,648
|
4,630
|
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|||
Revenue, net
|
|
|
801
|
|
|
|
256
|
226
|
|
·
|
Nationally deployed, quality infrastructure through which a range of services are provided;
|
·
|
Presence in most businesses and households;
|
·
|
Strong and familiar brand;
|
·
|
Technological innovation;
|
·
|
Strong capital structure and positive cash flows;
|
·
|
Broad service infrastructure and varied customer interfaces; and
|
·
|
Professional, experienced and skilled human resources.
|
·
|
Absence of tariff flexibility - Bezeq is limited in its ability to grant discounts on its principal services and to offer different tariffs.
|
·
|
Regulatory structural separation.
|
·
|
Bezeq’s duty to provide universal service -Bezeq operates under an obligation to provide service to the entire public in Israel (universal service). Due to this obligation, Bezeq could be required to provide services in circumstances which are not financially viable (subject to the possibility of obtaining an exemption from an exemptions committee in extraordinary circumstances following the recommendations of the advisory committee and the Minister of Communications decision on this matter). This obligation is not imposed on the holders of special Domestic Carrier licenses, who can offer their services to the most profitable of Bezeq's customers, mainly business customers, who are a material source of Bezeq’s income.
|
·
|
Access deficit - Bezeq's telephony tariffs are determined in regulations established by the Minister of Communications in consultation with the Minister of Finance. As a result of a deliberate regulatory policy, the monthly usage tariff for a telephone line is set at a level that does not cover the cost involved in providing it. This deficit has been reduced over the years but still exists. The negative factor of this deficit is exacerbated by competitor’s use of Bezeq's infrastructure to supply their services.
|
·
|
Limitations in marketing joint service bundles of Bezeq and other Bezeq Group companies.
|
·
|
Fixed-line terminal equipment is technologically less advanced that the cellular terminal equipment. Accordingly, the range of advanced services that can be offered to fixed line customers is limited.
|
·
|
The creation of a wholesale market
|
|
|
Number of employees
|
|
|||||
Description of employment framework
|
|
|
2011
|
|
|
|
2012
|
|
Senior managers excluded from application of the Company’s collective bargaining agreements
|
|
|
63
|
|
|
|
61
|
|
Permanent employees employed under collective agreements (without new permanent employees)
|
|
|
2,847
|
|
|
|
2,742
|
|
Permanent employees employed under collective agreements (new permanent employees)
|
|
|
437
|
|
|
|
596
|
|
Employees employed under personal agreements that are not part of the collective agreements
|
|
|
666
|
|
|
|
635
|
|
Employees employed under individual agreements on the terms of the collective agreement
|
|
|
44
|
|
|
|
26
|
|
Employees employed in accordance with the special collective agreement of December 2006, on an hourly basis
|
|
|
1,948
|
|
|
|
2,288
|
|
Employees employed under the special collective agreement of December 2006, on a monthly basis
|
|
|
1,071
|
|
|
|
1,074
|
|
Total
|
|
|
7,076
|
|
|
|
7,422
|
|
|
●
|
Retirement arrangements under the collective agreement were extended to December 31, 2016. Under these retirement arrangements, Bezeq may, at its discretion, terminate the employment of up to 245 permanent employees in each of the years 2010 – 2016.
|
|
●
|
"New Permanent Employees" will be entitled to reduced retirement compensation.
|
Name of plan
|
Number of options granted (before forfeitures)
(in thousands)
|
Number of options in circulation as at December 31, 2012
(in thousands)
|
Weighted average of exercise price as at December
31, 2012 (NIS)
|
Weighted average of remaining contractual
life
|
||||||||||||
Employee option plan of 2010
|
69,495 | (1) | 66,938 | (1) | 5.16 | 3 | ||||||||||
Option plan for senior managers and employees of the Group of 2007
|
65,250 | 3,089 | 2.84 | 4.25 | ||||||||||||
Phantom options plan for senior officers in the Group granted in December 2010
|
16,400 | 16,400 | 7.91 | 3 |
(1)
|
Subsequent to the date of Bezeq’s financial reports for the year ended December 31, 2012 and until April 22, 2013, 406,000 Bezeq shares were issued pursuant to exercises of options under this plan.
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|||
Revenues from services (NIS millions)
|
|
|
4,550
|
|
|
|
3,637
|
3,261
|
|
|||
Revenues from sale of terminal equipment (NIS millions)
|
|
|
1,182
|
|
|
|
1,911
|
1,207
|
|
|||
Total revenue (NIS millions)
|
|
|
5,732
|
|
|
|
5,548
|
4,468
|
|
|||
Operating profit (NIS millions)
|
|
|
1,383
|
|
|
|
1,360
|
892
|
|
|||
Depreciation and amortization (NIS)
|
|
|
601
|
|
|
|
561
|
531
|
|
|||
Operating profit plus depreciation (EBITDA) (NIS millions)
|
|
|
1,984
|
|
|
|
1,921
|
1,423
|
|
|||
Net profit (NIS millions)
|
|
|
1,033
|
|
|
|
1,056
|
698
|
|
|||
Cash flow from operating activities (NIS millions)
|
|
|
1,219
|
|
|
|
800
|
1,728
|
|
|||
Payments for investments in property, plant and equipment and intangible assets (NIS millions)
|
|
|
397
|
|
|
|
382
|
381
|
|
|||
Free cash flow (in NIS millions) (1)
|
|
|
822
|
|
|
|
418
|
1,347
|
|
|||
Number of subscribers at the end of the period (thousands) (2) (7)
|
|
|
2,857
|
|
|
|
2,847
|
2,800
|
|
|||
Average number of minutes per subscriber per month
(MOU) (3) (7)
|
|
|
349
|
|
|
|
375
|
419
|
|
|||
Average monthly revenue per subscriber (NIS) (ARPU) (4) (7)
|
|
|
135
|
|
|
|
107
|
95
|
|
|||
Average monthly revenue per subscriber (NIS) (ARPU) (based on reduced interconnect tariffs) (5) (7)
|
|
|
111
|
|
|
|
107
|
95
|
|
|||
Churn rate (6) (7)
|
|
|
15.3
|
%
|
|
|
22.9
|
%
|
22.4
|
%
|
(1)
|
Cash from operating activities less purchase of property, plant and equipment and intangible assets, net.
|
(2)
|
Subscriber data does not include subscribers connected to Pelephone services for six months or more but who are inactive. An inactive subscriber is one who in the past six months has not received or made at least one call or who has not paid for Pelephone services.
|
(3)
|
Average monthly use per subscriber (in minutes) is calculated by the average monthly total outgoing minutes and incoming minutes in the period, divided by the average number of subscribers in the same period.
|
(4)
|
Average monthly revenue per subscriber is calculated by dividing average monthly total revenues from cellular services, repair and other services in the period, by the average number of active subscribers in the same period. The revenue was calculated based on the interconnect tariffs in force for each period.
|
(5)
|
In view of the reduction in interconnect tariffs commencing January 1, 2011, average monthly revenue data per subscriber for all three years is based on the reduced interconnect tariffs, for comparison with the 2011 data.
|
(6)
|
The churn rate is calculated at the ratio of subscribers who disconnected from the company's services and subscribers who became inactive during the period, to the average number of active subscribers during the period.
|
(7)
|
Due to increased movement of subscribers to pre-paid tracks in the initial months after reduction of the exit penalties, Pelephone decided not to include subscribers who had made no outgoing calls during the fourth quarter in the number of active subscribers. As a result, Pelephone deducted 91,000 subscribers. These subscribers were deducted retrospectively from each quarter in which they were moved to the pre-paid tracks. Consequently, figures for subscribers, ARPU, MOU and churn rates were corrected retroactively in each quarter.
|
·
|
Basic telephone services (voice) – including basic call services, call completion services and auxiliary services such as call waiting, call forwarding, voice mail, voice conference call and caller ID.
|
·
|
Browsing and data services – Internet browsing using a mobile device with maximum download speeds of 42 mbps. Pelephone also offers its customers Internet browsing by means of a cellular modem.
|
·
|
Messaging service – a service for sending and receiving SMS text messages and multimedia MMS messages.
|
·
|
Content services - Pelephone offers its customers content services such as information and entertainment services on Pelephone's Internet portal, navigating services, Super TV and musixmatch, which makes it possible to listen to a variety of music via cellphone and PC.
|
·
|
Roaming services – Pelephone provides roaming services based on agreements it has with cellular operators abroad, enabling it to use their networks. Pelephone is able to offer its customers with handsets in that technology, roaming services using their personal handsets to countries all over the world, and also provides these customers with roaming coverage in 212 countries. Pelephone also provides incoming roaming services for the customers of foreign operators staying in Israel.
|
·
|
Repair services – Pelephone offers its customers a repair service for a monthly payment entitling the customer to a warranty for the cellular handset, or for a one-time payment at the time of repair. Pelephone provides its customers with these services, and in addition, it provides, as part of hosting agreements, basic telephone (voice) services, surfing and data communications services, sending and receiving text messages, and roaming services to other cellular operators (Hot Mobile and Rami Levy).
|
·
|
Handsets – Pelephone offers its customers various types of cellular telephone, on-board telephones and hands-free devices, as well as support for its range of services.
|
·
|
Pelephone also supplies its customers with modems, laptop computers and tablets for surfing the Internet through the Pelephone network.
|
·
|
UMTS/HSPA
, a digital technology based on the GSM standard. This technology is widespread throughout the world and enables subscriber identification and the provision of service by means of a SIM card, which can be transferred from one handset to another. Among the advantages of this technology is its support for download speeds of up to 42 Mbps and upload speeds of up to 5.7 Mbps. This cellular communications network is Pelephone’s primary network.
|
·
|
CDMA
, a digital technology, which is less widespread than UMTS/HSPA and in which subscriber identification is by the identification of details burned onto the terminal equipment rather than by means of a SIM card. Until 2009, the CDMA network was Pelephone's only network and it continues to operate nationwide. This network serves a limited number of subscribers who seldom use the network. Since the UMTS/HSAP network was launched, Pelephone has sought to transfer existing subscribers from CDMA to UMTS/HSPA, and offers subscribers an upgrade of their handsets to connect to the new network. It is not increasing its investments in the CDMA network beyond the needs of current maintenance.
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|||
|
|
(in NIS millions)
|
|
|||||||||
Revenue from services (1)
|
|
|
4,550
|
|
|
|
3,637
|
|
|
|
3,261
|
|
Percentage of total revenue
|
|
|
79.4
|
%
|
|
|
65.6
|
%
|
|
|
73.0
|
%
|
Revenue from terminal equipment
|
|
|
1,182
|
|
|
|
1,911
|
|
|
|
1,207
|
|
Percentage of total revenue
|
|
|
20.6
|
%
|
|
|
34.4
|
%
|
|
|
27.0
|
%
|
Total revenue
|
|
|
5,732
|
|
|
|
5,548
|
|
|
|
4,468
|
|
|
(1)
|
Revenue from services includes revenues from cellular services (airtime, usage fees, call completion fees, roaming fees, value added services and others), and revenues from repair services and warranty.
|
Pelephone
|
Partner
|
Cellcom
|
Golan Telecom (1)
|
Hot Mobile
|
Total in market
|
|||||||||||||||||||||
At Dec.
31, 2011
|
No. of subscribers (2)
|
2,847 | 3,176 | 3,349 | - | 444 | 9,816 | |||||||||||||||||||
Market share
|
29.0 | % | 32.4 | % | 34.1 | % | - | 4.5 | % | |||||||||||||||||
At Sep.
30, 2012
|
No. of subscribers (2)
|
2,839 | 3,042 | 3,338 | 110 | 687 | 10,016 | |||||||||||||||||||
Market share
|
28.3 | % | 30.4 | % | 33.3 | % | 1.1 | % | 6.9 | % |
(1)
|
Since Golan Telecom is a private company, it does not publish data about numbers of subscribers. The numbers in the table are an assessment.
|
(2)
|
The numbers of subscribers are as at September 30, 2012 and December 31, 2011, based on the reports of Cellcom, Partner and Hot Mobile to the public. (Hot Mobile is now a private company and therefore its figures are based on estimates.)
|
·
|
A high quality cellular network with extensive deployment;
|
·
|
A high-speed, advanced cellular network;
|
·
|
A broad array of services and diverse service interfaces for customers, enabling a high grade of customer service;
|
·
|
A distribution network that is skilled in providing appropriate solutions for every type of customer, with a skilled staff;
|
·
|
Strong capital structure and positive cash flow; and
|
·
|
Use of the Pelephone network by other cellular operators.
|
·
|
As a subsidiary of Bezeq, Pelephone is subject to regulatory restrictions, which do not apply to its competitors, with respect to its entry into other areas of operation and the expansion of its service bundle for customers;
|
·
|
Limitations relating to its joint activities with Bezeq, including the marketing of joint service bundles;
|
·
|
The frequencies available to Pelephone might not be suitable, in certain cases, to the application of new cellular technologies that are under development. This could impede Pelephone in applying new technologies and could also impact adversely on its competitive status with other license-holders who may have frequencies that are suitable for those technologies and Pelephone may encounter difficulties in obtaining new frequency allocations; and
|
·
|
A disadvantageous position in the pre-paid market (use of terminal equipment at lower cost), due to the absence of a range of low-cost terminal equipment that operate in the UMTS/HSPA network.
|
·
|
The high penetration rate in the cellular market;
|
·
|
The need for a cellular license, the allocation of frequencies, which involves high costs and the subjection of operations to the regulatory supervision that applies to the market;
|
·
|
The need for significant financial resources necessary to make substantial and ongoing investments in infrastructure resulting from frequent technological changes and advances; and
|
·
|
The difficulty in erecting radio sites due to regulatory limitations and public opposition.
|
·
|
The large investments and the time required to recoup such investments; and
|
·
|
The commitment to provide services for customers arising from the terms of the cellular license
and agreements made in accordance with those terms
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|||
Revenues from private customers
|
|
|
2,899
|
|
|
|
2,985
|
2,461
|
|
|||
Revenues from business customers (1)
|
|
|
2,833
|
|
|
|
2,563
|
2,007
|
|
|||
Total revenue
|
|
|
5,732
|
|
|
|
5,548
|
4,468
|
|
(1)
|
Revenues from business customers include revenue from hosting agreements which amounted to NIS 129 million in 2012
.
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
From 2014 onwards
|
|
|||||
Call minute completion tariff
|
|
|
25.1
|
|
|
|
7.28
|
|
|
|
6.80
|
|
|
|
6.43
|
|
|
|
6.01
|
|
SMS (text) completion tariff
|
|
|
2.85
|
|
|
|
0.17
|
|
|
|
0.16
|
|
|
|
0.15
|
|
|
|
0.14
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
||||
Revenue
|
|
|
1,054
|
|
|
|
343
|
363
|
|
|||
Expenses
|
|
|
813
|
|
|
|
265
|
300
|
|
|
●
|
A model of forced sharing of sites will be defined, giving preference to the possibility of involving the new operators;
|
|
●
|
Obtaining a permit to set up a site will be conditional on a proposal for cooperation for all operators;
|
|
●
|
The operators will be obligated to erect sites that facilitate sharing with up to four participants;
|
|
●
|
All the components and infrastructures used for broadcasting from the facility will be shared, excluding active designated equipment (radio equipment);
|
|
●
|
That the costs of sharing sites be shared; and
|
|
●
|
All license holders will be encouraged and obligated to reduce the number of unshared sites each year.
|
|
●
|
Under certain circumstances, the Minister is entitled to modify, restrict or suspend the terms of the license, and in certain instances to revoke it.
|
|
●
|
The license is non-transferable, and it contains restrictions on the acquisition or transfer (including by means of a charge), directly or indirectly, of control of 10% or more of any means of control in Pelephone, including an encumbrance on such means of control, unless the Minister has given his consent beforehand.
|
|
●
|
Pelephone is obliged to provide interconnect services under equal terms to all other operators and must refrain from any discrimination in the implementation thereof.
|
|
●
|
Pelephone must refrain from giving a preference in providing its infrastructure services to a licensee with an interest (as defined in the license), such as a related party, over another licensee.
|
|
●
|
Pelephone is generally not entitled to sell, lease or mortgage any of the assets used for the implementation of the license without the consent of the Minister of Communications, except as stipulated in the license.
|
|
●
|
In periods of emergency, the relevant governmental authority may issue certain instructions to Pelephone with respect to its mode of operation and/or manner of provision of services.
|
|
●
|
The license sets forth the types of payments that Pelephone may collect from its subscribers for cellular services, mechanisms for setting tariffs, reports that Pelephone must submit to the Ministry of Communications and also the duty of serving notice to the Ministry of Communications prior to modifying its tariffs. The license also determines the Minister’s power to intervene in setting tariffs in certain instances.
|
|
●
|
The license commits Pelephone to provide a minimal standard of service, including setting up of service call centers, the determination of a maximum period for repair of malfunctions, an accounts collection procedure and protection of the privacy of the recipient of the service.
|
|
●
|
To secure Pelephone's undertakings and to compensate and indemnify the State of Israel for any damage caused by acts committed by Pelephone, Pelephone is required to furnish a bank guarantee of $10 million, which is subject to forfeiture.
|
·
|
New and existing subscribers browsing services abroad would be blocked by default.
|
·
|
An alert via text message (SMS) would be sent to subscribers who have purchased an overseas
roaming package and reached a utilization rate for each component of the package purchased.
|
·
|
Subscribers would be blocked from using roaming services abroad after they have fully utilized the
package they purchased.
|
·
|
Subscribers who use overseas roaming services only occasionally would be blocked when their bill
reaches approximately NIS 100.
|
|
|
2011
|
|
|
2012
|
|
||
Management and headquarters
|
|
|
279
|
|
|
|
223
|
|
Content and product marketing
|
|
|
96
|
|
|
|
57
|
|
Service – Private customers
|
|
|
2,206
|
|
|
|
1,592
|
|
Business customers
|
|
|
533
|
|
|
|
463
|
|
Operation and logistics
|
|
|
344
|
|
|
|
347
|
|
Engineering and information systems
|
|
|
583
|
|
|
|
505
|
|
Total
|
|
|
4,041
|
|
|
|
3,187
|
|
|
2010
|
2011
|
2012
|
|||||||||
Revenues from international carrier services
|
501 | 413 | 383 | |||||||||
% of total revenues
|
36.30 | % | 30.51 | % | 28.58 | % | ||||||
Revenues from Internet and communication services for businesses (ISP, ICT, data)
|
879 | 941 | 957 | |||||||||
% of total revenues
|
63.70 | % | 69.49 | % | 71.42 | % | ||||||
Total revenue
|
1,380 | 1,354 | 1,340 | |||||||||
Operating profit
|
320 | 241 | 219 | |||||||||
Depreciation and amortization
|
94 | 109 | 136 | |||||||||
Operating profit before depreciation and amortization
|
414 | 350 | 355 | |||||||||
Net profit
|
254 | 182 | 160 | |||||||||
Cash flow from current activities
|
292 | 243 | 272 | |||||||||
Payments for investments in property, plant and equipment and intangible assets(1)
|
180 | 288 | 173 | |||||||||
Free cash flow (2)
|
112 | (44 | ) | 99 | ||||||||
Churn rate (3)
|
12.7 | % | 12.6 | % | 18.4 | % |
|
(1)
|
The item also includes long-term investments in long-term assets.
|
|
(2)
|
Cash from operating activities less purchase of property, plant and equipment and intangible assets, net.
|
|
(3)
|
The number of Internet subscribers who left Bezeq International during the period, divided by the average number of registered Internet subscribers in the period.
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|||
Revenues from private customers
|
|
|
523
|
|
|
|
540
|
546
|
|
|||
Revenues from business customers
|
|
|
857
|
|
|
|
813
|
794
|
|
|||
Total revenues
|
|
|
1,380
|
|
|
|
1,354
|
1,340
|
|
|
|
Number of employees
|
|
|||||
|
|
2011
|
|
|
2012
|
|
||
Head office employees
|
|
|
1,209
|
|
|
|
1,261
|
|
Sales and service representatives
|
|
|
1,053
|
|
|
|
841
|
|
Total
|
|
|
2,262
|
|
|
|
2,102
|
|
2011
|
2012
|
|||||||
Revenues (NIS millions)
|
1,619
|
1636
|
||||||
Operating profit (NIS millions)
|
295
|
253
|
||||||
Depreciation and amortization (NIS millions)
|
276
|
248
|
||||||
Operating profit before depreciation (NIS millions)
|
571
|
501
|
||||||
Net (loss) (NIS millions)
|
|
|
(230
|
)
|
|
|
(310)
|
|
Cash flow from current operations (NIS millions)
|
|
|
513
|
|
|
|
418
|
|
Payments for investments in property, plant and equipment and intangible assets (NIS millions)
|
|
|
264
|
|
|
|
284
|
|
Free cash flow (NIS millions) (1)
|
|
|
250
|
|
|
|
134
|
|
Number of subscribers (2) (at the end of the period, in thousands)
|
|
|
586
|
|
|
|
578
|
|
Average monthly revenues per subscriber (ARPU) (3) (NIS)
|
|
|
232
|
|
|
|
234
|
|
Churn rate (4)
|
|
|
11.9
|
%
|
|
|
15.4
|
%
|
|
(1)
|
Cash from operating activities less purchase of property, plant and equipment and intangible assets, net.
|
|
(2)
|
Subscriber – one household or small business customer. Where a business customer has many reception points or many decoders (such as a hotel, kibbutz or gym), the number of subscribers is calculated by dividing the total payment received from the business customer by the average revenue per small business customer.
|
|
(3)
|
Monthly ARPU is calculated by dividing total DBS revenues (from content and equipment, premium channels, technical service, advanced products, one-time sale of content, revenues from channels, Internet and other) by average number of customers.
|
|
(4)
|
Number of DBS subscribers who left DBS during the period, divided by the average number of DBS registered subscribers in the period.
|
|
●
|
Content purchased from third parties, including content and channels; and
|
|
●
|
Content which DBS produces (wholly or partially) and has the right to use in its broadcasts. In most instances, DBS is also entitled to authorize the use of the content to third parties and share in the revenues arising from additional use of the content.
|
|
●
|
invest considerable effort in marketing and sales and to formulate an appropriate marketing strategy designed to attract new subscribers and retain existing customers;
|
|
●
|
continuously improve the array of services offered to subscribers;
|
|
●
|
create differentiation and innovation in its broadcasting content which is to be expanded relative to HOT’s content;
|
|
●
|
increase the amount of content purchased by each subscriber and expand DBS's value-added services; and
|
|
●
|
invest in the development and integration of advanced technologies and new services.
|
|
●
|
Sales persons employed by DBS who recruit subscribers;
|
|
●
|
Call centers operated by DBS employees that receive telephone enquiries from customers wishing to obtain DBS services, as well as telemarketing campaigns to potential subscribers; and
|
|
●
|
External resellers.
|
2010
|
|
|
2011
|
|
|
2012
|
|
|||||||||||||||
Subscribers
|
|
|
Market share
|
|
|
Subscribers
|
|
|
Market share
|
|
|
Subscribers (1)
|
|
|
Market share
|
|
||||||
577,700
|
39%
|
586,400
|
40%
|
578,404
|
39%
|
|
(1)
|
A subscriber is either one household or one small business customer. For business customers with many reception points or a large number of decoders (such as a hotel, kibbutz or gym), the number of subscribers is calculated by dividing the total payment received from the business customer by the average revenue from a small business customer.
|
·
|
Use of state-of-the-art advanced technology to provide its services;
|
·
|
Quality and variety of content broadcast to subscribers;
|
·
|
Level, quality and availability of DBS’s customer service;
|
·
|
Ability to provide broadcasts in remote or isolated areas where there is no deployment of cable infrastructure; and
|
·
|
The acceptance of the "yes" brand as a preferred, popular brand with a high level of loyalty
.
|
·
|
Inferior infrastructure – DBS's infrastructure is inferior because the satellite infrastructure does not enable: (i) bidirectional communication, (ii) the provision of VOD services, and (iii) the transmission of telephony and internet services. Hot’s cable infrastructure enables the supply of these services;
|
·
|
Regulatory restrictions;
|
·
|
Restrictions on its broadcast content, including a ban on broadcasting commercials;
|
·
|
Restrictions on the ownership of the channels it broadcasts, including the News Channel; and
|
·
|
The high cost of utilizing space segments to reach its subscribers.
|
·
|
DBS seeks to purchase, produce and broadcast high-quality, innovative and varied content, creating differentiation of its content;
|
·
|
DBS seeks to cultivate, promote and differentiate its YES brand;
|
·
|
DBS places an emphasis on its customer service; and
|
·
|
DBS invests in order to expand its technological capabilities, while placing an emphasis on technological innovation. To achieve this goal, it attaches great importance to the supply of personal television broadcasts as part of the range of services it offers its subscribers, including VOD, PVR and HD services.
|
·
|
The quality, differentiation, innovation and originality in the content, variety, branding and packaging
of its broadcasts;
|
·
|
Provision of television services while using advanced technologies such as personal television services, and in particular, PVR decoders and VOD services, as well as HOT services;
|
·
|
Its ability to offer bundles of communications services including television services and other services such as telephony services and internet services;
|
·
|
High level of customer service; and
|
·
|
The YES brand strength and its identification with quality, innovation and industry-leading content and services.
|
·
|
The need to obtain licenses under the Communications Law;
|
·
|
The significant investment required of carriers in this segment of operations, including the deployment of appropriate infrastructure and the purchase and production of attractive content;
|
·
|
The limited size of the broadcast market, which reduces the size advantage characteristics of the broadcast field elsewhere; and
|
·
|
Saturation of the broadcast market.
|
·
|
the regulatory barrier - termination of operations under the Broadcasting License is dependent on a decision of the Minister of Communications to cancel the license prior to the end of the license term, including arrangements (which could be imposed on the licensee) for ensuring the continuation of broadcasts and services and minimization of harm to subscribers; and
|
·
|
existing contracts with customers, important suppliers and with entities that provided long-term loans to DBS.
|
Department
|
|
Number of Employees
|
|
|||||
|
|
2011
|
|
|
2012
|
|
||
Marketing Department
|
|
|
34
|
|
|
|
38
|
|
Customer Service
|
|
|
1,467
|
|
|
|
1,462
|
|
Content Department
|
|
|
70
|
|
|
|
74
|
|
Engineering Department
|
|
|
102
|
|
|
|
101
|
|
Finance and Operations Department
|
|
|
114
|
|
|
|
118
|
|
Human Resources Department
|
|
|
50
|
|
|
|
52
|
|
Regulation and Legal Management Department
|
|
|
6
|
|
|
|
4
|
|
Information Systems Department
|
|
|
138
|
|
|
|
100
|
|
Management and Spokesperson
|
|
|
7
|
|
|
|
15
|
|
Sales
|
|
|
284
|
263
|
||||
Total
|
|
|
2,276
|
|
|
|
2,227
|
|
C.
|
Organizational Structure
|
Year ended December 31,
|
||||||||||||||||||||||||
2010 | 2011 |
2012
|
||||||||||||||||||||||
NIS
|
%
|
NIS
|
%
|
NIS
|
%
|
|||||||||||||||||||
Revenues
|
8,657 | 100 | % | 11,373 | 100 | % | 10,278 | 100 | % | |||||||||||||||
Depreciation and amortization
|
2,294 | 28 | % | 2,984 | 26 | % | 2,367 | 23 | % | |||||||||||||||
Salaries
|
1,488 | 17 | % | 2,114 | 19 | % | 1,984 | 19 | % | |||||||||||||||
General and operating expenses
|
3,640 | 42 | % | 4,462 | 39 | % | 3,995 | 39 | % | |||||||||||||||
Other operating expenses
|
5 | - | 326 | 3 | % | (11 | ) | - | ||||||||||||||||
Operating income
|
1,230 | 12 | % | 1,487 | 13 | % | 1,943 | 19 | % | |||||||||||||||
Finance expense
|
600 | 6 | % | 983 | 9 | % | 915 | 9 | % | |||||||||||||||
Finance income
|
(313 | ) | (3 | )% | (485 | ) | (4 | )% | (562 | ) | (6 | )% | ||||||||||||
Income after financing expenses (income), net
|
943 | 9 | % | 989 | 9 | % | 1,590 | 15 | % | |||||||||||||||
Share of losses in equity-accounted investee
|
235 | 3 | % | 216 | 2 | % | 245 | 2 | % | |||||||||||||||
Income before income tax
|
708 | 6 | % | 773 | 7 | % | 1,345 | 13 | % | |||||||||||||||
Income tax
|
385 | 4 | % | 653 | 6 | % | 555 | 5 | % | |||||||||||||||
Income for the year
|
323 | 2 | % | 120 | 1 | % | 790 | 8 | % | |||||||||||||||
Income (loss) attributable to owners of the Company
|
(140 | ) | (2 | )% | (219 | ) | (2 | )% | 45 | 1 | % | |||||||||||||
Income attributable to non-controlling interest
|
463 | 4 | % | 339 | 3 | % | 745 | 7 | % | |||||||||||||||
Income for the year
|
323 | 2 | % | 120 | 1 | % | 790 | 8 | % | |||||||||||||||
Basic earnings (loss) per share
|
(4.83 | ) | -- | (7.34 | ) | -- | 1.52 | -- | ||||||||||||||||
Diluted earnings (loss) per share
|
(4.93 | ) | -- | (7.38 | ) | -- | 1.49 | -- |
Year ended December 31, 2012
|
||||||||||||||||||||||||||||||||
Domestic
fixed–line communications
|
Cellular communications
|
International communications and Internet services
|
Multi-channel television
|
Others
|
Adjustments
|
Consolidated
|
Convenience translation into
U.S. dollars
|
|||||||||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||||||||||||||
Revenue from external entities
|
4,339 | 4,371 | 1,286 | 1,636 | 256 | (1,636 | ) | 10,252 | 2,746 | |||||||||||||||||||||||
Inter-segment revenues
|
291 | 97 | 54 | - | 36 | (452 | ) | 26 | 7 | |||||||||||||||||||||||
Total revenue
|
4,630 | 4,468 | 1,340 | 1,636 | 292 | (2,088 | ) | 10,278 | 2,753 | |||||||||||||||||||||||
Depreciation and amortization
|
730 | 531 | 136 | 248 | 25 | 697 | 2,367 | 634 | ||||||||||||||||||||||||
Segment results - operating income
|
1,923 | 892 | 219 | 253 | (13 | ) | (1,331 | ) | 1,943 | 521 | ||||||||||||||||||||||
Finance income
|
312 | 146 | 10 | 2 | - | 92 | 562 | 151 | ||||||||||||||||||||||||
Finance expenses
|
(579 | ) | (101 | ) | (18 | ) | (563 | ) | (7 | ) | 353 | (915 | ) | (245 | ) | |||||||||||||||||
Total finance income (expense), net
|
(267 | ) | 45 | (8 | ) | (561 | ) | (7 | ) | 445 | (353 | ) | (94 | ) | ||||||||||||||||||
Segment profit (loss) after finance expenses, net
|
1,656 | 937 | 211 | (308 | ) | (20 | ) | (886 | ) | 1,590 | 427 | |||||||||||||||||||||
Share in losses of equity-accounted investee
|
- | - | 1 | - | - | (246 | ) | (245 | ) | (66 | ) | |||||||||||||||||||||
Segment profit (loss) before income tax
|
1,656 | 937 | 212 | (308 | ) | (20 | ) | (1,132 | ) | 1,345 | 361 | |||||||||||||||||||||
Income tax
|
462 | 239 | 52 | 2 | (3 | ) | (197 | ) | 555 | 149 | ||||||||||||||||||||||
Segment results - net profit (loss)
|
1,194 | 698 | 160 | (310 | ) | (17 | ) | (935 | ) | 790 | 212 | |||||||||||||||||||||
Additional information:
|
||||||||||||||||||||||||||||||||
Segment assets
|
8,096 | 4,704 | 1,251 | 1,387 | 288 | 3,060 | 18,786 | 5,032 | ||||||||||||||||||||||||
Goodwill
|
- | - | 6 | - | 87 | 2,743 | 2,836 | 760 | ||||||||||||||||||||||||
Investment in equity-accounted investee
|
- | - | 2 | - | - | 1,003 | 1,005 | 269 | ||||||||||||||||||||||||
Segment liabilities
|
11,690 | 1,735 | 436 | 5,349 | 258 | (1,182 | ) | 18,286 | 4,898 | |||||||||||||||||||||||
Investments in property, plant and
|
||||||||||||||||||||||||||||||||
equipment and intangible assets
|
945 | 397 | 169 | 324 | 32 | (324 | ) | 1,543 | 413 |
Year ended December 31, 2011
|
||||||||||||||||||||||||||||
Domestic
fixed–line communications
|
Cellular communications
|
International communications and Internet services
|
Multi-channel television
|
Others
|
Adjustments
|
Consolidated
|
||||||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
||||||||||||||||||||||
Revenue from external entities
|
4,371 | 5,454 | 1,288 | 1,619 | 236 | (1,619 | ) | 11,349 | ||||||||||||||||||||
Inter-segment revenues
|
277 | 94 | 66 | - | 41 | (454 | ) | 24 | ||||||||||||||||||||
Total revenue
|
4,648 | 5,548 | 1,354 | 1,619 | 277 | (2,073 | ) | 11,373 | ||||||||||||||||||||
Depreciation and amortization
|
688 | 561 | 109 | 276 | 21 | 1,329 | 2,984 | |||||||||||||||||||||
Segment results - operating income
|
1,695 | 1,360 | 241 | 295 | 3 | (2,107 | ) | 1,487 | ||||||||||||||||||||
Finance income
|
304 | 105 | 9 | 23 | - | 44 | 485 | |||||||||||||||||||||
Finance expenses
|
(531 | ) | (67 | ) | (11 | ) | (547 | ) | (5 | ) | 178 | (983 | ) | |||||||||||||||
Total finance income (expense), net
|
(227 | ) | 38 | (2 | ) | (524 | ) | (5 | ) | 222 | (498 | ) | ||||||||||||||||
Segment profit (loss) after finance expenses, net
|
1,468 | 1,398 | 239 | (229 | ) | (2 | ) | (1,885 | ) | 989 | ||||||||||||||||||
Share in losses of equity-accounted investee
|
- | - | 1 | - | - | (217 | ) | (216 | ) | |||||||||||||||||||
Segment profit (loss) before income tax
|
1,468 | 1,398 | 240 | (229 | ) | (2 | ) | (2,102 | ) | 773 | ||||||||||||||||||
Income tax
|
366 | 342 | 58 | 1 | 4 | (118 | ) | 653 | ||||||||||||||||||||
Segment results - net profit (loss)
|
1,102 | 1,056 | 182 | (230 | ) | (6 | ) | (1,984 | ) | 120 | ||||||||||||||||||
Additional information:
|
||||||||||||||||||||||||||||
Segment assets
|
9,202 | 5,404 | 1,260 | 1,282 | 314 | 3,552 | 21,014 | |||||||||||||||||||||
Goodwill
|
- | - | 6 | - | 87 | 2,743 | 2,836 | |||||||||||||||||||||
Investment in equity-accounted investee
|
- | - | 2 | - | - | 1,057 | 1,059 | |||||||||||||||||||||
Segment liabilities
|
13,529 | 2,255 | 439 | 4,932 | 272 | (1,521 | ) | 19,906 | ||||||||||||||||||||
Investments in property, plant and
equipment and intangible assets
|
1,174 | 442 | 285 | - | 38 | - | 1,939 |
Year ended December 31, 2010
|
||||||||||||||||||||||||||||
Domestic
fixed–line communications
|
Cellular communications
|
International communications and Internet services
|
Multi-channel television
|
Others
|
Adjustments
|
Consolidated
|
||||||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
||||||||||||||||||||||
Revenue from external entities
|
3,581 | 3,957 | 949 | 1,187 | 162 | (1,187 | ) | 8,649 | ||||||||||||||||||||
Inter-segment revenues
|
195 | 186 | 38 | 5 | 26 | (442 | ) | 8 | ||||||||||||||||||||
Total revenue
|
3,776 | 4,143 | 987 | 1,192 | 188 | (1,629 | ) | 8,657 | ||||||||||||||||||||
Depreciation and amortization
|
496 | 431 | 68 | 221 | 14 | 1,064 | 2,294 | |||||||||||||||||||||
Segment results - operating income
|
1,486 | 1,015 | 248 | 119 | 13 | (1,651 | ) | 1,230 | ||||||||||||||||||||
Finance income
|
140 | 67 | 5 | - | - | 101 | 313 | |||||||||||||||||||||
Finance expenses
|
(229 | ) | (101 | ) | (9 | ) | (424 | ) | (3 | ) | 166 | (600 | ) | |||||||||||||||
Total finance income (expense), net
|
(89 | ) | (34 | ) | (4 | ) | (424 | ) | (3 | ) | 267 | (287 | ) | |||||||||||||||
Segment profit (loss) after finance expenses, net
|
1,397 | 981 | 244 | (305 | ) | 10 | (1,384 | ) | 943 | |||||||||||||||||||
Share in losses of equity-accounted investee
|
- | - | 5 | - | - | (240 | ) | (235 | ) | |||||||||||||||||||
Segment profit (loss) before income tax
|
1,397 | 981 | 249 | (305 | ) | 10 | (1,624 | ) | 708 | |||||||||||||||||||
Income tax
|
379 | 241 | 47 | 1 | 4 | (287 | ) | 385 | ||||||||||||||||||||
Segment results - net profit (loss)
|
1,018 | 740 | 202 | (306 | ) | 6 | (1,337 | ) | 323 |
Year ended
December 31,
|
|
Israeli inflation
rate %
|
|
|
NIS depreciation
(appreciation)
rate %
|
|
|
Israeli inflation adjusted for depreciation (appreciation) %
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
3.8
|
|
|
|
(1.1
|
)
|
|
|
4.9
|
|
2009
|
|
|
3.9
|
|
|
|
(0.7
|
)
|
|
|
4.6
|
|
2010
|
|
|
2.7
|
|
|
|
(6.0
|
)
|
|
|
8.7
|
|
2011
|
|
|
2.2
|
|
|
|
7.7
|
|
|
|
(5.5
|
)
|
2012
|
|
|
1.6
|
(2.3
|
)
|
3.9
|
|
●
|
Credit A - a “bullet” floating rate loan, in the amount of NIS 700 million; with principal and interest that was payable on November 30, 2010. Credit A is indexed to Bank Hapoalim’s prime interest rate, plus a margin of 2%. Bank Hapoalim Prime on the date of the closing was equal to 1.62%. We repaid this loan in full following our receipt of a dividend from Bezeq on May 3, 2010.
|
|
●
|
Credit B –This tranche is divided into two parts. The first part, originally in the amount of NIS 1.1 billion, is a floating loan indexed to the Bank Hapoalim prime interest rate; and the second part, originally in the amount of NIS 900 million, is a fixed rate loan, linked to the Israeli CPI. Both parts of Credit B are payable in 13 equal semi-annual installments of both principal and interest, with the first payments made on November 30, 2010. The interest rate on the first part of Credit B is 4.58% and the interest rate on the second part of Credit B is 4.35%. As of December 31, 2012, NIS 715 million of the first part and NIS 627 million of the second part remained outstanding.
|
|
●
|
Credit C – a “bullet” loan, originally in the principal amount of NIS 700 million, is a floating rate loan, indexed to the Bank Hapoalim prime interest rate, at an interest rate of 4.73%. The principal of Credit C will be paid in one payment on November 30, 2016; and the interest will be paid in 13 semi-annual installments, the first of which was made on November 30, 2010. As of December 31, 2012, NIS 32 million of this tranche remained outstanding.
|
|
●
|
Credit D - two “bullet” loans, the principal of which will be paid in one payment on May 30, 2017 and the interest will be paid in 13 semi-annual installments, the first of which is due on November 30, 2010. The first loan of Credit D is in the principal amount of NIS 800 million and is a floating rate loan, indexed to the Bank Hapoalim prime interest rate, at a rate of 4.75%. The second loan is in the principal amount of NIS 400 million and is a fixed rate loan, linked to the Israeli CPI, at a rate of 5.4%. As of December 31, 2012, NIS 800 million of the first part and NIS 430 million of the second part remained outstanding.
|
|
●
|
A floating charge on all the SP2 assets, property (current and fixed) and its present and future rights (with the exception of additional shares of Bezeq which may be purchased) and a first-ranking fixed charge on the share capital of SP2, which has not yet been realized and/or which has been exercised and not yet realized, on SP2’s goodwill and its rights to a tax exemption and/or tax relief and/or tax dispensation.
|
|
●
|
A fixed lien, assignment by way of lien and a floating charge on the rights and assets of SP2, as set forth below:
|
|
o
|
All of SP2’s rights in the SP2 account, and all the monies and/or assets deposited and/or located and/or to be deposited and/or located in the SP2 account and/or credited and/or to be credited thereto, including securities and income and proceeds which SP2 has and is to have with respect to and in connection with the SP2 account, the aforementioned monies, securities and/or assets, and the profits, all with the exception of additional shares of Bezeq which may be purchased.
|
|
o
|
SP2’s rights under the Bezeq’s shares purchase agreement.
|
|
●
|
The failure of: (i) Bezeq to maintain minimum shareholders equity and minimum ratio of shareholder equity; (ii) Bezeq to exceed certain thresholds relating to the ratio of financial debt to EBITDA; and (iii) our wholly-owned subsidiary that directly holds the Bezeq interest to maintain a minimum ratio of debt to EBITDA and a debt service coverage ratio.
|
|
●
|
Material breach of an undertaking or representation; certain restructuring, insolvency or debt restructuring events of SP2 or Bezeq; any material change in the nature of Bezeq’s activities; certain changes in control of SP2 or dilution of SP2’s holdings in Bezeq or if SP2 ceases to control Bezeq; if Bezeq’s general license is adversely modified; if any of the permits or approvals issued in connection with our acquisition of controlling interest in Bezeq ceases to be in force or was amended; and if Bezeq or certain subsidiaries of Bezeq fail to make certain payments when due.
|
Source of finance
|
Amount (NIS millions)
|
Currency or linkage
|
Type of interest and change mechanism
|
Average interest rate
|
Effective interest rate
|
Interest range in 2012
|
|||||||||||||
Banks
|
2,306 |
Unlinked NIS
|
Variable, based on prime rate (1)
|
3.20 | % | 3.22 | % | 3.20%-4.20 | % | ||||||||||
Banks
|
2,340 |
Unlinked NIS
|
Fixed
|
5.67 | % | 5.69 | % | 5%- 6.85 | % | ||||||||||
Non-bank
|
425 |
Unlinked NIS
|
Variable, based on annual STL rate (2)
|
3.26 | % | 3.41 | % | 3.26%-4.08 | % | ||||||||||
Non-bank
|
1,729 |
Unlinked NIS
|
Fixed
|
5.92 | % | 6.11 | % | 5.70%-6.65 | % | ||||||||||
Non-bank (3)
|
2,334 |
CPI-linked NIS
|
Fixed
|
3.86 | % | 3.95 | % | 3.70%-5.95 | % |
(1)
|
Prime interest rate in March 2013 – 3.25%.
|
(2)
|
Based on Israeli government short term loan rate of 1.858% (calculated as the average last five trading days of November 2012 for the interest period that ended on March 1, 2013).
|
(3)
|
Not including Debentures (Series 5) held by a wholly-owned subsidiary. Bezeq’s loans in the total amount of NIS 7.8 billion include a cross-default mechanism that under certain conditions allows immediate recall of the debt should a third party demand immediate repayment of debt owed to it due to a breach of contract.
|
|
●
|
An undertaking not to create any other liens on its assets (negative lien) under the same conditions as those of the negative lien given in favor of the banks, and subject to exceptions defined therein.
|
|
●
|
The financing documents include grounds for recalling the credit, including violations, insolvency, liquidation procedures, receivership or the like, as well as the right to demand immediate repayment if a third-party lender demanded immediate repayment of Bezeq's debts towards it for an amount that is more than the defined amount.
|
|
●
|
Bezeq undertook that should it make a commitment towards any additional lending entity in connection with financial covenants, the financing entities may (under certain conditions) ask Bezeq to sign an identical undertaking towards them. for the outstanding long-term debt.
|
·
|
NIS 958,088,000 par value of debentures (Series 6), bearing fixed annual interest of 3.70%. The debentures will be repaid in five (5) equal, annual installments, payable every year on December 1, from 2018 through 2022 (inclusive). The first interest payment was made on December 1, 2011 and subsequently interest is payable twice a year on June 1 and December 1 every year through 2016. The principal of the debentures (Series 6) and their interest will be linked to the CPI published in June 2011.
|
·
|
NIS 424,955,000 par value of debentures (Series 7), bearing variable interest at the short-term government loan yield per annum, or base interest, plus a margin of 1.40%. The debentures will be repaid in five (5) equal, annual installments, payable every year on December 1 from 2018 through 2022 (inclusive). The first interest payment was made on September 1, 2011 and subsequently interest is payable four times a year on March 1, June 1, September 1, and December 1, through 2022. The debentures (Series 7) are not linked to the CPI or to any currency.
|
·
|
NIS 1,329,363,000 par value of debentures (Series 8), bearing fixed annual interest of 5.70%. The debentures will be repaid in three (3) equal, annual installments, payable on June 1 every year from 2015 through 2017 (inclusive). The first interest payment was made on December 1, 2011 and subsequently interest will be paid twice a year on June 1 and December 1 every year through 2016. The last interest payment will be made on June 1, 2017. The debentures (Series 8) are not linked to the CPI or to any curren
cy.
|
·
|
Bezeq will not create additional pledges on its assets unless pledges are created at the same time in favor of the debenture holders and the lending banks (negative pledge). Bezeq may create additional pledges under certain circumstances, including liens that are created for the purchase or expansion of Bezeq’s assets and pledges of immaterial amounts.
|
·
|
Standard grounds were included for immediate repayment of the debentures and loans, including breach events, insolvency, dissolution procedures or receivership. In addition, a right was provided to call for immediate repayment if a third party lender calls for immediate repayment of Bezeq's debts in an amount exceeding the amount determined.
|
Rating agency
|
Rating
|
Changes in rating
|
Type of credit rated
|
S&P Maalot
|
ilAA +
|
February 6, 2011 – Ratification of Bezeq's rating of ilAA+ (removal from CreditWatch), with a negative outlook.
June 29, 2011 – Rating set at ilAA+ with a negative outlook for new debentures (Series 6-8) of up to NIS 3 billion.
July 4, 2012 – Ratification of the current rating without change.
February 21, 2013 – Rating of Bezeq and its debentures was lowered to ilAA with a stable outlook.
|
Bezeq and
Debentures
Series 5 – 8
|
Midroog
|
Aa2
|
January 2, 2011 – Transfer of rating of Bezeq’s debentures to Watch List with negative outlook, following Bezeq's notice of NIS 3 billion dividend distribution in 2011 -2013, that is not in compliance with the profit test for dividends,
April 3, 2011 – Removal of above debentures from Watch List with an unchanged rating (Aa1) and negative outlook, following the approval of the NIS 3 billion distribution by shareholders and the District Court.
June 29, 2011 – Rating set at Aa1 with negative outlook for NIS 3 billion of new debentures (Series 6-8) issued by Bezeq, and the same rating for Bezeq’s outstanding debentures..
July 19, 2012 –Rating of Bezeq’s debentures (Series 5, 6, 7, 8) lowered from Aa1/Negative Outlook to Aa2/Stable Outlook)
|
Debentures
Series 5 – 8
|
Source of finance
|
Amount at Dec. 31, 2012 (NIS millions)
|
Currency or linkage
|
Average interest rate
|
Effective interest rate
|
|||||
Banks
|
97 |
CPI-linked NIS
|
4.50% | 4.55% | |||||
Non-bank
|
353 |
CPI-linked NIS
|
4.62% | 4.67% | |||||
Loan from parent company
|
549 |
Fixed interest NIS
|
5.75% | 5.75% |
|
●
|
Pelephone's total debt will not exceed three times its equity.
|
|
●
|
If its debt exceeds 2.5 times its equity and for as long as it does so, Pelephone will not distribute dividends and will not pay management fees to its shareholders. If Pelephone violates this undertaking, it must repay the banks, within 120 days from the demand, the entire outstanding credit facility, or alternatively, remedy the violation by increasing its equity or repaying its debt so that the ratio is maintained.
|
|
●
|
Total debt (including guarantees and less cash and cash equivalents) should not exceed NIS 3.8 billion (linked to the CPI of January 2002). The amount of the debt will be reviewed once every quarter.
|
|
●
|
No fixed or floating charge can be imposed on Pelephone's assets unless it obtains the banks' prior written consent.
|
|
●
|
No security or charge on Pelephone's assets or guarantee to secure credit can be provided for Pelephone's shareholders or any third party, without the prior written consent of the banks.
|
|
●
|
No loans or credit can be provided for Pelephone's shareholders, except for Bezeq, without the prior written consent of the banks, and provided that its debt to equity ratio does not exceed 2.5 times its equity.
|
|
●
|
In addition to these covenants, Pelephone undertook to insure that the cumulative amount of all its debts and liabilities towards a particular bank does not exceed at any time a sum equal to 40% of its total debt to financial entities, including debenture-holders.
|
Source of financing
|
Amount at December 31, 2012 (NIS millions)
|
Currency or linkage
|
Average interest rate
|
Effective interest rate
|
||||||
Short-term loans
|
Banks
|
69
|
NIS
|
5.2%
|
5.4%
|
|||||
Banks (1) |
0
|
NIS | 5.65% | 5.72% | ||||||
Long-term loans
|
|
|
||||||||
Non-bank (2)
|
1,539
|
CPI-linked NIS
|
6.3%
|
6.4%
|
||||||
Shareholder loans(3)
|
3,086
|
CPI-linked NIS
|
6.1%
|
6.2%
|
(1)
|
Until December 31, 2010, the long-term bank loans bore 5.6% annual fixed interest. As of December 31, 2010, some of these loans began bearing fixed interest at an average rate of 6.63%, and others variable interest at an average rate of prime plus 1.8%.
|
(2)
|
The non-bank credit, which is valid to December 31, 2011, consists of debentures.
|
(3)
|
Loans extended to DBS by its shareholders are linked to the CPI and are divided into three types: A. Non-interest bearing loans; B. Loans bearing annual interest of 5.5%; C. Loans bearing annual interest of 11%.
|
|
|
Year ended December 31,
|
|
|||||||||
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|||
|
|
(NIS in
millions
)
|
|
|||||||||
|
|
|
|
|||||||||
Net cash provided by operating activities
|
|
|
2,596
|
|
|
|
3,184
|
3,996
|
|
|||
Net cash (used in) investing activities
|
|
|
(6,073
|
)
|
|
|
(2,048
|
)
|
(1,273)
|
|||
Net cash (used in) provided by financing activities
|
|
|
2,920
|
|
|
|
(150
|
)
|
(3,335)
|
|||
Net (decrease) increase in cash and cash equivalents
|
|
|
(557
|
)
|
|
|
986
|
(612)
|
||||
Cash and cash equivalents at beginning of year
|
|
|
940
|
|
|
|
383
|
1,369
|
|
|||
Cash and cash equivalents at end of year
|
|
|
383
|
|
|
|
1,369
|
757
|
|
Year ended December 31,
|
||||||||||||
2010
|
2011
|
2012
|
||||||||||
|
|
(NIS in millions)
|
|
|||||||||
Net cash provided by operating activities
|
|
|
3,696
|
|
|
|
3,186
|
|
4,014
|
|||
Net cash (used in) investing activities
|
|
|
(1,484
|
)
|
|
|
(2,491
|
)
|
(1,237)
|
|||
Net cash (used in) provided by financing activities
|
|
|
(2,427
|
)
|
|
|
292
|
|
(3,663)
|
|||
Net (decrease) increase in cash and cash equivalents
|
|
|
(215
|
)
|
|
|
987
|
|
(886)
|
|||
Cash and cash equivalents at beginning of period
|
|
|
580
|
|
|
|
365
|
|
1,352
|
|||
Cash and cash equivalents at end of period
|
|
|
365
|
|
|
|
1,352
|
|
466
|
Year ended
December 31,
|
Israeli inflation
rate %
|
NIS devaluation (appreciation)
rate %
|
Israeli inflation adjusted for devaluation (appreciation) %
|
|||||||||
2008
|
3.8 | (1.1 | ) | 4.9 | ||||||||
2009
|
3.9 | (0.7 | ) | 4.6 | ||||||||
2010
|
2.7 | (6.0 | ) | 8.7 | ||||||||
2011
|
2.2 | 7.7 | (5.5 | ) | ||||||||
2012
|
1.6 | (2.3 | ) | 3.9 |
Years
|
Principal depreciation rate (%)
|
|||||||
NGN equipment
|
8 | 13 | ||||||
Transmission and power equipment
|
5-10 | 10 | ||||||
Network equipment
|
8-25 | 4 | ||||||
Subscriber equipment and installations
|
3-7 | 25 | ||||||
Motor vehicles
|
6-7 | 17 | ||||||
Internet equipment
|
4 | 25 | ||||||
Office equipment
|
5-14 | 10 | ||||||
Electronic equipment, computers and internal
|
||||||||
communication systems
|
3-7 | 20 | ||||||
Cellular network
|
4-10 | 14 | ||||||
Buildings
|
25 | 4 | ||||||
Submarine communications cable
|
4-25 | 4 |
Type of Asset
|
Amortization Period
|
Development expenses
|
4 - 7 years
|
Other rights
|
3 - 10 years, depending on the useful life
|
Frequency usage right
|
Over the term of the license for 13 years starting from the use of the frequencies
|
Computer programs and software licenses
|
Over the term of the license or the estimated time of use of the program
|
Customer relationships
|
10 years
|
|
●
|
Bezeq Fixed Line - approximately NIS 672 million;
|
|
●
|
Pelephone - approximately NIS 160 million; and
|
|
●
|
Bezeq International - approximately NIS 29 million
.
|
Contractual Obligations
|
Payments due by period
(NIS in millions)
|
|||||||||||||||||||
Total
|
less than 1 year
|
1-3 years
|
3-5 years
|
more than 5 years
|
||||||||||||||||
Long-term debt obligations (including interest)
|
|
|
16,898
|
2,789
|
4,463
|
5,991
|
3,654
|
|
||||||||||||
Operating lease obligations
|
|
|
830
|
247
|
383
|
120
|
80
|
|
||||||||||||
Purchase obligations
|
|
|
286
|
286
|
-
|
-
|
-
|
|
||||||||||||
Total
|
|
|
18,014
|
3,322
|
4,846
|
6,111
|
3,734
|
|
ITEM 6.
|
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Shaul Elovitch
|
|
65
|
|
Chairman of the Board of Directors
|
Or Elovitch
|
|
37
|
|
Director
|
Moshe Rosenthal (1) (2)
|
|
54
|
|
Outside Director
|
Debbie Saperia (1) (2)
|
|
45
|
|
Outside Director
|
Anat Winner (1) (2)
|
|
54
|
|
Director
|
Doron Turgeman
|
|
45
|
|
Chief Executive Officer
|
Ehud Yahalom
|
|
35
|
|
Principal Financial Officer
|
Name
|
Age
|
Position
|
||
Shaul Elovitch
|
65
|
Chairman of the Board of Directors of Bezeq
|
||
Stella Handler
|
44
|
Chief Executive Officer of Bezeq
|
||
David Mizrahi
|
43
|
Chief Financial Officer and Deputy Chief Executive Officer
|
C.
|
Board Practices
|
|
●
|
The majority of shares voting on the matter (not including abstentions), including at least a majority of the shares of the non-controlling shareholders (and of shareholders who do not have a personal interest in the election of the outside director as a result of their relationship with the controlling shareholder) voting on the matter, vote in favor of the outside director; or
|
|
●
|
The majority of shares voting on the matter (not including abstentions) vote in favor of the outside director and the total number of ordinary shares held by non-controlling shareholders (and of shareholders who do not have a personal interest in the election of the outside director as a result of their relationship with the controlling shareholder) that voted against the election of the outside director does not exceed 2% of all of the voting rights in the company.
|
|
●
|
One or more shareholders holding at least 1% of the voting rights in the company nominated the outside director for an additional term of office and the appointment was approved by a majority of the shares voting on the matter, not including votes of controlling shareholders or shareholders who have a personal interest in the election of the outside director as a result of their relationship with the controlling shareholder; and provided that the total number of shares held by non-controlling persons and by persons who have no personal interest in the appointment of the outside director as a result of their relationship with the controlling shareholder, who voted in favor of the election of the nominee, exceeds 2% of the voting rights in the company; or
|
|
●
|
The board of directors proposed the nominee for an additional term of office, and the election was approved by the general meeting of shareholders by the majority required for the election of an outside director for a first term of office, as described above.
|
|
●
|
monetary liability imposed on the office holder in favor of a third party in a judgment, including a settlement or an arbitral award confirmed by a court. However, if a company undertakes to indemnify an office holder in advance of such a liability, the undertaking must be limited to foreseeable events based on the company's activities when the company undertook such indemnification, and to amounts or standards that the board of directors has determined are reasonable under the circumstances;
|
|
●
|
reasonable litigation expenses, including attorneys' fees, expended by an office holder as a result of an investigation or proceeding instituted against the office holder by a competent authority, provided that such investigation or proceeding concludes without the filing of an indictment against the office holder and either: no financial liability was imposed on the office holder in lieu of criminal proceedings, or a financial liability was imposed on the office holder in lieu of criminal proceedings with respect to an alleged criminal offense that does not require proof of criminal intent;
|
|
●
|
reasonable litigation expenses, including attorneys' fees, expended by the office holder or for which the office holder is charged by a court:
|
|
o
|
in an action brought against the office holder by the company, on behalf of the company or on behalf of a third party,
|
|
o
|
in a criminal action from which the office holder is acquitted, or
|
|
o
|
in a criminal action in which the office holder is convicted of a criminal offense which does not require proof of criminal intent.
|
|
●
|
a payment that the office holder is obligated to make to an injured party pursuant to Section 52(54)(a)(1)(a) of the Israeli Securities Law, and expenses that the office holder incurred in connection with an administrative proceeding under the Israeli Securities Law, including reasonable litigation expenses and attorney fees.
|
Name
|
Number of
Ordinary
Shares
Beneficially
Owned (1)
|
Percentage of
Ownership
(2)
|
||||||
|
|
|
|
|
|
|
||
Internet Gold
|
|
|
23,891,997
|
|
|
|
79.94
|
%
|
(1)
|
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options currently exercisable or exercisable within 60 days of the date of this table, are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.
|
(2)
|
The percentages shown are based on 29,889,045 ordinary shares outstanding (not including 19,230 shares held as treasury stock) as of April 22, 2013.
|
|
Significant Changes in the Ownership of Major Shareholders
|
·
|
On March 31, 2007, Internet Gold provided us with a long-term loan of NIS 100.6 million ($28.3 million), bearing the prime interest rate published from time to time by the Bank of Israel. As of December 31, 2009, we had an outstanding balance payable to Internet Gold of NIS 326 million ($86.4 million). On March 24, 2010, NIS 302 million ($85.1 million) of the loan was repaid from the proceeds from Internet Gold’s participation in our March 2010 private placement. On May 12, 2010, we repaid the remaining outstanding balance of NIS 31.5 million ($8.9 million).
|
·
|
In November 2009, Internet Gold provided to us a NIS 217.5 million ($61.3 million) loan, which bears interest equal to the yield on Israel Government bonds with an average maturity that is closest to the maturity date of the loan, as such yield is reflected in the average closing price of Israel Government bonds for the seven trading days preceding the grant of the loan. On March 24, 2010, the loan was fully repaid from proceeds from Internet Gold’s participation in our March 2010 private placement.
|
|
●
|
The amount of the transaction does not exceed NIS 10 million;
|
|
●
|
Bezeq is not required to issue an immediate report for the transaction under Article 36 of the periodic reports regulations or any other law; and
|
|
●
|
The transaction does not address the employment terms (as set out in the Companies Law) of the interested parties or their relatives.
|
·
|
Debt arrangement between Bezeq and DBS
. Bezeq engaged in a new debt arrangement agreement according to which all the payments under earlier debt arrangements, which were due to be paid as of August 1, 2012 through to June 10, 2013 will be postponed, each for a period of 18 months from their expected repayment date, and during this period each installment will bear interest of prime + 4%, with the addition of VAT as required by law. The total principal of these deferred payments amounts to NIS 26,663,027.
|
·
|
Debt arrangement between Bezeq International and DBS
. An agreement with regard to a new debt arrangement according to which the payments under the general meeting's resolution dated October 14, 2010 and the debt arrangement of June 10, 2010, the original due dates of which were as of August 1, 2012 through December 31, 2013, will be deferred for a period of 18 months from the expected repayment date, and during this period, each installment will bear interest of prime + 4%, with the addition of VAT as required by law. The total principal of these deferred payments amounts to NIS 5,928,750.
|
NASDAQ Global Market
|
Tel Aviv Stock
Exchange
|
|||||||||||||||
Year
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
2008
|
|
$
|
12.77
|
|
|
$
|
3.80
|
|
|
|
NIS 50.85
|
|
|
|
NIS 13.97
|
|
2009
|
|
$
|
22.63
|
|
|
$
|
4.96
|
|
|
|
NIS 85.47
|
|
|
|
NIS 18.78
|
|
2010
|
|
$
|
38.19
|
|
|
$
|
21.13
|
|
|
|
NIS 133.7
|
|
|
|
NIS 81.59
|
|
2011
|
|
$
|
39.48
|
|
|
$
|
14.57
|
|
|
|
NIS 137.5
|
|
|
|
NIS 54.93
|
|
2012
|
|
$
|
14.28
|
$
|
2.27
|
NIS 57.96
|
NIS 9.40
|
|
NASDAQ Global Market
|
Tel Aviv Stock Exchange
|
|||||||||||||||
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
$
|
39.48
|
|
|
$
|
29.61
|
|
|
|
NIS 136.90
|
|
|
|
NIS 109.10
|
|
|
Second Quarter
|
|
$
|
35.00
|
|
|
$
|
24.08
|
|
|
|
NIS 121.70
|
|
|
|
NIS 86.00
|
|
Third Quarter
|
|
$
|
28.00
|
|
|
$
|
16.26
|
|
|
|
NIS 94.85
|
|
|
|
NIS 59.32
|
|
Fourth Quarter
|
|
$
|
22.75
|
|
|
$
|
14.57
|
|
|
|
NIS 78.48
|
|
|
|
NIS 54.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
14.28
|
|
|
$
|
9.20
|
|
|
|
NIS 57.96
|
|
|
|
NIS 33.88
|
|
Second Quarter
|
|
$
|
10.61
|
|
|
$
|
2.65
|
|
|
|
NIS 41.42
|
|
|
|
NIS 11.31
|
|
Third Quarter
|
|
$
|
5.30
|
$
|
2.27
|
NIS 20.70
|
NIS 9.40
|
|
||||||||
Fourth Quarter
|
|
$
|
9.08
|
$
|
3.90
|
NIS 32.88
|
NIS 15.02
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
6.32
|
$
|
3.83
|
NIS 22.20
|
NIS 14.28
|
|
||||||||
Second Quarter (through April 21)
|
|
$
|
7.68
|
$
|
5.86
|
NIS 28.99
|
NIS 21.90
|
|
NASDAQ Global Market
|
Tel Aviv Stock Exchange
|
|||||||||||||||
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
October 2012
|
|
$
|
9.08
|
|
|
$
|
4.44
|
|
|
|
NIS 32.88
|
|
|
|
NIS 18.4
|
|
November 2012
|
|
$
|
5.79
|
|
|
$
|
3.90
|
|
|
|
NIS 22.90
|
|
|
|
NIS 16.3
|
|
December 2012
|
|
$
|
5.89
|
|
|
$
|
4.14
|
|
|
|
NIS 20.87
|
|
|
|
NIS 15.02
|
|
January 2013
|
|
$
|
4.98
|
|
|
$
|
3.83
|
|
|
|
NIS 17.77
|
|
|
|
NIS 14.28
|
|
February 2013
|
|
$
|
5.50
|
|
|
$
|
3.87
|
|
|
|
NIS 19.50
|
|
|
|
NIS 14.40
|
|
March 2013
|
|
$
|
6.32
|
|
|
$
|
4.33
|
|
|
|
NIS 22.20
|
|
|
|
NIS 16.75
|
|
April 2013 (through April 21)
|
|
$
|
7.68
|
|
|
$
|
5.86
|
|
|
|
NIS 28.99
|
|
|
|
NIS 21.90
|
|
B.
|
Plan of Distribution
|
E.
|
Dilution
|
·
|
at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such matter, present and voting at such meeting, are voted in favor of the compensation package, excluding abstentions; or
|
·
|
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter voting against the compensation package does not exceed 2% of the aggregate voting rights in the company.
|
|
●
|
who qualifies as a resident of the United States within the meaning of the U.S.-Israel tax treaty; and
|
|
●
|
who is entitled to claim the benefits available to the person by the U.S.-Israel tax treaty.
|
|
●
|
broker-dealers,
|
|
●
|
financial institutions,
|
|
●
|
certain insurance companies,
|
|
●
|
regulated investment companies,
|
|
●
|
investors liable for alternative minimum tax,
|
|
●
|
tax-exempt organizations,
|
|
●
|
non-resident aliens of the U.S. or taxpayers whose functional currency is not the U.S. dollar,
|
|
●
|
persons who hold the ordinary shares through partnerships or other pass-through entities,
|
|
●
|
persons who acquired their ordinary shares through the exercise or cancellation of employee stock options or otherwise as compensation for services,
|
|
●
|
certain expatriates or former long-term residents of the United States,
|
|
●
|
investors that own or have owned, directly, indirectly or by attribution, 10 percent or more of our voting shares, and
|
|
●
|
investors holding ordinary shares as part of a straddle or appreciated financial position or a hedging or conversion transaction.
|
|
●
|
an individual who is a citizen or, for U.S. federal income tax purposes, a resident of the United States;
|
|
●
|
a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any political subdivision thereof;
|
|
●
|
an estate whose income is subject to U.S. federal income tax regardless of its source; or
|
|
●
|
a trust that (a) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons or (b) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
|
|
●
|
you will be required to allocate income recognized upon receiving certain dividends or gain recognized upon the disposition of ordinary shares ratably over the holding period for such ordinary shares,
|
|
●
|
the amount allocated to each year during which we are considered a PFIC other than the year of the dividend payment or disposition would be subject to tax at the highest individual or corporate tax rate, as the case may be, in effect for that year and an interest charge would be imposed with respect to the resulting tax liability allocated to each such year, and
|
|
●
|
the amount allocated to the current taxable year and any taxable year before we became a PFIC would be taxable as ordinary income in the current year.
|
|
●
|
A direct or indirect owner of a pass-through entity, including a trust or estate, that is a direct or indirect shareholder of a PFIC,
|
|
●
|
A shareholder of a PFIC that is a shareholder of another PFIC, or
|
|
●
|
A 50%-or-more shareholder of a foreign corporation that is not a PFIC and that directly or indirectly owns stock of a PFIC.
|
|
Year Ended December 31,
|
|||||||
Services Rendered
|
2011
|
2012
|
||||||
Audit and audit-related fees (1)(2)
|
NIS | 6,664,000 | NIS | 6,281,000 | ||||
Tax and all other fees (3)
|
NIS | 696,000 | NIS | 519,000 | ||||
Total
|
NIS | 7,360,000 | NIS | 6,800,000 |
(1)
|
Audit fees are for audit services for each of the years shown in the table, including fees associated with the annual audit and audit services provided in connection with other statutory and regulatory filings.
|
(2)
|
Audit related fees are the aggregate fees billed for assurance and related services that are not reported under audit fees. These fees include internal controls review services as well as agreed upon procedures for certain regulatory matters.
|
(3)
|
Tax fees are the aggregate fees billed for professional services rendered for tax compliance and tax advice.
|
|
●
|
The requirement that the majority of the company’s board of directors qualify as independent directors, as defined under the NASDAQ Stock Market Rules. Instead, we follow Israeli law and practice which requires that we appoint at least two outside directors, within the meaning of the Israeli Companies Law, to our board of directors. In addition, we have the mandated three independent directors, within the meaning of the rules of the SEC and NASDAQ, on our audit committee. See Item 6C. “
Directors, Senior Management and Employees - Board Practices
.”
|
|
●
|
The requirement that the compensation of the chief executive officer and all other executive officers be determined, or recommended to the board of directors for determination, either by (i) a majority of the independent directors or (ii) a compensation committee comprised solely of independent directors. Under the Israeli Companies Law, any compensation arrangement with an office holder (including an exemption from liability and the insurance and indemnification of an office holder), require the approval of the compensation committee, the board of directors and in certain circumstances, shareholders.
|
|
●
|
The requirement that director nominees either be selected or recommended for the board of directors’ selection, either by (a) a majority of independent directors or (b) a nominations committee comprised solely of independent directors. Instead, we follow Israeli law and practice, in accordance with which directors may be recommended by our board of directors for election by our shareholders.
|
Consolidated Financial Statements of B Communications Ltd.
|
Page
|
|
|
Index to Consolidated Financial Statements
|
F-1
|
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
|
Consolidated Statements of Financial Position
|
F-3
|
|
Consolidated Statements of Income
|
F-5
|
|
Consolidated Statements of Comprehensive Income
|
F-6
|
|
Consolidated Statements of Changes in Equity
|
F-7
|
|
Consolidated Statements of Cash Flows
|
F-10
|
|
Notes to the Consolidated Financial Statements
|
F-12
|
Consolidated Financial Statements of DBS Satellite Service (1998) Ltd.
|
Page
|
|
|
Index to Consolidated Financial Statements
|
DF-1
|
|
Report of Independent Registered Public Accounting Firm
|
DF-2
|
|
Consolidated Statements of Financial Position
|
DF-3
|
|
Consolidated Statements of Income
|
DF-5
|
|
Consolidated Statements of Comprehensive Income
|
DF-6
|
|
Consolidated Statements of Changes in Equity
|
DF-7
|
|
Consolidated Statements of Cash Flows
|
DF-9
|
|
Notes to the Consolidated Financial Statements
|
DF-11
|
ITEM 19.
|
EXHIBITS
|
Exhibit
|
Description
|
|
1.1
|
Memorandum of Association of the Registrant. (1)
|
|
1.2
|
Amended and Restated Articles of Association of the Registrant
|
|
2.1
|
Specimen of Ordinary Share Certificate. (1)
|
|
4.1
|
|
Trust Deed between the Registrant and Shiff Hezenfortz Trustees (2004) Ltd. dated March 8, 2007. (1)
|
|
|
|
4.2
|
|
Form of Smile.Communications Series A Debenture Certificate for Notes issued in March and May 2007 (1)
|
|
|
|
4.3
|
|
Form of Registration Rights Agreement among the Registrant, Internet Gold-Golden Lines Ltd. and Eurocom Communications Ltd. (1)
|
|
|
|
4.4
|
|
Share Purchase Agreement dated October 25, 2009, between the Registrant and Ap.Sb.Ar. Holdings Ltd. (2)
|
|
|
|
4.5
|
|
First Amendment to the Share Purchase Agreement dated as of March 28, 2010, between B Communications (SP2) Ltd. and Ap.Sb.Ar. Holdings Ltd. (3)
|
4.6
|
|
Asset Purchase Agreement dated November 16, 2009, between Ampal Communication 2010 Ltd., the Registrant and Merhav Ampal Energy Ltd., as Guarantor (4)
|
|
|
|
4.7
|
|
English translation of Bezeq Control Permit issued by the Prime Minister of Israel and Israeli Minister of Communication to members of the Eurocom Group on April 13, 2010 (5)
|
|
|
|
4.8
|
|
English translation of Credit Agreement dated February 11, 2010 between B Communications (SP2) Ltd. and Bank Hapoalim Ltd. (as Lender, Facility Agent and Security Trustee), Bank Leumi le-Israel BM, Amitim (Senior Pension Funds), Israel Discount Bank Ltd., Mizrahi Tefahot Bank Ltd., HSBC Bank PLC, First International Bank of Israel Ltd. and Union Bank of Israel (as Lenders) (6)
|
|
|
|
4.9
|
|
English translation of Loan Agreement dated February 18, 2010, between B Communications (SP1) Ltd. and entities within the Migdal Insurance and Financial Holdings Ltd. group (7)
|
|
|
|
4.10
|
|
English translation of Addendum and Amendment No. 1 the Credit Agreement dated February 11, 2010, dated April 14, 2010, between B Communications (SP2) Ltd. and Bank Hapoalim Ltd. (as Lender, Facility Agent and Security Trustee), Bank Leumi le-Israel BM, Israel Discount Bank Ltd., Mizrahi Tefahot Bank Ltd., HSBC Bank PLC, First International Bank of Israel Ltd., Union Bank of Israel, Central Benefits Fund of Histadrut Employees Ltd. (under special management), Makefet Fund Pension and Provident Center - AS Ltd. Pension Fund, Makefet Fund Pension and Provident Center - AS Ltd. (under special management) – Other-Purpose Funds, Mivtachim The Workers Social Insurance Fund Ltd. (under special management) - Pension Fund, Mivtachim The Workers Social Insurance Fund Ltd. (under special management) Illness and Accident Provident Fund, Hadassa Employees Pension Fund Ltd. (under special management), “Egged” Members Pension Fund Ltd. (under special management) – Pension Track and “Egged” Members Pension Fund Ltd. (under special management) – Full Pension Track (as Lenders) (8)
|
4.11
|
|
English translation of Addendum and Amendment No. 2 the Credit Agreement dated February 11, 2010, dated June 26, 2011, between B Communications (SP2) Ltd. and Bank Hapoalim Ltd. (as Lender, Facility Agent and Security Trustee) and the Lenders (9)
|
|
|
|
4.12
|
|
English translation of Addendum and Amendment No. 1 the Loan Agreement dated February 18, 2010, dated April 14, 2010, between B Communications (SP1) Ltd. and entities within the Migdal Insurance and Financial Holdings Ltd. group (10)
|
|
|
|
4.13
|
|
2007 Equity Incentive Plan. (1)
|
|
|
|
4.14
|
|
English translation of Deed of Trust dated August 31, 2010 between the Registrant and Reznik, Paz, Nevo Trustees Ltd (11)
|
4.15
|
|
English translation of Addendum to the Deed of Trust of August 31, 2010 dated September 20, 2010 between the Registrant and Reznik, Paz, Nevo Trustees Ltd (12)
|
8.1
|
|
List of Subsidiaries of the Registrant
|
|
|
|
12.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
|
|
|
|
12.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act 1934, as amended
|
|
|
|
13.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
|
|
|
|
13.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
|
(1)
|
|
Filed as an exhibit to the Registrant’s Registration Statement on Form F-1, Registration Number 333-146645, filed with the Securities and Exchange Commission, and incorporated herein by reference.
|
(2)
|
|
Filed as Exhibit 4.4 to the Registrant’s Report on Form 20-F for the year ended December 31, 2009, and incorporated herein by reference
|
(3)
|
|
Filed as Exhibit 4.5 to the Registrant’s Report on Form 20-F for the year ended December 31, 2009, and incorporated herein by reference
|
(4)
|
|
Filed as Exhibit 99.2 to Registrant’s Report on Form 6-K for the month of May 2010 submitted to Securities and Exchange Commission on May 24, 2010, and incorporated herein by reference
|
(5)
|
|
Filed as Exhibit 4.7 to the Registrant’s Report on Form 20-F for the year ended December 31, 2009, and incorporated herein by reference
|
(6)
|
|
Filed as Exhibit 4.8 to the Registrant’s Report on Form 20-F for the year ended December 31, 2009, and incorporated herein by reference
|
(7)
|
|
Filed as Exhibit 4.9 to the Registrant’s Report on Form 20-F for the year ended December 31, 2009, and incorporated herein by reference
|
(8)
|
|
Filed as Exhibit 4.10 to the Registrant’s Report on Form 20-F for the year ended December 31, 2009, and incorporated herein by reference
|
(9)
|
|
Filed as Exhibit 4.11 to the Registrant’s Report on Form 20-F for the year ended December 31, 2010, and incorporated herein by reference
|
(10)
|
|
Filed as Exhibit 4.11 to the Registrant’s Report on Form 20-F for the year ended December 31, 2009, and incorporated herein by reference
|
(11)
|
|
Filed as Exhibit 4.14 to the Registrant’s Report on Form 20-F for the year ended December 31, 2010, and incorporated herein by reference
|
(12)
|
|
Filed as Exhibit 4.15 to the Registrant’s Report on Form 20-F for the year ended December 31, 2010, and incorporated herein by reference
|
Page
|
|
F-2
|
|
F-3
|
|
F-5
|
|
F-6
|
|
F-7
|
|
F-10
|
|
F-12
|
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
U.S. dollars
|
||||||||||||||||
December 31
|
(Note 2D)
|
|||||||||||||||
2011
|
2012
|
2012
|
||||||||||||||
Note
|
NIS
|
NIS
|
US$
|
|||||||||||||
Assets
|
||||||||||||||||
Cash and cash equivalents
|
7 | 1,369 | 757 | 203 | ||||||||||||
Investments, including derivative financial
instruments
|
8 | 1,284 | 1,484 | 398 | ||||||||||||
Trade receivables, net
|
9 | 3,059 | 2,927 | 784 | ||||||||||||
Other receivables
|
9 | 295 | 330 | 87 | ||||||||||||
Inventory
|
204 | 123 | 33 | |||||||||||||
Assets classified as held-for-sale
|
158 | 164 | 44 | |||||||||||||
Total current assets
|
6,369 | 5,785 | 1,549 | |||||||||||||
Investments, including derivative financial
instruments
|
8 | 119 | 90 | 24 | ||||||||||||
Long-term trade and other receivables
|
9 | 1,499 | 1,074 | 289 | ||||||||||||
Property, plant and equipment
|
10 | 7,143 | 6,911 | 1,852 | ||||||||||||
Intangible assets
|
11 | 8,085 | 7,252 | 1,943 | ||||||||||||
Deferred and other expenses
|
12 | 412 | 384 | 101 | ||||||||||||
Investment in equity-accounted investee
(mainly loans)
|
13 | 1,059 | 1,005 | 269 | ||||||||||||
Deferred tax assets
|
20 | 223 | 126 | 34 | ||||||||||||
Total non-current assets
|
18,540 | 16,842 | 4,512 | |||||||||||||
Total assets
|
24,909 | 22,627 | 6,061 |
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
U.S. dollars
|
||||||||||||||||
December 31
|
(Note 2D)
|
|||||||||||||||
2011
|
2012
|
2012
|
||||||||||||||
Note
|
NIS
|
NIS
|
US$
|
|||||||||||||
Liabilities
|
||||||||||||||||
Short-term bank credit, current maturities
|
||||||||||||||||
of long-term liabilities and debentures
|
14 | 1,185 | 1,582 | 424 | ||||||||||||
Trade payables
|
15 | 892 | 792 | 212 | ||||||||||||
Other payables, including derivative financial
instruments
|
15 | 840 | 734 | 196 | ||||||||||||
Dividend payable
|
13 | 669 | 669 | 179 | ||||||||||||
Current tax liabilities
|
499 | 588 | 158 | |||||||||||||
Provisions
|
16 | 186 | 145 | 39 | ||||||||||||
Employee benefits
|
19 | 389 | 258 | 69 | ||||||||||||
Total current liabilities
|
4,660 | 4,768 | 1,277 | |||||||||||||
Debentures
|
14 | 5,403 | 5,018 | 1,344 | ||||||||||||
Bank loans
|
14 | 6,843 | 6,422 | 1,720 | ||||||||||||
Loans from institutions and others
|
14 | 544 | 540 | 145 | ||||||||||||
Dividend payable
|
13 | 636 | - | - | ||||||||||||
Employee benefits
|
19 | 229 | 246 | 66 | ||||||||||||
Other liabilities
|
96 | 67 | 18 | |||||||||||||
Provisions
|
16 | 69 | 66 | 18 | ||||||||||||
Deferred tax liabilities
|
20 | 1,426 | 1,159 | 310 | ||||||||||||
Total non-current liabilities
|
15,246 | 13,518 | 3,621 | |||||||||||||
Total liabilities
|
19,906 | 18,286 | 4,898 | |||||||||||||
Equity
|
24 | |||||||||||||||
Share capital
|
3 | 3 | 1 | |||||||||||||
Share premium
|
1,057 | 1,057 | 283 | |||||||||||||
Treasury shares
|
(* | ) | (* | ) | (** | ) | ||||||||||
Other reserves
|
(87 | ) | (101 | ) | (27 | ) | ||||||||||
Retained earnings (accumulated deficit)
|
(37 | ) | 2 | 1 | ||||||||||||
Total equity attributable to equity holders
of the Company
|
936 | 961 | 258 | |||||||||||||
Non-controlling interests
|
4,067 | 3,380 | 905 | |||||||||||||
Total equity
|
5,003 | 4,341 | 1,163 | |||||||||||||
Total liabilities and equity
|
24,909 | 22,627 | 6,061 |
*
|
Represents an amount less than NIS 1.
|
**
|
Represents an amount less than US$ 1.
|
Convenience
|
||||||||||||||||||||
translation into
|
||||||||||||||||||||
U.S. dollars
|
||||||||||||||||||||
(Note 2D)
|
||||||||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||||||
Note
|
NIS
|
NIS
|
NIS
|
US$
|
||||||||||||||||
Revenues
|
25 | 8,657 | 11,373 | 10,278 | 2,753 | |||||||||||||||
Cost and expenses
|
||||||||||||||||||||
Depreciation and amortization
|
2,294 | 2,984 | 2,367 | 634 | ||||||||||||||||
Salaries
|
26 | 1,488 | 2,114 | 1,984 | 531 | |||||||||||||||
General and operating expenses
|
27 | 3,640 | 4,462 | 3,995 | 1,070 | |||||||||||||||
Other operating expenses (income),
net
|
28 | 5 | 326 | (11 | ) | (3 | ) | |||||||||||||
7,427 | 9,886 | 8,335 | 2,232 | |||||||||||||||||
Operating income
|
1,230 | 1,487 | 1,943 | 521 | ||||||||||||||||
Financing expenses (income)
|
||||||||||||||||||||
Finance expenses
|
600 | 983 | 915 | 245 | ||||||||||||||||
Finance income
|
(313 | ) | (485 | ) | (562 | ) | (151 | ) | ||||||||||||
Financing expenses, net
|
29 | 287 | 498 | 353 | 94 | |||||||||||||||
Income after financing
expenses, net
|
943 | 989 | 1,590 | 427 | ||||||||||||||||
Share of losses in
equity-accounted investee
|
13 | 235 | 216 | 245 | 66 | |||||||||||||||
Income before income tax
|
708 | 773 | 1,345 | 361 | ||||||||||||||||
Income tax
|
20 | 385 | 653 | 555 | 149 | |||||||||||||||
Net income for the year
|
323 | 120 | 790 | 212 | ||||||||||||||||
Income (loss) attributable to:
|
||||||||||||||||||||
Owners of the company
|
(140 | ) | (219 | ) | 45 | 12 | ||||||||||||||
Non-controlling interests
|
463 | 339 | 745 | 200 | ||||||||||||||||
Net income for the year
|
323 | 120 | 790 | 212 | ||||||||||||||||
Earnings per share
|
31 | |||||||||||||||||||
Basic income (loss) per share
|
(4.83 | ) | (7.34 | ) | 1.52 | 0.41 | ||||||||||||||
Diluted income (loss) per share
|
(4.93 | ) | (7.38 | ) | 1.49 | 0.40 |
Convenience
|
||||||||||||||||||||
translation into
|
||||||||||||||||||||
U.S. dollars
|
||||||||||||||||||||
(Note 2D)
|
||||||||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||||||
Note
|
NIS
|
NIS
|
NIS
|
US$
|
||||||||||||||||
Net income for the year
|
323 | 120 | 790 | 212 | ||||||||||||||||
Other comprehensive income
|
||||||||||||||||||||
Net change in fair value of
available-for-sale financial
|
||||||||||||||||||||
assets transferred to profit
or loss
|
(1 | ) | - | - | - | |||||||||||||||
Defined benefit plan actuarial
gains (losses), net
|
19 | 15 | 37 | (25 | ) | (7 | ) | |||||||||||||
Other items of comprehensive
income
|
- | 10 | (8 | ) | (2 | ) | ||||||||||||||
Income tax on other
comprehensive income
|
20 | (2 | ) | (12 | ) | 6 | 2 | |||||||||||||
Other comprehensive income
for the year, net of tax
|
12 | 35 | (27 | ) | (7 | ) | ||||||||||||||
Total comprehensive income
for the year
|
335 | 155 | 763 | 205 | ||||||||||||||||
Attributable to:
|
||||||||||||||||||||
Owners of the Company
|
(137 | ) | (207 | ) | 37 | 10 | ||||||||||||||
Non-controlling interests
|
472 | 362 | 726 | 195 | ||||||||||||||||
Total comprehensive income
for the year
|
335 | 155 | 763 | 205 |
Attributable to owners of the Company
|
||||||||||||||||||||||||||||||||||||
Share capital
|
||||||||||||||||||||||||||||||||||||
Non-
|
||||||||||||||||||||||||||||||||||||
Number of
|
Share
|
Treasury
|
Other
|
Retained
|
Controlling
|
Total
|
||||||||||||||||||||||||||||||
Shares
(1)
|
Amount
|
premium
|
Shares
|
reserves
(2)
|
earnings
|
Total
|
interests
|
equity
|
||||||||||||||||||||||||||||
NIS 0.1 par
|
||||||||||||||||||||||||||||||||||||
value
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
||||||||||||||||||||||||||||
Balance as at January 1, 2010
|
25,340,770 | 3 | 618 | (* | ) | 1 | 299 | 921 | - | 921 | ||||||||||||||||||||||||||
Changes during 2010:
|
||||||||||||||||||||||||||||||||||||
Exercise of options
|
1,100,000 | (* | ) | 40 | - | - | - | 40 | - | 40 | ||||||||||||||||||||||||||
Share-based compensation
|
- | - | - | - | - | 11 | 11 | - | 11 | |||||||||||||||||||||||||||
Share-based compensation in subsidiary
|
- | - | - | - | - | - | - | 52 | 52 | |||||||||||||||||||||||||||
Issuance of shares, net
|
3,448,275 | (* | ) | 399 | - | - | - | 399 | - | 399 | ||||||||||||||||||||||||||
Increase in the rate of holding in a
|
||||||||||||||||||||||||||||||||||||
subsidiary
|
- | - | - | - | (2 | ) | - | (2 | ) | (9 | ) | (11 | ) | |||||||||||||||||||||||
Non-controlling interests with
|
||||||||||||||||||||||||||||||||||||
respect to the acquisition of Bezeq
|
- | - | - | - | - | - | - | 9,118 | 9,118 | |||||||||||||||||||||||||||
Exercise of options in a subsidiary
|
- | - | - | - | (20 | ) | - | (20 | ) | 30 | 10 | |||||||||||||||||||||||||
Non-controlling interests with
|
||||||||||||||||||||||||||||||||||||
respect to other business
combination
|
- | - | - | - | - | - | - | 63 | 63 | |||||||||||||||||||||||||||
Dividends to non-controlling
interests
|
- | - | - | - | - | - | - | (2,597 | ) | (2,597 | ) | |||||||||||||||||||||||||
Transfers by non-controlling
interests
|
- | - | - | - | - | - | - | 2 | 2 | |||||||||||||||||||||||||||
Other comprehensive income, net of tax
|
- | - | - | - | (1 | ) | 4 | 3 | 9 | 12 | ||||||||||||||||||||||||||
Net income (loss) for the year
|
- | - | - | - | - | (140 | ) | (140 | ) | 463 | 323 | |||||||||||||||||||||||||
Comprehensive income (loss) for the year
|
- | - | - | - | (1 | ) | (136 | ) | (137 | ) | 472 | 335 | ||||||||||||||||||||||||
Balance as at December 31, 2010
|
29,889,045 | 3 | 1,057 | (* | ) | (22 | ) | 174 | 1,212 | 7,131 | 8,343 |
(1)
|
Net of treasury shares.
|
(2)
|
Including reserve from available-for-sale assets and reserve from transaction with non-controlling interest.
|
*
|
Represents an amount less than NIS 1.
|
Attributable to owners of the Company
|
||||||||||||||||||||||||||||||||||||
Share capital
|
||||||||||||||||||||||||||||||||||||
Retained
|
||||||||||||||||||||||||||||||||||||
earnings
|
Non-
|
|||||||||||||||||||||||||||||||||||
Number of
|
Share
|
Treasury
|
Other
|
(Accumulated
|
Controlling
|
Total
|
||||||||||||||||||||||||||||||
Shares
(1)
|
Amount
|
premium
|
Shares
|
reserves
(2)
|
deficit)
|
Total
|
interests
|
equity
|
||||||||||||||||||||||||||||
NIS 0.1 par
|
||||||||||||||||||||||||||||||||||||
value
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
||||||||||||||||||||||||||||
Balance as at January 1, 2011
|
29,889,045 | 3 | 1,057 | (* | ) | (22 | ) | 174 | 1,212 | 7,131 | 8,343 | |||||||||||||||||||||||||
Changes during 2011:
|
||||||||||||||||||||||||||||||||||||
Share-based compensation in subsidiary
|
- | - | - | - | - | - | - | 176 | 176 | |||||||||||||||||||||||||||
Increase in the rate of holding in a
|
||||||||||||||||||||||||||||||||||||
Transactions with non-controlling interests
|
- | - | - | - | (74 | ) | - | (74 | ) | (226 | ) | (300 | ) | |||||||||||||||||||||||
Exercise of options in a subsidiary
|
- | - | - | - | 5 | - | 5 | 16 | 21 | |||||||||||||||||||||||||||
Dividends to non-controlling interests
|
- | - | - | - | - | - | - | (3,392 | ) | (3,392 | ) | |||||||||||||||||||||||||
Other comprehensive income, net of tax
|
- | - | - | - | 4 | 8 | 12 | 23 | 35 | |||||||||||||||||||||||||||
Net income (loss) for the year
|
- | - | - | - | - | (219 | ) | (219 | ) | 339 | 120 | |||||||||||||||||||||||||
Comprehensive income (loss) for the year
|
- | - | - | - | 4 | (211 | ) | (207 | ) | 362 | 155 | |||||||||||||||||||||||||
Balance as at December 31, 2011
|
29,889,045 | 3 | 1,057 | (* | ) | (87 | ) | (37 | ) | 936 | 4,067 | 5,003 |
(1)
|
Net of treasury shares.
|
(2)
|
Including reserve from available-for-sale assets and reserve from transaction with non-controlling interest.
|
*
|
Represents an amount less than NIS 1.
|
Attributable to owners of the Company
|
||||||||||||||||||||||||||||||||||||||||
Share capital
|
Convenience
|
|||||||||||||||||||||||||||||||||||||||
Retained
|
translation
|
|||||||||||||||||||||||||||||||||||||||
earnings
|
Non-
|
into U.S.
|
||||||||||||||||||||||||||||||||||||||
Number of
|
Share
|
Treasury
|
Other
|
(Accumulated
|
Controlling
|
Total
|
dollars
|
|||||||||||||||||||||||||||||||||
Shares
(1)
|
Amount
|
premium
|
Shares
|
reserves
(2)
|
deficit)
|
Total
|
interests
|
equity
|
(Note 2D)
|
|||||||||||||||||||||||||||||||
NIS 0.1 par
|
||||||||||||||||||||||||||||||||||||||||
value
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||||||||||||||||||||
Balance as at January 1, 2012
|
29,889,045 | 3 | 1,057 | (* | ) | (87 | ) | (37 | ) | 936 | 4,067 | 5,003 | 1,340 | |||||||||||||||||||||||||||
Changes during 2012:
|
||||||||||||||||||||||||||||||||||||||||
Share-based compensation in subsidiary
|
- | - | - | - | - | - | - | 72 | 72 | 19 | ||||||||||||||||||||||||||||||
Acquisition of non-controlling interests
|
- | - | - | - | (10 | ) | - | (10 | ) | (67 | ) | (77 | ) | (21 | ) | |||||||||||||||||||||||||
Transactions with non-controlling interests
|
- | - | - | - | (3 | ) | - | (3 | ) | 10 | 7 | 2 | ||||||||||||||||||||||||||||
Exercise of options in a subsidiary
|
- | - | - | - | 1 | - | 1 | 7 | 8 | 2 | ||||||||||||||||||||||||||||||
Dividends to non-controlling interests
|
- | - | - | - | - | - | - | (1,431 | ) | (1,431 | ) | (383 | ) | |||||||||||||||||||||||||||
Distribution to non-controlling
|
||||||||||||||||||||||||||||||||||||||||
interests less their investment
in a subsidiary
|
- | - | - | - | - | - | - | (4 | ) | (4 | ) | (1 | ) | |||||||||||||||||||||||||||
Other comprehensive income, net of tax
|
- | - | - | - | (2 | ) | (6 | ) | (8 | ) | (19 | ) | (27 | ) | (7 | ) | ||||||||||||||||||||||||
Net income for the year
|
- | - | - | - | - | 45 | 45 | 745 | 790 | 212 | ||||||||||||||||||||||||||||||
Comprehensive income (loss) for the year
|
- | - | - | - | (2 | ) | 39 | 37 | 726 | 763 | 205 | |||||||||||||||||||||||||||||
Balance as at December 31, 2012
|
29,889,045 | 3 | 1,057 | (* | ) | (101 | ) | 2 | 961 | 3,380 | 4,341 | 1,163 |
(1)
|
Net of treasury shares.
|
(2)
|
Including reserve from available-for-sale assets and reserve from transaction with non-controlling interest.
|
*
|
Represents an amount less than NIS 1.
|
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
U.S. dollars
|
||||||||||||||||
(Note 2D)
|
||||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||
Cash flows from operating activities
|
||||||||||||||||
Net income for the year
|
323 | 120 | 790 | 212 | ||||||||||||
Adjustments:
|
||||||||||||||||
Depreciation and amortization
|
2,294 | 2,984 | 2,367 | 634 | ||||||||||||
Share of losses of equity accounted investees
|
235 | 216 | 245 | 66 | ||||||||||||
Finance expenses (income), net
|
321 | 579 | 494 | 132 | ||||||||||||
Capital loss (gain), net
|
(29 | ) | 6 | (26 | ) | (7 | ) | |||||||||
Share-based compensation
|
63 | 176 | 72 | 19 | ||||||||||||
Income tax expenses
|
385 | 653 | 555 | 149 | ||||||||||||
Income (expenses) from derivative financial
instruments, net
|
10 | (19 | ) | - | - | |||||||||||
Change in inventory
|
5 | (33 | ) | 74 | 20 | |||||||||||
Change in trade and other receivables
|
(126 | ) | (761 | ) | 505 | 135 | ||||||||||
Change in trade and other payables
|
71 | (156 | ) | (206 | ) | (55 | ) | |||||||||
Changes in provisions
|
(207 | ) | (64 | ) | (41 | ) | (11 | ) | ||||||||
Changes in employee benefits
|
(192 | ) | 82 | (140 | ) | (38 | ) | |||||||||
Change in deferred income
|
- | 50 | (31 | ) | (8 | ) | ||||||||||
Net income tax paid
|
(557 | ) | (649 | ) | (662 | ) | (177 | ) | ||||||||
Net cash provided by operating activities
|
2,596 | 3,184 | 3,996 | 1,071 | ||||||||||||
Cash flows from investing activities
|
||||||||||||||||
Bezeq acquisition, net of cash acquired
|
(5,344 | ) | - | - | - | |||||||||||
Acquisitions of other subsidiaries,
net of cash acquired
|
(144 | ) | - | - | - | |||||||||||
Purchase of property, plant and equipment
|
(998 | ) | (1,548 | ) | (1,271 | ) | (341 | ) | ||||||||
Investment in intangible assets and
deferred expenses
|
(254 | ) | (355 | ) | (269 | ) | (72 | ) | ||||||||
Proceeds from the sale of property, plant and equipment and
|
||||||||||||||||
refund from Ministry
of Communications
|
125 | 266 | 305 | 82 | ||||||||||||
Change in investments, net
|
(679 | ) | (463 | ) | (182 | ) | (49 | ) | ||||||||
Proceeds from sale of the Company's legacy
communication business
|
1,196 | - | - | - | ||||||||||||
Proceeds from disposal of investments
and long-term loans
|
8 | 11 | 100 | 27 | ||||||||||||
Other
|
17 | 41 | 44 | 12 | ||||||||||||
Net cash used in investing activities
|
(6,073 | ) | (2,048 | ) | (1,273 | ) | (341 | ) |
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
U.S. dollars
|
||||||||||||||||
(Note 2D)
|
||||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||
Cash flows from financing activities
|
||||||||||||||||
Loans received
|
7,725 | 2,200 | 650 | 174 | ||||||||||||
Proceeds from issuance of debentures, net
|
395 | 3,092 | 122 | 33 | ||||||||||||
Repayment of debentures and loans
|
(1,942 | ) | (2,342 | ) | (1,224 | ) | (328 | ) | ||||||||
Net short-term borrowing
|
(450 | ) | - | - | ||||||||||||
Interest paid
|
(346 | ) | (649 | ) | (697 | ) | (187 | ) | ||||||||
Dividends paid by Bezeq to non-
controlling interests
|
(2,597 | ) | (2,171 | ) | (2,119 | ) | (568 | ) | ||||||||
Transactions with non-controlling interests
|
(14 | ) | (300 | ) | (77 | ) | (21 | ) | ||||||||
Exercise of options
|
50 | - | - | - | ||||||||||||
Proceeds from issuance of shares, net
|
97 | - | - | - | ||||||||||||
Others
|
2 | 20 | 10 | 3 | ||||||||||||
Net cash provided by (used in) financing
activities
|
2,920 | (150 | ) | (3,335 | ) | (894 | ) | |||||||||
Net increase (decrease) in cash and
cash equivalents
|
(557 | ) | 986 | (612 | ) | (164 | ) | |||||||||
Cash and cash equivalents as at the
beginning of the year
|
940 | 383 | 1,369 | 367 | ||||||||||||
Cash and cash equivalents as at the
end of the year
|
383 | 1,369 | 757 | 203 |
A.
|
Statement of compliance
|
B.
|
Definitions
|
|
(1)
|
International Financial Reporting Standards (“IFRS”) – Standards and interpretations that were issued by the International Accounting Standards Board (“IASB”) and which include international financial reporting standards and international accounting standards (“IAS”), along with the interpretations to these standards of the International Financial Reporting Interpretations Committee (“IFRIC”) or interpretations of the Standing Interpretations Committee (“SIC”), respectively.
|
|
(2)
|
The Company: B Communications Ltd.
|
|
(3)
|
The Group: B Communications Ltd. and its subsidiaries, as listed in Note 13.B.
|
|
(4)
|
Parent company: Internet Gold - Golden Lines Ltd.
|
|
(5)
|
Bezeq: Bezeq The Israel Telecommunication Corporation Limited.
|
|
(6)
|
Bezeq Group: Bezeq The Israel Telecommunication Corporation Limited and its subsidiaries, as listed in Note 13 – Investees.
|
|
(7)
|
Pelephone: Pelephone Communications Ltd.
|
B.
|
Definitions (cont’d)
|
|
(8)
|
Subsidiaries: Companies including a partnership, whose financial statements are fully consolidated, directly or indirectly, with the financial statements of the Company.
|
|
(9)
|
Associates: Companies in which the Group’s investment is included, directly or indirectly, in the consolidated financial statements on an equity basis, including DBS Satellite Services (1998) Ltd (“DBS”). and other associates that are immaterial.
|
(11)
|
Investees: Subsidiaries, Jointly-controlled companies or associates.
|
|
(12)
|
Related party - As defined in IAS 24 (2009), Related Party Disclosures.
|
(13)
|
Israeli CPI - The consumer price index as published by the Israeli Central Bureau of Statistics.
|
|
C.
|
Functional currency and presentation currency
|
|
D.
|
Convenience translation into U.S. dollars (“dollars” or “$”)
|
|
For the convenience of the reader, the reported NIS figures as at December 31, 2012, have been presented in dollars, translated at the representative rate of exchange as at December 31, 2012 (NIS 3.733 = US$ 1.00). The dollar amounts presented in these financial statements are merely supplementary information and should not be construed as complying with IFRS translation method or as representing amounts that are receivable or payable in dollars or convertible into dollars, unless otherwise indicated.
|
|
E.
|
Basis of measurement
|
|
The consolidated financial statements have been prepared on the historical cost basis except for the following items:
|
|
*
|
Financial instruments, including financial derivative instruments, at fair value recognized through profit or loss.
|
|
*
|
Financial assets classified as available-for-sale at fair value.
|
|
*
|
Inventory measured at the lower of cost or net realizable value.
|
|
*
|
Equity-accounted investments.
|
|
*
|
Deferred tax assets and liabilities.
|
|
*
|
Provisions.
|
|
*
|
Liabilities for employee benefits.
|
|
*
|
Liabilities for cash-settled share-based payment arrangements.
|
|
F.
|
Operating cycle
|
|
G.
|
Classification of expenses recognized in the statement of income
|
|
H.
|
Use of estimates and judgment
|
|
The preparation of financial statements in conformity with IFRS requires management to make judgments and use estimates and assumptions that affect application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
|
|
H.
|
Use of estimates and judgment (cont'd)
|
|
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
|
|
Significant estimates and judgments made when applying accounting policies and changes in these estimates and assumptions that could potentially have a material effect on the financial statements are as follows:
|
|
H.
|
Use of estimates and judgment (cont'd)
|
Subject
|
Main assumptions
|
Possible implications
|
Reference
|
Provision for doubtful debts
|
Assessment of the risk of non-collection of trade receivables
|
Recognition or reversal of doubtful debt expense and recognition of lost debt expense
|
Note 18
|
Post-employment employee benefits
|
Actuarial assumptions such as discount rate, future salary increases and churn rate
|
Increase or decrease in the post-employment defined benefit obligation
|
Note 19
|
Indications of investment impairment in an equity-accounted investee
|
There are no indications of impairment.
|
Recognition of loss from investment Impairment in an investee
|
Note 13
|
|
I.
|
Certain insignificant comparative amounts were reclassified to the relevant line items in the financial statements for the current year.
|
|
A.
|
Consolidation of the financial statements and investments in associates
|
|
(1)
|
Business combinations
|
|
A.
|
Consolidation of the financial statements and investments in associates (cont’d)
|
|
(1)
|
Business combinations (cont’d)
|
|
(2)
|
Transactions eliminated on consolidation
|
|
(3)
|
Non-controlling interests
|
(4)
|
Put option granted to non-controlling shareholders
|
|
A.
|
Consolidation of the financial statements and investments in associates (cont’d)
|
(5)
|
Associates (accounted for by the equity method)
|
|
|
B.
|
Foreign currency transactions
|
|
C.
|
Financial instruments
|
|
(1)
|
Non-derivative financial assets
|
|
a.
|
Initial recognition of financial assets
|
|
C.
|
Financial instruments (cont'd)
|
|
(1)
|
Non-derivative financial assets (cont'd)
|
|
b.
|
Derecognition of financial assets
|
|
c.
|
Classification of financial assets and the accounting treatment in each group
|
|
C.
|
Financial instruments (cont'd)
|
|
(2)
|
Non-derivative financial liabilities
|
|
a.
|
Initial recognition of financial liabilities
|
|
b.
|
Derecognition of financial liabilities
|
|
(3)
|
Offsetting financial instruments
|
|
(4)
|
CPI-linked assets and liabilities that are not measured at fair value
|
|
(5)
|
Derivative financial instruments including hedge accounting
|
|
a.
|
Hedge accounting
|
|
C.
|
Financial instruments (cont'd)
|
|
(5)
|
Derivative financial instruments including hedge accounting (cont’d)
|
|
a.
|
Hedge accounting (cont’d)
|
|
b.
|
Economic hedges
|
|
(6)
|
Share capital
|
a.
|
Ordinary shares
|
|
C.
|
Financial instruments (cont'd)
|
|
(6)
|
Share capital (cont’d)
|
|
b.
|
Treasury shares
|
|
D.
|
Property, plant and equipment
|
|
(1)
|
Recognition and measurement
|
|
(2)
|
Subsequent expenditure
|
|
(3)
|
Capitalization of borrowing costs
|
|
D.
|
Property, plant and equipment (cont'd)
|
|
(4)
|
Depreciation
|
Years
|
Principal depreciation rate (%)
|
||
NGN equipment
|
8
|
13
|
|
Transmission and power equipment
|
5-10
|
10
|
|
Network equipment
|
8-25
|
4
|
|
Subscriber equipment and installations
|
3-7
|
25
|
|
Motor vehicles
|
6-7
|
17
|
|
Internet equipment
|
4
|
25
|
|
Office equipment
|
5-14
|
10
|
|
Electronic equipment, computers and internal
|
|||
communication systems
|
3-7
|
20
|
|
Cellular network
|
4-10
|
14
|
|
Buildings
|
25
|
4
|
|
Submarine communications cable
|
4-25
|
4
|
|
E.
|
Non-current assets held for sale
|
|
F.
|
Intangible assets
|
|
(1)
|
Goodwill and brand name
|
|
(2)
|
Software development costs
|
|
(3)
|
Software
|
|
(4)
|
Rights to frequencies
|
|
(5)
|
Other intangible assets
|
|
(6)
|
Subsequent expenditure
|
|
F.
|
Intangible assets (cont’d)
|
|
(7)
|
Amortization
|
Type of asset
|
Amortization period
|
|
Development expenses
|
4 - 7 years
|
|
Other rights
|
3 - 10 years, depending on the useful life
|
|
Frequency usage right
|
Over the term of the license for 13 years starting from the use of the frequencies
|
|
Computer programs and software licenses
|
Over the term of the license or the estimated time of use of the program
|
|
Customer relationships
|
10 years
|
|
G.
|
Leased assets
|
|
G.
|
Leased assets (cont’d)
|
|
H.
|
Right of use of capacities
|
|
I.
|
Inventory
|
|
J.
|
Impairment
|
|
(1)
|
Non-derivative financial assets
|
|
J.
|
Impairment (cont'd)
|
|
|
(2)
|
Non-financial assets
|
|
J.
|
Impairment (cont'd)
|
|
(3)
|
Investments in equity-accounted investees
|
|
K.
|
Employee benefits
|
|
(1)
|
Post-employment benefits
|
|
a.
|
Defined contribution plans
|
|
b.
|
Defined benefit plans
|
|
K.
|
Employee benefits (cont'd)
|
|
(2)
|
Other long-term employee benefits
|
|
(3)
|
Benefits for early retirement and dismissal
|
|
(4)
|
Short-term benefits
|
|
(5)
|
Share-based payments
|
|
L.
|
Provisions
|
|
(1)
|
Legal claims
|
|
a.
|
More likely than not – more than 50% probability
|
|
b.
|
Possible – probability higher than unlikely and less than 50%
|
|
c.
|
Unlikely – probability of 10% or less
|
|
(2)
|
Site dismantling and clearing costs
|
|
(3)
|
Warranty
|
|
M.
|
Revenues
|
|
(1)
|
Equipment sales
|
(2)
|
Revenues from services
|
|
(3)
|
Multi-component sales agreements
|
|
(4)
|
Reporting gross or net revenues
|
N.
|
Financing income and expense
|
O.
|
Income tax expense
|
|
•
|
Initial recognition of goodwill.
|
|
•
|
Initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit.
|
|
•
|
Carry-forward losses that are not expected to be utilized in the foreseeable future.
|
|
•
|
Differences arising from investment in subsidiaries and associates, if it is probable that they will not reverse in the foreseeable future and if the Group controls the date of reversal.
|
O.
|
Income tax expense (cont'd)
|
P.
|
Earnings per share
|
Q.
|
Dividend
|
R.
|
New standards and interpretations not yet adopted
|
|
(1)
|
The Group will apply the following standards and amendments ("the New Standards") as from January 1, 2013:
|
|
a.
|
A new suite of accounting standards:
Consolidation of Financial Statements
(IFRS 10),
Joint Arrangements
(IFRS 11) and
Disclosure of Involvement with Other Entities
(IFRS 12).
|
|
b.
|
IFRS 13,
Fair Value Measurement
.
|
|
c.
|
Amendment to IAS 19,
Employee Benefits
.
|
|
d.
|
Amendment to IFRS 7
Financial Instruments: Disclosure, Transfers of Financial Assets and Liabilities
.
|
|
(2)
|
Amendment to IAS 32,
Financial Instruments: Presentation
|
|
(3)
|
IFRS 9 (2010),
Financial Instruments
|
|
A.
|
Investment in securities
|
|
B.
|
Trade receivables
|
|
C.
|
Derivative financial instruments
|
|
D.
|
Property, plant and equipment
|
|
E.
|
Intangible assets
|
|
F.
|
Non-derivative financial liabilities
|
|
G.
|
Share-based payment transactions
|
-
|
Bezeq The Israel Telecommunication Corp. Ltd.: fixed line domestic communications
|
-
|
Pelephone Communications Ltd.: cellular communications
|
|
-
|
Bezeq International Ltd.: international communications, internet services and network end point
|
-
|
DBS Satellite Services (1998) Ltd.: multichannel television
|
A.
|
Operating Segments
|
Year ended December 31, 2010
|
||||||||||||||||||||||||||||
Domestic
fixed–line communications
|
Cellular communications
|
International communications and Internet services
|
Multi-channel television
|
Others
|
Adjustments
|
Consolidated
|
||||||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
||||||||||||||||||||||
Revenue from external entities
|
3,581 | 3,957 | 949 | 1,187 | 162 | (1,187 | ) | 8,649 | ||||||||||||||||||||
Inter-segment revenues
|
195 | 186 | 38 | 5 | 26 | (442 | ) | 8 | ||||||||||||||||||||
Total revenue
|
3,776 | 4,143 | 987 | 1,192 | 188 | (1,629 | ) | 8,657 | ||||||||||||||||||||
Depreciation and amortization
|
496 | 431 | 68 | 221 | 14 | 1,064 | 2,294 | |||||||||||||||||||||
Segment results - operating income
|
1,486 | 1,015 | 248 | 119 | 13 | (1,651 | ) | 1,230 | ||||||||||||||||||||
Finance income
|
140 | 67 | 5 | - | - | 101 | 313 | |||||||||||||||||||||
Finance expenses
|
(229 | ) | (101 | ) | (9 | ) | (424 | ) | (3 | ) | 166 | (600 | ) | |||||||||||||||
Total finance income (expense), net
|
(89 | ) | (34 | ) | (4 | ) | (424 | ) | (3 | ) | 267 | (287 | ) | |||||||||||||||
Segment profit (loss) after finance expenses, net
|
1,397 | 981 | 244 | (305 | ) | 10 | (1,384 | ) | 943 | |||||||||||||||||||
Share in losses of equity-accounted investee
|
- | - | 5 | - | - | (240 | ) | (235 | ) | |||||||||||||||||||
Segment profit (loss) before income tax
|
1,397 | 981 | 249 | (305 | ) | 10 | (1,624 | ) | 708 | |||||||||||||||||||
Income tax
|
379 | 241 | 47 | 1 | 4 | (287 | ) | 385 | ||||||||||||||||||||
Segment results - net profit (loss)
|
1,018 | 740 | 202 | (306 | ) | 6 | (1,337 | ) | 323 |
A.
|
Operating Segments (cont’d)
|
Year ended December 31, 2011
|
||||||||||||||||||||||||||||
Domestic
fixed–line communications
|
Cellular communications
|
International communications and Internet services
|
Multi-channel television
|
Others
|
Adjustments
|
Consolidated
|
||||||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
||||||||||||||||||||||
Revenue from external entities
|
4,371 | 5,454 | 1,288 | 1,619 | 236 | (1,619 | ) | 11,349 | ||||||||||||||||||||
Inter-segment revenues
|
277 | 94 | 66 | - | 41 | (454 | ) | 24 | ||||||||||||||||||||
Total revenue
|
4,648 | 5,548 | 1,354 | 1,619 | 277 | (2,073 | ) | 11,373 | ||||||||||||||||||||
Depreciation and amortization
|
688 | 561 | 109 | 276 | 21 | 1,329 | 2,984 | |||||||||||||||||||||
Segment results - operating income
|
1,695 | 1,360 | 241 | 295 | 3 | (2,107 | ) | 1,487 | ||||||||||||||||||||
Finance income
|
304 | 105 | 9 | 23 | - | 44 | 485 | |||||||||||||||||||||
Finance expenses
|
(531 | ) | (67 | ) | (11 | ) | (547 | ) | (5 | ) | 178 | (983 | ) | |||||||||||||||
Total finance income (expense), net
|
(227 | ) | 38 | (2 | ) | (524 | ) | (5 | ) | 222 | (498 | ) | ||||||||||||||||
Segment profit (loss) after finance expenses, net
|
1,468 | 1,398 | 239 | (229 | ) | (2 | ) | (1,885 | ) | 989 | ||||||||||||||||||
Share in losses of equity-accounted investee
|
- | - | 1 | - | - | (217 | ) | (216 | ) | |||||||||||||||||||
Segment profit (loss) before income tax
|
1,468 | 1,398 | 240 | (229 | ) | (2 | ) | (2,102 | ) | 773 | ||||||||||||||||||
Income tax
|
366 | 342 | 58 | 1 | 4 | (118 | ) | 653 | ||||||||||||||||||||
Segment results - net profit (loss)
|
1,102 | 1,056 | 182 | (230 | ) | (6 | ) | (1,984 | ) | 120 | ||||||||||||||||||
Additional information:
|
||||||||||||||||||||||||||||
Segment assets
|
9,202 | 5,404 | 1,260 | 1,282 | 314 | 3,552 | 21,014 | |||||||||||||||||||||
Goodwill
|
- | - | 6 | - | 87 | 2,743 | 2,836 | |||||||||||||||||||||
Investment in equity-accounted investee
|
- | - | 2 | - | - | 1,057 | 1,059 | |||||||||||||||||||||
Segment liabilities
|
13,529 | 2,255 | 439 | 4,932 | 272 | (1,521 | ) | 19,906 | ||||||||||||||||||||
Investments in property, plant and
equipment and intangible assets
|
1,174 | 442 | 285 | - | 38 | - | 1,939 |
A.
|
Operating Segments (cont’d)
|
Year ended December 31, 2012
|
||||||||||||||||||||||||||||||||
Domestic
fixed–line communications
|
Cellular communications
|
International communications and Internet services
|
Multi-channel television
|
Others
|
Adjustments
|
Consolidated
|
Convenience translation into
US$ (Note 2D)
|
|||||||||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||||||||||||||
Revenue from external entities
|
4,339 | 4,371 | 1,286 | 1,636 | 256 | (1,636 | ) | 10,252 | 2,746 | |||||||||||||||||||||||
Inter-segment revenues
|
291 | 97 | 54 | - | 36 | (452 | ) | 26 | 7 | |||||||||||||||||||||||
Total revenue
|
4,630 | 4,468 | 1,340 | 1,636 | 292 | (2,088 | ) | 10,278 | 2,753 | |||||||||||||||||||||||
Depreciation and amortization
|
730 | 531 | 136 | 248 | 25 | 697 | 2,367 | 634 | ||||||||||||||||||||||||
Segment results - operating income
|
1,923 | 892 | 219 | 253 | (13 | ) | (1,331 | ) | 1,943 | 521 | ||||||||||||||||||||||
Finance income
|
312 | 146 | 10 | 2 | - | 92 | 562 | 151 | ||||||||||||||||||||||||
Finance expenses
|
(579 | ) | (101 | ) | (18 | ) | (563 | ) | (7 | ) | 353 | (915 | ) | (245 | ) | |||||||||||||||||
Total finance income (expense), net
|
(267 | ) | 45 | (8 | ) | (561 | ) | (7 | ) | 445 | (353 | ) | (94 | ) | ||||||||||||||||||
Segment profit (loss) after finance expenses, net
|
1,656 | 937 | 211 | (308 | ) | (20 | ) | (886 | ) | 1,590 | 427 | |||||||||||||||||||||
Share in losses of equity-accounted investee
|
- | - | 1 | - | - | (246 | ) | (245 | ) | (66 | ) | |||||||||||||||||||||
Segment profit (loss) before income tax
|
1,656 | 937 | 212 | (308 | ) | (20 | ) | (1,132 | ) | 1,345 | 361 | |||||||||||||||||||||
Income tax
|
462 | 239 | 52 | 2 | (3 | ) | (197 | ) | 555 | 149 | ||||||||||||||||||||||
Segment results - net profit (loss)
|
1,194 | 698 | 160 | (310 | ) | (17 | ) | (935 | ) | 790 | 212 | |||||||||||||||||||||
Additional information:
|
||||||||||||||||||||||||||||||||
Segment assets
|
8,096 | 4,704 | 1,251 | 1,387 | 288 | 3,060 | 18,786 | 5,032 | ||||||||||||||||||||||||
Goodwill
|
- | - | 6 | - | 87 | 2,743 | 2,836 | 760 | ||||||||||||||||||||||||
Investment in equity-accounted investee
|
- | - | 2 | - | - | 1,003 | 1,005 | 269 | ||||||||||||||||||||||||
Segment liabilities
|
11,690 | 1,735 | 436 | 5,349 | 258 | (1,182 | ) | 18,286 | 4,898 | |||||||||||||||||||||||
Investments in property, plant and
|
||||||||||||||||||||||||||||||||
equipment and intangible assets
|
945 | 397 | 169 | 324 | 32 | (324 | ) | 1,543 | 413 |
B.
|
Adjustments for segment reporting of revenue, profit or loss, assets and liabilities
|
B.
|
Adjustments for segment reporting of revenue, profit or loss, assets and liabilities (cont'd)
|
December 31,
|
Convenience translation into
US$ (Note 2D)
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
Assets
|
||||||||||||
Assets from reporting segments
|
17,156 | 15,446 | 4,138 | |||||||||
Assets attributable to operations in other categories
|
401 | 375 | 100 | |||||||||
Goodwill not attributable to segment assets
|
2,743 | 2,743 | 735 | |||||||||
Investment in an equity-accounted investee (mainly loans)
|
||||||||||||
reported as a segment
|
1,057 | 1,003 | 269 | |||||||||
Cancellation of assets for a segment classified as an associate
|
(1,282 | ) | (1,387 | ) | (372 | ) | ||||||
Inter-segment assets
|
(1,091 | ) | (761 | ) | (204 | ) | ||||||
Assets resulting from the Bezeq PPA, net
|
5,561 | 4,506 | 1,207 | |||||||||
Assets attributable to a non-reportable segment
|
364 | 702 | 188 | |||||||||
Consolidated assets
|
24,909 | 22,627 | 6,061 |
December 31,
|
Convenience translation into
US$ (Note 2D)
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
Liabilities
|
||||||||||||
Liabilities from reporting segments
|
21,155 | 19,210 | 5,146 | |||||||||
Liabilities attributable to operations in other categories
|
272 | 258 | 69 | |||||||||
Cancellation of liabilities for a segment classified as an associate
|
(4,932 | ) | (5,349 | ) | (1,433 | ) | ||||||
Inter-segment liabilities
|
(1,889 | ) | (820 | ) | (220 | ) | ||||||
Liabilities resulting from the Bezeq PPA, net
|
1,488 | 1,189 | 318 | |||||||||
Liabilities attributable to a non-reportable segment
|
4,401 | 4,098 | 1,098 | |||||||||
Other adjustments
|
(589 | ) | (300 | ) | (80 | ) | ||||||
Consolidated liabilities
|
19,906 | 18,286 | 4,898 |
Convenience
|
||||||||||||
translation into
|
||||||||||||
December 31
|
US$ (Note 2D)
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
Current investments
|
||||||||||||
Financial assets held for trading
|
1,253 | 1,365 | 366 | |||||||||
Bank deposits
|
- | 105 | 28 | |||||||||
Derivative instruments and other investments
|
31 | 14 | 4 | |||||||||
1,284 | 1,484 | 398 |
A.
|
Composition of trade and other receivables
|
Convenience
|
||||||||||||
translation into
|
||||||||||||
December 31
|
US$ (Note 2D)
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
Trade receivables, net
|
||||||||||||
Outstanding debts
|
827 | 847 | 227 | |||||||||
Credit cards and checks receivable
|
418 | 422 | 113 | |||||||||
Unbilled receivables
|
307 | 305 | 82 | |||||||||
Current maturities of long-term receivables
|
1,439 | 1,331 | 356 | |||||||||
Related parties
|
68 | 22 | 6 | |||||||||
Total trade receivables
|
3,059 | 2,927 | 784 | |||||||||
Other receivables and current tax assets
|
||||||||||||
Prepaid expenses
|
70 | 110 | 29 | |||||||||
Other receivables
|
221 | 218 | 57 | |||||||||
Related parties
|
4 | 2 | 1 | |||||||||
Total other receivables
|
295 | 330 | 87 | |||||||||
Long-term trade and other receivables
|
||||||||||||
Trade receivables – open debts (1)
|
1,439 | 992 | 267 | |||||||||
Trade receivables – associate
|
12 | 34 | 9 | |||||||||
Long term receivables (from real estate sales)
|
48 | 48 | 13 | |||||||||
1,499 | 1,074 | 289 | ||||||||||
4,853 | 4,331 | 1,160 |
|
(1)
|
Discount rate is based on the total average cost of unlinked credit provided by the seven large banks in Israel, as published by the Bank of Israel once a month. The interest rates used by the Bezeq Group for capitalization in 2012 are 5.41%-6.15% (in 2011: 5.04 – 6.28%).
|
B.
|
Change in provision for doubtful debts during the year
|
Convenience
|
||||||||||||
translation into
|
||||||||||||
December 31
|
US$ (Note 2D)
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
Balance at January 1
|
44 | 85 | 23 | |||||||||
Impaired loss recognized
|
68 | 51 | 14 | |||||||||
Lost debts
|
(27 | ) | (37 | ) | (10 | ) | ||||||
Balance at December 31
|
85 | 99 | 27 |
|
C.
|
From time to time, Pelephone factors trade receivables derived from the sale of equipment that are paid for in credit card installments, without the right of return. The assets qualify for de-recognition in accordance with the criteria in IAS 39. During the period, Pelephone factored NIS 165 (gross undiscounted amount).
|
Switching
|
||||||||||||||||||||||||||||
transmission,
|
Office
|
Convenience
|
||||||||||||||||||||||||||
power, cellular
|
equipment,
|
translation
|
||||||||||||||||||||||||||
Land and
|
and satellite
|
Network
|
Subscriber
|
computers and
|
Into US$
|
|||||||||||||||||||||||
buildings
|
equipment
|
equipment
|
equipment
|
vehicles
|
Total
|
(Note 2D)
|
||||||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
US$
|
||||||||||||||||||||||
Cost
|
||||||||||||||||||||||||||||
Balance as at January 1,
2011
|
1,190 | 2,748 | 3,610 | 363 | 548 | 8,459 | ||||||||||||||||||||||
Additions
|
86 | 533 | 634 | 155 | 177 | 1,585 | ||||||||||||||||||||||
Disposals
|
(72 | ) | (2 | ) | (122 | ) | (9 | ) | - | (205 | ) | |||||||||||||||||
Transfer to assets held for sale
|
(47 | ) | - | - | - | - | (47 | ) | ||||||||||||||||||||
Balance as at December 31, 2011
|
1,157 | 3,279 | 4,122 | 509 | 725 | 9,792 | ||||||||||||||||||||||
Balance as at January 1,
2012
|
1,157 | 3,279 | 4,122 | 509 | 725 | 9,792 | 2,623 | |||||||||||||||||||||
Additions
|
58 | 508 | 473 | 150 | 97 | 1,286 | 344 | |||||||||||||||||||||
Disposals
|
(10 | ) | (79 | ) | (85 | ) | (11 | ) | (11 | ) | (196 | ) | (53 | ) | ||||||||||||||
Transfer to assets held for sale
|
(88 | ) | - | - | - | - | (88 | ) | (22 | ) | ||||||||||||||||||
Balance as at December 31, 2012
|
1,117 | 3,708 | 4,510 | 648 | 811 | 10,794 | 2,892 | |||||||||||||||||||||
Depreciation and impairment losses
|
||||||||||||||||||||||||||||
Balance as at January 1, 2011
|
60 | 283 | 599 | 37 | 88 | 1,067 | ||||||||||||||||||||||
Depreciation for the year
|
52 | 428 | 776 | 138 | 188 | 1,582 | ||||||||||||||||||||||
Balance as at December 31, 2011
|
112 | 711 | 1,375 | 175 | 276 | 2,649 | ||||||||||||||||||||||
Balance as at January 1, 2012
|
112 | 711 | 1,375 | 175 | 276 | 2,649 | 709 | |||||||||||||||||||||
Depreciation for the year
|
74 | 551 | 416 | 126 | 138 | 1,305 | 350 | |||||||||||||||||||||
Disposals
|
(1 | ) | (42 | ) | (10 | ) | (4 | ) | (4 | ) | (61 | ) | (16 | ) | ||||||||||||||
Transfer to assets held for sale
|
(10 | ) | - | - | - | - | (10 | ) | (3 | ) | ||||||||||||||||||
Balance as at December 31, 2012
|
175 | 1,220 | 1,781 | 297 | 410 | 3,883 | 1,040 | |||||||||||||||||||||
Carrying amounts
|
||||||||||||||||||||||||||||
As at December 31, 2011
|
1,045 | 2,568 | 2,747 | 334 | 449 | 7,143 | ||||||||||||||||||||||
As at December 31, 2012
|
942 | 2,488 | 2,729 | 351 | 401 | 6,911 | 1,852 |
|
A.
|
The residual value of the Bezeq Group’s copper cables is assessed at the end of each reporting period. The residual value is NIS 469 and NIS 359 as at December 31, 2011 and December 31, 2012, respectively. The change in the residual value is not expected to have a material effect on future depreciation expenses.
|
|
B.
|
Bezeq Group companies reviewed the useful life of the property, plant and equipment through the depreciation committee, in order to determine the estimated useful life of their equipment. Following the findings of the committees, minor changes were made in the estimated useful life of certain assets.
|
|
C.
|
Most of the real estate assets used by Bezeq are leased under a capitalized finance lease from the Israel Lands Administration for 49 years beginning as of 1993, with an option for an extension of another 49 years. The lease rights are amortized over the term of the lease period.
|
|
D.
|
At the reporting date, there are commitments to purchase property, plant and equipment in the amount of NIS 128.
|
|
E.
|
In accordance with the Telecommunications Order (Telecommunications and Broadcasts) (Determination of Essential Service Provided by Bezeq The Israel Telecommunication Corp. Ltd.), 1997, approval from the Minister of Communications is required to confer rights in some of the Bezeq's assets (switches, cable network, transmission network, and information and databases.
|
|
F.
|
In accordance with its cellular license, Pelephone is not permitted to sell, lease or pledge any of its assets used for the implementation of the license, without the consent of the Minister of Communications, except for:
|
|
(1)
|
A pledge on one of the license assets in favor of a bank operating lawfully in Israel, to receive bank credit, provided that it submitted notice to the Ministry of Communications regarding the pledge it intends to register, noting that the pledge agreement includes a clause ensuring that in any event, exercise of the rights by the bank will not impair, in any way, the services provided under the license.
|
|
(2)
|
Sale of items of equipment when implementing an upgrade, including sale of equipment by the trade-in method.
|
|
G.
|
For information about liens for loans and borrowings, see Note 14.
|
Subscribers
|
Convenience
|
|||||||||||||||||||||||||||||||
acquisition
|
translation
|
|||||||||||||||||||||||||||||||
Customer
|
Computer
|
costs and |
into US$
|
|||||||||||||||||||||||||||||
Goodwill
|
relationships
|
Brand name
|
software
|
Licenses
|
other
|
Total
|
(Note 2D)
|
|||||||||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||||||||||||||
Cost
|
||||||||||||||||||||||||||||||||
Balance as at January 1, 2011
|
2,833 | 5,163 | 1,310 | 561 | 387 | 118 | 10,372 | |||||||||||||||||||||||||
Acquisitions or additions from
|
||||||||||||||||||||||||||||||||
independent development
|
3 | - | - | 247 | - | 82 | 332 | |||||||||||||||||||||||||
Disposals
|
- | - | - | - | (36 | ) | (1 | ) | (37 | ) | ||||||||||||||||||||||
Balance as at December 31, 2011
|
2,836 | 5,163 | 1,310 | 808 | 351 | 199 | 10,667 | |||||||||||||||||||||||||
Balance as at January 1, 2012
|
2,836 | 5,163 | 1,310 | 808 | 351 | 199 | 10,667 | 2,857 | ||||||||||||||||||||||||
Acquisitions or additions from
|
||||||||||||||||||||||||||||||||
independent development
|
- | - | - | 227 | - | 35 | 262 | 70 | ||||||||||||||||||||||||
Disposals
|
- | - | - | (54 | ) | - | - | (54 | ) | (14 | ) | |||||||||||||||||||||
Balance as at December 31, 2012
|
2,836 | 5,163 | 1,310 | 981 | 351 | 234 | 10,875 | 2,913 | ||||||||||||||||||||||||
Amortization and impairment losses
|
||||||||||||||||||||||||||||||||
Balance as at January 1, 2011
|
- | 996 | 6 | 125 | 23 | 59 | 1,209 | |||||||||||||||||||||||||
Amortization for the year
|
- | 1,066 | 12 | 182 | 30 | 83 | 1,373 | |||||||||||||||||||||||||
Balance as at December 31, 2011
|
- | 2,062 | 18 | 307 | 53 | 142 | 2,582 | |||||||||||||||||||||||||
Balance as at January 1, 2012
|
- | 2,062 | 18 | 307 | 53 | 142 | 2,582 | 692 | ||||||||||||||||||||||||
Amortization for the year
|
- | 756 | 12 | 191 | 28 | 54 | 1,041 | 278 | ||||||||||||||||||||||||
Balance as at December 31, 2012
|
- | 2,818 | 30 | 498 | 81 | 196 | 3,623 | 970 | ||||||||||||||||||||||||
Carrying amounts
|
||||||||||||||||||||||||||||||||
As at December 31, 2011
|
2,836 | 3,101 | 1,292 | 501 | 298 | 57 | 8,085 | |||||||||||||||||||||||||
As at December 31, 2012
|
2,836 | 2,345 | 1,280 | 483 | 270 | 38 | 7,252 | 1,943 |
Convenience
|
||||||||||||
translation
|
||||||||||||
into US$
|
||||||||||||
December 31
|
(Note 2D)
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
International communications and
|
||||||||||||
internet services
|
181 | 181 | 48 | |||||||||
Domestic fixed-line communications
|
1,283 | 1,283 | 344 | |||||||||
Cellular telephone
|
1,217 | 1,217 | 326 | |||||||||
Others
|
155 | 155 | 42 | |||||||||
Total
|
2,836 | 2,836 | 760 |
|
—
|
Cash flows were projected based on actual operating results and additional information received from Bezeq's management upon request, and assumptions regarding changes in revenue mix (traditional telephony and internet) and investments required. The anticipated annual revenue growth included in the cash flow projections varied from approximately minus 7% to approximately minus 1% for the years 2013 to 2017.
|
|
—
|
A pre-tax discount rate of about 13.8% (equivalent to a post-tax discount rate of 10.5%) was applied in determining the recoverable amount of the CGU.
|
|
—
|
The terminal year's anticipated annual revenue growth included in the cash flow projections was 1%.
|
2012
|
||||
%
|
||||
Post-tax discount rate
|
11.1 | |||
Terminal year's anticipated annual
|
||||
revenue growth
|
0.2 |
|
—
|
Cash flows were projected based on actual operating results and additional information received from Pelephone's management upon request, and assumptions regarding changes in revenue mix (income from services and from end user devises) and investments required. The anticipated annual revenue growth included in the cash flow projections varied from approximately minus 6% to approximately a positive 2% for the years 2013 to 2017.
|
|
—
|
A pre-tax discount rate of 14.4% (equivalent to a post-tax discount rate of 11%) was applied in determining the recoverable amount of the units.
|
|
—
|
The terminal year's anticipated annual revenue growth included in the cash flow projections was 1%.
|
2012
|
||||
%
|
||||
Post-tax discount rate
|
12.1 | |||
Terminal year's anticipated annual
|
||||
revenue growth
|
(0.5 | ) |
|
—
|
Cash flows were projected based on actual operating results and additional information received from Bezeq International's management upon request, and assumptions regarding revenue growth and investments required. The anticipated annual revenue growth included in the cash flow projections varied from about 1% to 7% for the years 2013 to 2017.
|
|
—
|
A pre-tax discount rate of about 15.7% (equivalent to a post-tax discount rate of 12.2%) was applied in determining the recoverable amount of the CGU.
|
|
—
|
The terminal year's anticipated annual revenue growth included in the cash flow projections was 1%.
|
2012
|
||||
%
|
||||
|
||||
Post-tax discount rate
|
12.3 | |||
Terminal year's anticipated annual
|
||||
revenue growth
|
0.9 |
|
A.
|
Equity-accounted associates
|
1.
|
As at December 31, 2012, the Group’s investment in an associate includes Bezeq’s investments of NIS 1,003 in DBS and investments in other associates.
|
2.
|
Bezeq holds 49.78% of DBS's share capital. In addition, at the reporting date, Bezeq holds options to purchase 8.6% of DBS's share capital. Following the 2009 Supreme Court's ruling not to approve Bezeq's merger with DBS, the options are not exercisable as of the balance sheet date. Following the Supreme Court ruling, Bezeq may not direct the financial and operating policy of DBS, therefore Bezeq cannot be considered as having control over DBS (neither legal nor effective control). Therefore, as from the ruling of the Supreme Court, Bezeq accounts for its investment in DBS in accordance with the equity method.
|
|
A.
|
Equity-accounted associates (cont'd)
|
3.
|
Following is the DBS investment account composition:
|
Convenience
|
||||||||||||
translation into
|
||||||||||||
December 31
|
US$ (Note 2D)
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
Investment in shares and options
|
24 | 24 | 6 | |||||||||
Shareholders loans (including
|
||||||||||||
accrued interest), see Note
|
||||||||||||
13.A.5
|
1,549 | 1,742 | 467 | |||||||||
Bezeq's share in accumulated loss
|
(516 | ) | (763 | ) | (204 | ) | ||||||
1,057 | 1,003 | 269 |
4.
|
Following is the change in the DBS investment account:
|
|
A.
|
Equity-accounted associates (cont'd)
|
5.
|
Following are details of Bezeq’s loans to DBS:
|
Convenience translation
|
||||||||||||||||||||||||
into US$ (Note 2D)
|
||||||||||||||||||||||||
December 31, 2011
|
December 31, 2012
|
December 31, 2012
|
||||||||||||||||||||||
Value
|
Value
|
Value
|
||||||||||||||||||||||
according
|
according
|
according
|
||||||||||||||||||||||
to the
|
to the
|
to the
|
||||||||||||||||||||||
Carrying
|
terms of
|
Carrying
|
terms of
|
Carrying
|
terms of
|
|||||||||||||||||||
amount
|
the loans
|
amount
|
the loans
|
amount
|
the loans
|
|||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
US$
|
US$
|
|||||||||||||||||||
CPI-linked loans (1)
|
59 | 1,173 | 73 | 1,190 | 20 | 319 | ||||||||||||||||||
CPI-linked loans, bearing
|
||||||||||||||||||||||||
interest at a rate of 5.5% (2)
|
214 | 309 | 240 | 331 | 64 | 89 | ||||||||||||||||||
CPI-linked loans, bearing
|
||||||||||||||||||||||||
interest at a rate of 11% (2)
|
1,276 | 1,266 | 1,429 | 1,426 | 383 | 382 | ||||||||||||||||||
1,549 | 2,748 | 1,742 | 2,947 | 467 | 790 |
|
(1)
|
Loans provided to DBS until July 10, 2002 (“the Old Shareholders’ Loans”) are linked to the CPI, do not have a repayment date and do not bear interest.
|
|
|
(2)
|
In accordance with the agreement between DBS and its shareholders as at December 30, 2002, it was decided that the loans provided by certain shareholders (including Bezeq) to DBS commencing July 10, 2002 ("the New Shareholders' Loans"), will have preference over the Old Shareholders Loans. In accordance with the agreement, the New Shareholders Loans will be eligible for full settlement by DBS before any dividend is distributed by DBS and/or the repayment of the Old Shareholders Loans provided to DBS by its shareholders and subject to the cash flows and liabilities of DBS under its agreements with the banks. No repayment dates were set for the New Shareholders' Loans as well.
|
|
6.
|
Financial position of DBS:
|
|
a.
|
Since commencing its operations, DBS has accumulated considerable losses. The losses in 2012 and 2011 amounted to NIS 310 and NIS 230, respectively. As a result of these losses, the capital deficit and working capital deficit of DBS as at December 31, 2012 totaled NIS 3,960 and NIS 654, respectively.
|
|
b.
|
In May 2012, DBS and a number of financial institutions ("the Lenders") signed a debenture, according to which the Lenders would provide DBS with a loan of NIS 392 ("the debenture"). The proceeds of the funds raised were used for a full repayment of the long-term credit granted to DBS by the banks. DBS received the loan in July 2012 after complying with covenants set out in the debenture. In July 2012, DBS issued additional debentures (Series B) by expanding the series, amounting to NIS 10. The proceeds of the issuance, together with the funds of the raised from the debenture, were used for the repayment of the long-term bank credit. For details of the debenture, section 13.A.7 below.
|
|
A.
|
Equity-accounted associates (cont'd)
|
|
6.
|
Financial position of DBS: (cont’d)
|
|
c.
|
In October 2012, Standard & Poor's Maalot confirmed a rating of ilA for DBS and for all of its debentures with a stable outlook.
|
|
d.
|
As at December 31, 2012, DBS is in compliance with the financial covenants under its financing agreement and the debentures. See Note 13.A.7 below for information about compliance with the covenants.
|
|
e.
|
The management of DBS believes that the financial resources available to it, that include increasing its working capital deficit and its volumes of debt raising, will be sufficient for its operating needs in the coming year based on the forecasted cash flow approved by DBS’s board of directors. If additional resources will be required in order to meet its operational requirements for the coming year, DBS will adjust its operations so that no additional resources beyond those available to it will be required.
|
|
7.
|
Financial covenants and stipulations applicable to DBS
|
|
a.
|
DBS issued three debenture series and is party to a financing agreement with a consortium of banks, as described below:
|
Convenience
|
||||||||
Carrying
|
translation into
|
|||||||
amount as at |
U.S. dollars
|
|||||||
December 31, |
(Note 2D)
|
|||||||
2012
|
2012
|
|||||||
NIS
|
US$
|
|||||||
Debentures (Series A)
|
552 | 148 | ||||||
Debentures (Series B)
|
596 | 160 | ||||||
Debentures 2012
|
391 | 105 | ||||||
Bank loans
|
69 | 18 | ||||||
1,608 | 431 |
b.
|
Restrictions and covenants by virtue of debentures (Series A)
|
|
A.
|
Equity-accounted associates (cont'd)
|
|
7.
|
Financial covenants and stipulations applicable to DBS (cont’d)
|
b.
|
Restrictions and covenants by virtue of debentures (Series A) (cont’d)
|
c.
|
Restrictions and covenants by virtue of debentures (Series B)
|
|
A.
|
Equity-accounted associates (cont'd)
|
|
7.
|
Financial covenants and stipulations applicable to DBS (cont’d)
|
d.
|
Restrictions and covenants by virtue of Debentures 2012
|
|
e.
|
Restrictions and conditions by virtue of the financing agreement with a consortium of banks
|
|
A.
|
Equity-accounted associates (cont'd)
|
|
7.
|
Financial covenants and stipulations applicable to DBS (cont’d)
|
|
e.
|
Restrictions and conditions by virtue of the financing agreement with a consortium of banks (cont’d)
|
f.
|
Liens
|
|
1.
|
Unlimited floating first liens, for all DBS assets (other than exceptions arising from the Communications Law), including a stipulation that limits additional liens (subject to the exceptions set out in the financing agreements).
|
|
2.
|
Unlimited floating first liens on the rights and assets of DBS, including its rights under material agreements to which it is a party, its unissued registered capital, goodwill, some intellectual property rights and insurance rights under its insurance policies. The fixed liens will not apply to exceptions arising from the Communications Law.
|
|
A.
|
Equity-accounted associates (cont'd)
|
|
8.
|
DBS has a current debt to the Group companies. As at December 31, 2012, the balance of DBS's current debt to the Group companies amounts to NIS 46.
|
|
9.
|
In 2012, the general meeting of Bezeq's shareholders approved the postponement of some of the payments due from DBS to Bezeq and to Bezeq International, by virtue of the prior arrangements for settling NIS 33 of debt. The payments will be postponed for 18 months and in this period; interest will be at a rate of prime + 4%.
|
10.
|
For the guarantees that Bezeq provided to DBS, see Note 23.D.
|
|
B.
|
Subsidiaries held directly and indirectly by the Company
|
1.
|
General
|
Country of
|
Ownership
|
|||
incorporation
|
interest
|
|||
2012
|
||||
Bezeq - The Israel Telecommunication Corp. Limited
|
Israel
|
30.97%
|
||
B Communications (SP1) Ltd.
|
Israel
|
100%
|
||
B Communications (SP2) Ltd. (1)
|
Israel
|
100%
|
||
Subsidiaries of Bezeq - The Israel Telecommunication Corp. Limited
|
||||
Pelephone Communications Ltd.
|
Israel
|
100%
|
||
Bezeq International Ltd.
|
Israel
|
100%
|
||
Bezeq Online Ltd.
|
Israel
|
100%
|
||
Bezeq Zahav (Holdings) Ltd.
|
Israel
|
100%
|
||
Walla! Communications Ltd.
|
Israel
|
100%
|
||
Stage One Venture Capital Fund
|
Israel
|
71.8%
|
||
2011
|
||||
Bezeq - The Israel Telecommunication Corp. Limited
|
Israel
|
31.1%
|
||
B Communications (SP1) Ltd.
|
Israel
|
100%
|
||
B Communications (SP2) Ltd. (1)
|
Israel
|
100%
|
||
Subsidiaries of Bezeq - The Israel Telecommunication Corp. Limited.
|
||||
Pelephone Communications Ltd.
|
Israel
|
100%
|
||
Bezeq International Ltd.
|
Israel
|
100%
|
||
Bezeq Online Ltd.
|
Israel
|
100%
|
||
Bezeq Zahav (Holdings) Ltd.
|
Israel
|
100%
|
||
Walla! Communications Ltd.
|
Israel
|
71.55%
|
||
Stage One Venture Capital Fund
|
Israel
|
71.8%
|
|
(1)
|
Held by B Communications (SP1) Ltd.
|
|
B.
|
Subsidiaries held directly and indirectly by the Company (cont'd)
|
|
2.
|
Details of Group entities
|
a.
|
B Communications (SP1) Ltd.
|
|
B Communications (SP1) Ltd. ("SP1"), founded in 2010, is a wholly-owned subsidiary of the Company. SP1 is the sole shareholder of B Communications (SP2) Ltd. ("SP2") which directly holds the Bezeq controlling interest.
|
b.
|
B Communications (SP2) Ltd.
|
|
B Communications (SP2) Ltd. ("SP2") founded in 2010, is an indirect wholly-owned subsidiary of the Company, through SP1, and holds the Bezeq controlling interest.
|
c.
|
Bezeq- The Israel Telecommunications Corp. Ltd.
|
|
Bezeq is controlled by SP2 which holds 29.88% of Bezeq’s outstanding shares. An additional 1.09% of Bezeq outstanding shares is held by B Communications. Bezeq is the largest communications group in Israel.
|
d.
|
Pelephone Communications Ltd.
|
|
Pelephone Communications Ltd. ("Pelephone") is a wholly-owned subsidiary of Bezeq. Pelephone provides cellular communication services and value added services and markets terminal equipment.
|
e.
|
Bezeq International Ltd.
|
f.
|
Bezeq Online Ltd.
|
g.
|
Bezeq Zahav (Holdings) Ltd.
|
h.
|
Walla! Communications Ltd.
|
i.
|
Stage One Venture Capital Fund (Israel) L.P.
|
|
A venture capital fund in which the management rights are held by the general partner (Stage One Capital Investment LP) and Bezeq has rights in the profits. In February 2012, Stage One signed an agreement to sell all its holdings in Traffix Communications Systems Ltd. Following the agreement, in 2012, the Group recognized financing revenues of NIS 74 from the disposal of an available-for-sale asset.
|
|
B.
|
Subsidiaries held directly and indirectly by the Company (cont'd)
|
|
3.
|
Dividend received from subsidiaries
|
|
4.
|
Bezeq’s Dividend Distribution Policy
|
|
5.
|
Distribution not in compliance with the earnings test
|
|
B.
|
Subsidiaries held directly by the Company (cont’d)
|
|
5.
|
Distribution not in compliance with the earnings test (cont'd)
|
|
C.
|
Dividends
|
2011
|
2012
|
|||||||
NIS
|
NIS
|
|||||||
Distribution of a regular dividend (see section B4 above)
|
||||||||
2012 (NIS 0.76 per share)
|
2,071 | |||||||
2011 (NIS 0.797 per share)
|
2,155 | |||||||
Distribution not in compliance with the earnings test (see section B5 above)
|
||||||||
2012 (NIS 0.368 per share)
|
1,000 | |||||||
2011 (NIS 0.37 per share)
|
1,000 | |||||||
3,155 | 3,071 |
|
A.
|
Composition
|
Convenience
|
||||||||||||
translation into
|
||||||||||||
December 31
|
US$ (Note 2D)
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
Current liabilities
|
||||||||||||
Current maturities of debentures
|
594 | 569 | 153 | |||||||||
Current maturities of bank loans
|
580 | 1,001 | 268 | |||||||||
Current maturities of loans from others
|
11 | 12 | 3 | |||||||||
1,185 | 1,582 | 424 | ||||||||||
Non-current liabilities
|
||||||||||||
Debentures
|
5,403 | 5,018 | 1,344 | |||||||||
Bank loans
|
6,843 | 6,422 | 1,720 | |||||||||
Loans from institutions and others
|
544 | 540 | 145 | |||||||||
12,790 | 11,980 | 3,209 | ||||||||||
13,975 | 13,562 | 3,633 |
|
B.
|
Terms and debt repayment schedule
|
Convenience translation into
|
|||||||||||||||||||||||||||
US$ (Note 2D)
|
Nominal | ||||||||||||||||||||||||||
December 31, 2011
|
December 31, 2012
|
December 31, 2012
|
interest
|
||||||||||||||||||||||||
Par value
|
Carrying amount
|
Par value
|
Carrying amount
|
Par value
|
Carrying amount
|
Currency
|
Year
|
||||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
US$
|
US$
|
%
|
|||||||||||||||||||||
Loans from banks and others:
|
|||||||||||||||||||||||||||
Linked to the Israeli CPI - Fixed interest
|
1,727 | 1,806 | 1,562 | 1,660 | 418 | 445 |
NIS
|
4.35 - 6.81
|
|||||||||||||||||||
Unlinked - Variable interest
|
4,285 | 4,222 | 3,915 | 3,866 | 1,049 | 1,035 |
NIS
|
P-0.33 to P+1.75
|
|||||||||||||||||||
Unlinked - Fixed interest
|
1,800 | 1,800 | 2,340 | 2,340 | 627 | 627 |
NIS
|
5 - 6.85
|
|||||||||||||||||||
Linked to the Israeli CPI
|
124 | 115 | 104 | 95 | 28 | 25 |
NIS
|
-
|
|||||||||||||||||||
Linked to the US Dollar - Fixed interest
|
35 | 35 | 14 | 14 | 4 | 4 |
US$
|
3
|
|||||||||||||||||||
7,971 | 7,978 | 7,935 | 7,975 | 2,126 | 2,136 | ||||||||||||||||||||||
Debentures:
|
|||||||||||||||||||||||||||
Linked to the Israeli CPI - fixed interest
|
2,912 | 3,447 | 2,479 | 2,916 | 664 | 781 |
NIS
|
3.7 - 5.95
|
|||||||||||||||||||
Unlinked - variable interest
|
425 | 425 | 425 | 425 | 114 | 114 |
NIS
|
Makam + 1.4
|
|||||||||||||||||||
Unlinked - fixed interest
|
2,129 | 2,125 | 2,255 | 2,246 | 604 | 602 |
NIS
|
5.7 - 6.65
|
|||||||||||||||||||
5,466 | 5,997 | 5,159 | 5,587 | 1,382 | 1,497 | ||||||||||||||||||||||
Total interest-bearing liabilities
|
13,437 | 13,975 | 13,094 | 13,562 | 3,508 | 3,633 |
|
B.
|
Debt terms and repayment schedule (cont’d)
|
|
(1)
|
On April 14, 2010, SP2 received loans from certain banking and financial institutions led by Bank Hapoalim Ltd. (“Bank Hapoalim”), in a total principal amount of NIS 4.6 billion for the acquisition of the Bezeq shares as mentioned in Note 5A.
|
|
A.
|
Credit A - a “bullet” floating rate loan, in the amount of NIS 700, with principal and interest payable on November 30, 2010. Credit A was indexed to Bank Hapoalim’s prime interest rate, plus a margin of 0.62%. SP2 repaid this loan in full on May 3, 2010.
|
|
B.
|
Credit B - This tranche is divided into two parts. The first part, in the amount of NIS 1.1 billion, is a floating loan indexed to Bank Hapoalim’s prime interest rate, plus a margin of 1.58%; and the second part, in the amount of NIS 900, is a fixed rate loan of 4.35%, linked to the Israeli consumer price index. Both parts of Credit B are payable in 13 equal semi-annual installments of both principal and interest, the first of which was paid on November 30, 2010.
|
|
C.
|
Credit C - a “bullet” loan, in the principal amount of NIS 700, is a floating rate loan, indexed to Bank Hapoalim’s prime interest rate, plus a margin of 1.73%. The principal of Credit C is payable in full on November 30, 2016; and the interest is payable in 13 semi-annual installments, the first of which was paid on November 30, 2010. In February 2013 subsequent to the balance sheet date, the Company repaid the outstanding balance of Credit C in full and therefore the loan is classified as a current liability.
|
|
D.
|
Credit D - two “bullet” loans, the principal of which is payable in full on May 30, 2017 and the interest is payable in 13 semi-annual installments, the first of which was paid on November 30, 2010. The first loan of Credit D is in the principal amount of NIS 800 and is a floating rate loan, indexed to Bank Hapoalim’s prime interest rate, plus a margin of 1.75%. The second loan is in the principal amount of NIS 400 and is a fixed rate loan, linked to the Israeli consumer price index, at a rate of 5.4%.
|
|
B.
|
Debt terms and repayment schedule (cont’d)
|
|
A.
|
A floating charge on all its assets, property (current and fixed) and its present and future rights (with the exception of any additional shares of Bezeq which it may acquire) and a first-ranking fixed charge on its share capital, which has not yet been realized and/or which has been exercised and not yet realized, on its goodwill and rights to a tax exemption and/or relief and/or dispensation.
|
|
B.
|
A fixed lien, assignment by way of lien and a floating charge on its rights and assets, as set forth below:
|
|
1.
|
All of its rights in its deposit account with Bank Hapoalim, and all the monies and/or assets deposited and/or located and/or to be deposited in this account and/or credited and/or to be credited thereto, including securities and income and proceeds which it may receive with respect to and in connection with the account, (with the exception of any additional shares of Bezeq which it may acquire).
|
|
2.
|
SP2’s undertakings and limitations under the loan agreement include, among other things: (a) the obligation to provide the lenders with certain financial information; (b) limitations as to the use of amounts which will be received from Bezeq and the ability to withdraw and distribute the proceeds to SP2’s parent company; and (c) an undertaking to object to certain changes in Bezeq’s incorporation documents if the lenders find such changes would prejudice their rights. In certain situations, payments from Bezeq must be used for the early repayment of the loan or may not be withdrawn by SP2 to its parent company.
|
|
B.
|
Debt terms and repayment schedule (cont’d)
|
|
(2)
|
On February 18, 2010, SP1 entered into a loan agreement with certain entities associated with the Migdal Insurance and Financial Holdings Ltd. Group (“ Migdal”). According to the Migdal loan agreement, on April 14, 2010, SP1 was provided with a NIS 500 loan for the acquisition of the Bezeq shares as mentioned in Note 5. The loan bears annual interest at a rate of 6.81% and is linked to Israeli CPI.
|
|
(3)
|
The Company has issued NIS 706,636,643 of Series A and Series B debentures to investors in Israel. The debentures are traded on the Tel Aviv Stock Exchange.
|
|
A.
|
Series A- The par value of debentures as of December 31, 2012, is NIS 204, of NIS 1 par value each, repayable together with the accrued interest in eight equal payments on March 15 of each year until March 15, 2016. The debentures are linked to the Israeli CPI and bear annual interest at a rate of 4.75%.
|
|
1.
|
The Company is entitled to issue additional Series A debentures and to issue additional series on the same terms, providing that such issuance does not cause the credit rating of the outstanding debentures to decrease below the rating prior to the issuance.
|
|
2.
|
The Company is prohibited from creating any liens on its assets without the prior approval of the general meeting of the debenture holders.
|
|
B.
|
Debt terms and repayment schedule (cont’d)
|
|
3.
|
The Company may not repay all or any portion of its shareholders’ loans (if there are some) so long as the ratio of net debt (without the shareholders’ loans) to EBITDA (defined as operating income before financial expenses, taxes on income, depreciation and amortization) is greater than two for the prior four quarters.
|
|
4.
|
The Company is entitled to make an early redemption of the debentures, in whole or in part, in the last two weeks of each quarter. The amount payable will be the greater of: the principal plus accrued interest and linkage differences as at that date; or the present value of future cash flows as at that date based on a yield of Israeli Government Bonds + 0.3%.
|
|
5.
|
The debenture holders are entitled to demand the immediate redemption of the debentures under the following circumstances:
|
a.
|
The winding-up, dissolution or liquidation of the Company.
|
b.
|
Non-payment by the Company of the amounts required according to the terms of the debentures.
|
c.
|
A foreclosure is imposed on the Company’s principal assets.
|
d.
|
The breach of a material provision of the debentures.
|
|
B.
|
Series B - On September 21, 2010, the Company issued, at par value, NIS 400 Series B debentures to Israeli investors. The debentures are payable in four equal annual installments on March 31 of each of the years 2016 through 2019, unlinked to the Israeli CPI, bear interest at a fixed annual rate of 6.5%, payable semi-annually on March 31 and on September 30 of each of year during the years 2011 through 2019 (the first interest payment was paid on March 31, 2011, and the last interest payment is payable on March 31, 2019).
|
|
1.
|
Not to issue any additional Series B debentures if such increase will decrease the A2 rating of the Series B debentures.
|
|
|
2.
|
To maintain the control of Bezeq.
|
|
B.
|
Debt terms and repayment schedule (cont’d)
|
|
3.
|
The investors will have the right to require the immediate repayment of the Series B debentures if Eurocom will no longer hold the controlling interest in the Company.
|
|
(4)
|
For Bezeq’s debentures (Series 6 to 8) amounting to NIS 2.73 billion as at December 31, 2012, Bezeq bank loans amounting to NIS 4.65 billion as at December 31, 2012, and for Bezeq debentures issued to financial institutions in the amount of NIS 400, Bezeq has undertaken the following:
|
|
a.
|
Bezeq will not create additional pledges on its assets unless pledges are created at the same time in favor of the debenture holders and the lending banks (negative pledge). The pledge includes exceptions, among others, for liens on assets that are purchased or expanded by Bezeq, if the undertakings for which the charge serves as security is created for the purchase or expansion of those assets and for an immaterial charge.
|
|
b.
|
Standard grounds were included for immediate repayment of the debentures and loans, including breach events, insolvency, dissolution procedures or receivership. In addition, a right was determined to call for immediate repayment if a third party lender calls for immediate repayment of Bezeq’s debts in an amount exceeding the amount determined.
|
|
B.
|
Debt terms and repayment schedule (cont’d)
|
|
(5)
|
The par value of Bezeq Debentures (Series 5) is 1,591,311,333 of NIS 1 par value each, of which 1,004,578,000 debentures were issued to the public and the balance of 586,733,333 debentures were issued to Bezeq Zahav. Standard grounds were established for immediate repayment of the debentures, including breach events, insolvency, dissolution procedures or receivership.
|
|
(6)
|
The bank loans and debentures of Pelephone (NIS 98 and NIS 346 as at December 31, 2012 respectively) are secured by an irrevocable undertaking by Pelephone to the credit providers not to encumber its assets without their consent (a negative pledge). Pelephone also has an undertaking to comply with certain financial covenants.
|
|
As at the date of the financial statements, Pelephone is in compliance with the financial covenants and with its undertakings to banks and debenture holders. Non-compliance with these undertakings would allow the banks and the debenture holders to call for immediate repayment of the loans received from banks and debenture holders.
|
|
(7)
|
In connection with the sale of the Company's legacy communications business to Ampal, the Company agreed to assume a long term loan due to one of the Company's suppliers. This loan, in the amount of NIS 14 as at December 31, 2012 (NIS 25 as at December 31, 2011), bears 3% fixed interest, linked to the U.S. dollar and is payable on a monthly basis until February 2014.
|
Convenience
|
||||||||||||
translation into
|
||||||||||||
December 31,
|
US$ (Note 2D)
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
Trade payables (open accounts)
|
892 | 792 | 212 | |||||||||
Trade payables consisting of related
|
||||||||||||
parties
|
18 | 10 | 3 | |||||||||
Other payables including derivatives
|
||||||||||||
Liabilities to employees and other liabilities
|
||||||||||||
for salaries
|
346 | 294 | 79 | |||||||||
Institutions
|
137 | 77 | 21 | |||||||||
Accrued expenses
|
109 | 97 | 26 | |||||||||
Accrued interest
|
141 | 124 | 33 | |||||||||
Deferred income
|
56 | 55 | 15 | |||||||||
Related parties
|
7 | - | 0 | |||||||||
Put option and derivatives
|
2 | 49 | 13 | |||||||||
Other payables
|
42 | 38 | 9 | |||||||||
Total other payables including derivatives
|
840 | 734 | 196 |
Supplier
|
||||||||||||||||||||||||||||||||||||||||
and
|
Enterprise
|
Convenience
|
||||||||||||||||||||||||||||||||||||||
Communication
|
and
|
State and
|
Dismantling
|
warranty
|
translation
|
|||||||||||||||||||||||||||||||||||
Employee
|
Customer
|
Provider
|
Punitive
|
companies
|
Authorities
|
and clearing
|
and
|
into US$
|
||||||||||||||||||||||||||||||||
claims
|
claims
|
claims
|
claims
|
claims
|
claims
|
of sites
|
others
|
Total
|
(Note 2D)
|
|||||||||||||||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||||||||||||||||||||
Balance as at January 1, 2012
|
73 | 26 | 9 | 1 | 11 | 47 | 64 | 24 | 255 | 69 | ||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Provisions created in the period
|
2 | 1 | 5 | - | - | 2 | 4 | - | 14 | 4 | ||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Provisions used in the period
|
- | (1 | ) | (3 | ) | - | - | (9 | ) | - | (1 | ) | (14 | ) | (4 | ) | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Provisions cancelled in the period
|
(1 | ) | (10 | ) | (3 | ) | - | - | (18 | ) | (6 | ) | (6 | ) | (44 | ) | (12 | ) | ||||||||||||||||||||||
Balance as at December 31, 2012
|
74 | 16 | 8 | 1 | 11 | 22 | 62 | 17 | 211 | 57 | ||||||||||||||||||||||||||||||
Current
|
74 | 16 | 8 | 1 | 11 | 22 | - | 13 | 145 | 39 | ||||||||||||||||||||||||||||||
Non-current
|
- | - | - | - | - | - | 62 | 4 | 66 | 18 |
|
A.
|
General
|
|
-
|
Credit risk
|
|
-
|
Liquidity risk
|
|
-
|
Market risk (which includes currency, interest, inflation and other price risks)
|
|
B.
|
Framework for risk management
|
|
C.
|
Credit risk
|
|
C.
|
Credit risk (cont'd)
|
|
D.
|
Liquidity risk
|
|
E.
|
Market risks
|
|
E.
|
Market risks (cont'd)
|
|
A.
|
Credit risk
|
December 31
|
||||||||
2011
|
2012
|
|||||||
NIS
|
NIS
|
|||||||
Cash and cash equivalents
|
1,369 | 757 | ||||||
Bank deposits
|
- | 105 | ||||||
Monetary funds and ETFs
|
915 | 962 | ||||||
Financial assets held for trading
|
332 | 363 | ||||||
Available-for-sale financial assets
|
39 | 19 | ||||||
Trade and other receivables
|
4,779 | 4,221 | ||||||
Bank deposit for providing loans to employees
|
76 | 68 | ||||||
Derivatives and others
|
35 | 4 | ||||||
7,545 | 6,499 |
|
B.
|
Impairment losses
|
December 31, 2011
|
December 31, 2012
|
|||||||||||||||
Gross
|
Impairment
|
Gross
|
Impairment
|
|||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
|||||||||||||
Not past due
|
7,261 | (10 | ) | 6,249 | (9 | ) | ||||||||||
Past due up to one year
|
208 | (19 | ) | 209 | (33 | ) | ||||||||||
Past due one to two years
|
75 | (20 | ) | 59 | (22 | ) | ||||||||||
Past due more than two years
|
86 | (36 | ) | 81 | (35 | ) | ||||||||||
7,630 | (85 | ) | 6,598 | (99 | ) |
|
C.
|
Liquidity risk
|
December 31, 2011
|
||||||||||||||||||||||||
Carrying
|
Contractual
|
2017
|
||||||||||||||||||||||
amount
|
cash flow
|
2012
|
2013
|
2014-2016 |
and later
|
|||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
|||||||||||||||||||
Non-derivative
|
||||||||||||||||||||||||
financial liabilities
|
||||||||||||||||||||||||
Trade payables
|
892 | 892 | 892 | - | - | - | ||||||||||||||||||
Other payables
|
784 | 784 | 784 | - | - | - | ||||||||||||||||||
Bank loans
|
7,423 | 9,133 | 892 | 1,242 | 3,738 | 3,261 | ||||||||||||||||||
Loans from institutions
|
||||||||||||||||||||||||
and others
|
555 | 744 | 46 | 48 | 110 | 540 | ||||||||||||||||||
Debentures
|
5,997 | 7,254 | 773 | 768 | 2,870 | 2,843 | ||||||||||||||||||
Dividend payable
|
1,305 | 1,378 | 689 | 689 | - | - | ||||||||||||||||||
Total
|
16,956 | 20,185 | 4,076 | 2,747 | 6,718 | 6,644 | ||||||||||||||||||
Financial liabilities
|
||||||||||||||||||||||||
for derivative instruments
|
||||||||||||||||||||||||
Forward contracts on CPI
|
3 | 3 | - | 2 | 1 | - |
December 31, 2012
|
||||||||||||||||||||||||
Carrying
|
Contractual
|
2018
|
||||||||||||||||||||||
amount
|
cash flow
|
2013
|
2014
|
2015-2017 |
and later
|
|||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
|||||||||||||||||||
Non-derivative
|
||||||||||||||||||||||||
financial liabilities
|
||||||||||||||||||||||||
Trade payables
|
792 | 792 | 792 | - | - | - | ||||||||||||||||||
Other payables
|
663 | 663 | 663 | - | - | - | ||||||||||||||||||
Bank loans
|
7,423 | 8,807 | 1,303 | 1,290 | 4,724 | 1,490 | ||||||||||||||||||
Loans from institutions
|
||||||||||||||||||||||||
and others
|
552 | 705 | 46 | 38 | 621 | - | ||||||||||||||||||
Debentures
|
5,587 | 6,656 | 750 | 755 | 2,986 | 2,165 | ||||||||||||||||||
Dividend payable
|
669 | 690 | 690 | - | - | - | ||||||||||||||||||
Total
|
15,686 | 18,313 | 4,244 | 2,083 | 8,331 | 3,655 | ||||||||||||||||||
Financial liabilities
|
||||||||||||||||||||||||
for derivative instruments
|
||||||||||||||||||||||||
Forward contracts on
|
||||||||||||||||||||||||
CPI and copper price
|
21 | 21 | 8 | 9 | 4 | - |
|
D.
|
Linkage and foreign currency risks
|
|
(1)
|
The exposure to linkage and foreign currency risk
|
December 31, 2011
|
||||||||||||||||
Foreign
|
||||||||||||||||
Israeli
|
currency linked
|
|||||||||||||||
Unlinked
|
CPI-linked
|
(mainly US$)
|
Total
|
|||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
|||||||||||||
Current assets
|
||||||||||||||||
Cash and cash equivalents
|
1,347 | - | 22 | 1,369 | ||||||||||||
Other investments, including derivatives
|
1,144 | 123 | 17 | 1,284 | ||||||||||||
Trade receivables
|
2,986 | 37 | 36 | 3,059 | ||||||||||||
Other receivables
|
53 | 172 | - | 225 | ||||||||||||
Total current assets
|
5,530 | 332 | 75 | 5,937 | ||||||||||||
Non-current assets
|
||||||||||||||||
Long-term trade and other receivables
|
1,397 | 98 | 4 | 1,499 | ||||||||||||
Investments and long-term
|
||||||||||||||||
loans, including derivatives
|
80 | - | 38 | 118 | ||||||||||||
Equity-accounted investment
|
- | 1,549 | - | 1,549 | ||||||||||||
Total non-current assets
|
1,477 | 1,647 | 42 | 3,166 | ||||||||||||
Total assets
|
7,007 | 1,979 | 117 | 9,103 | ||||||||||||
Current liabilities
|
||||||||||||||||
Debentures, loans and borrowings
|
373 | 766 | 21 | 1,160 | ||||||||||||
Trade payables
|
752 | - | 140 | 892 | ||||||||||||
Other payables including derivatives
|
746 | 62 | 1 | 809 | ||||||||||||
Current tax liabilities (not in the scope of IFRS 7)
|
- | 499 | - | 499 | ||||||||||||
Deferred income
|
3 | - | - | 3 | ||||||||||||
Provisions (not in the scope of IFRS 7)
|
49 | 134 | - | 183 | ||||||||||||
Dividend payable
|
669 | - | - | 669 | ||||||||||||
Total current liabilities
|
2,592 | 1,461 | 162 | 4,215 | ||||||||||||
Non-current liabilities
|
||||||||||||||||
Debentures
|
2,550 | 2,853 | - | 5,403 | ||||||||||||
Bank loans
|
5,650 | 1,103 | - | 6,753 | ||||||||||||
Loans from institutions and others
|
- | 530 | 14 | 544 | ||||||||||||
Provisions and other liabilities
|
126 | 93 | - | 219 | ||||||||||||
Dividend payable
|
636 | - | - | 636 | ||||||||||||
Total non-current liabilities
|
8,962 | 4,579 | 14 | 13,555 | ||||||||||||
Total liabilities
|
11,554 | 6,040 | 176 | 17,770 | ||||||||||||
Total exposure in the statement
|
||||||||||||||||
of financial position
|
(4,547 | ) | (4,061 | ) | (59 | ) | (8,667 | ) | ||||||||
Currency futures transactions
|
||||||||||||||||
Israeli CPI forward transactions
|
(880 | ) | 880 | - | - |
|
D.
|
Linkage and foreign currency risks (cont’d)
|
|
(1)
|
The exposure to linkage and foreign currency risk (cont’d)
|
December 31, 2012
|
||||||||||||||||
Foreign
|
||||||||||||||||
Israeli
|
currency linked
|
|||||||||||||||
Unlinked
|
CPI-linked
|
(mainly US$ )
|
Total
|
|||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
|||||||||||||
Current assets
|
||||||||||||||||
Cash and cash equivalents
|
747 | - | 10 | 757 | ||||||||||||
Other investments, including derivatives
|
1,316 | 140 | 28 | 1,484 | ||||||||||||
Trade receivables
|
2,887 | 9 | 31 | 2,927 | ||||||||||||
Other receivables
|
77 | 135 | - | 212 | ||||||||||||
Total current assets
|
5,027 | 284 | 69 | 5,380 | ||||||||||||
Non-current assets
|
||||||||||||||||
Long-term trade and other receivables
|
1,007 | 67 | - | 1,074 | ||||||||||||
Investments including derivatives
|
71 | - | 19 | 90 | ||||||||||||
Equity-accounted investment
|
- | 1,741 | - | 1,741 | ||||||||||||
Total non-current assets
|
1,078 | 1,808 | 19 | 2,905 | ||||||||||||
Total assets
|
6,105 | 2,092 | 88 | 8,285 | ||||||||||||
Current liabilities
|
||||||||||||||||
Debentures, loans and borrowings
|
816 | 754 | 12 | 1,582 | ||||||||||||
Trade payables
|
639 | - | 153 | 792 | ||||||||||||
Other payables including derivatives
|
616 | 66 | - | 682 | ||||||||||||
Current tax liabilities (not in the scope of
|
||||||||||||||||
IFRS 7)
|
- | 588 | - | 588 | ||||||||||||
Provisions (not in the scope of IFRS 7)
|
16 | 127 | - | 143 | ||||||||||||
Dividend payable
|
669 | - | - | 669 | ||||||||||||
Total current liabilities
|
2,756 | 1,535 | 165 | 4,456 | ||||||||||||
Non-current liabilities
|
||||||||||||||||
Debentures
|
2,653 | 2,365 | - | 5,018 | ||||||||||||
Bank loans
|
5,407 | 1,015 | - | 6,422 | ||||||||||||
Loans from institutions and others
|
- | 538 | 2 | 540 | ||||||||||||
Provisions and other liabilities
|
69 | 5 | - | 74 | ||||||||||||
Total non-current liabilities
|
8,129 | 3,923 | 2 | 12,054 | ||||||||||||
Total liabilities
|
10,885 | 5,458 | 167 | 16,510 | ||||||||||||
Total exposure in the statement
|
||||||||||||||||
of financial position
|
(4,780 | ) | (3,366 | ) | (79 | ) | (8,225 | ) | ||||||||
Currency futures transactions
|
||||||||||||||||
Israeli CPI forward transactions
|
(1,347 | ) | 1,347 | - | - |
|
D.
|
Linkage and foreign currency risks (cont’d)
|
|
(1)
|
The exposure to linkage and foreign currency risk (cont’d)
|
Currency/
|
Currency/
|
||||||||||||||
linkage
|
linkage
|
Par value
|
|||||||||||||
receivable
|
payable
|
Expiry date
|
(currency)
|
Fair value
|
|||||||||||
NIS
|
NIS
|
||||||||||||||
December 31, 2011
|
|||||||||||||||
Israeli CPI forward contract
|
Israeli CPI
|
Unlinked
|
2012-2016 | 880 | 5 | ||||||||||
December 31, 2012
|
|||||||||||||||
Israeli CPI forward contract
|
Israeli CPI
|
Unlinked
|
2013-2016 |
1,347
|
(18 | ) |
Year ended December 31
|
December 31
|
|||||||||||||||||||||||
2010
|
2011
|
2012
|
2010
|
2011
|
2012
|
|||||||||||||||||||
Rate of change
|
Reporting date spot rate
|
|||||||||||||||||||||||
%
|
%
|
%
|
NIS
|
NIS
|
NIS
|
|||||||||||||||||||
1 US dollar
|
(5.99 | ) | 7.66 | (2.3 | ) | 3.549 | 3.821 | 3.733 | ||||||||||||||||
1 euro
|
(12.94 | ) | 4.22 | (0.34 | ) | 4.738 | 4.938 | 4.921 | ||||||||||||||||
Israeli CPI in Points
|
2.66 | 2.17 | 1.64 | 133.89 | 136.79 | 139.03 |
Equity
|
Net income
|
|||||||||||
Change
|
NIS
|
NIS
|
||||||||||
December 31, 2011
|
||||||||||||
Increase in the CPI of
|
2.0 | % | (48 | ) | (48 | ) | ||||||
Increase in the CPI of
|
1.0 | % | (24 | ) | (24 | ) | ||||||
Decrease in the CPI of
|
(1.0 | )% | 24 | 24 | ||||||||
Decrease in the CPI of
|
(2.0 | )% | 48 | 48 | ||||||||
December 31, 2012
|
||||||||||||
Increase in the CPI of
|
2.0 | % | (30 | ) | (30 | ) | ||||||
Increase in the CPI of
|
1.0 | % | (15 | ) | (15 | ) | ||||||
Decrease in the CPI of
|
(1.0 | )% | 15 | 15 | ||||||||
Decrease in the CPI of
|
(2.0 | )% | 30 | 30 |
|
E.
|
Interest rate risk
|
|
1.
|
Profile
|
December 31
|
|||||||||
2011
|
2012
|
||||||||
NIS
|
NIS
|
||||||||
Fixed rate instruments
|
|||||||||
Financial assets
|
4,720 | 3,735 | |||||||
Financial liabilities
|
(9,206 | ) | (9,177 | ) | |||||
(4,486 | ) | (5,442 | ) | ||||||
Variable rate instruments
|
|||||||||
Financial assets
|
84 | 64 | |||||||
Financial liabilities
|
(4,654 | ) | (4,291 | ) | |||||
(4,570 | ) | (4,227 | ) |
|
2.
|
Fair value sensitivity analysis for fixed rate financial liabilities and derivatives
|
|
3.
|
Sensitivity analysis of cash flow for instruments at variable interest
|
|
F.
|
Cash flow hedge accounting
|
|
F.
|
Cash flow hedge accounting (cont’d)
|
Expiry date
|
Number of transactions
|
Scope of transactions
|
Fair value as at December 31, 2012 (liability)
|
|||||||||
NIS
|
NIS
|
|||||||||||
June 2, 2013
|
4 | 370 | (5 | ) | ||||||||
June 1, 2014
|
2 | 357 | (6 | ) | ||||||||
June 1, 2015
|
2 | 340 | (2 | ) | ||||||||
8 | 1,067 | (13 | ) |
|
G.
|
Fair value
|
|
(1)
|
Fair values versus carrying amounts
|
December 31, 2011
|
December 31, 2012
|
|||||||||||||||
Carrying
|
Carrying
|
|||||||||||||||
amount
|
Fair value
|
amount
|
Fair value
|
|||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
|||||||||||||
Secured loans from banks and others
|
||||||||||||||||
Israeli CPI-linked
|
1,929 | 1,932 | 1,763 | 1,772 | ||||||||||||
Unlinked
|
3,586 | 3,644 | 3,868 | 3,883 | ||||||||||||
Linked to the US Dollar
|
25 | 25 | 14 | 14 | ||||||||||||
Debentures
|
||||||||||||||||
Israeli CPI-linked
|
4,880 | 4,965 | 4,329 | 4,568 | ||||||||||||
Unlinked
|
806 | 814 | 929 | 915 | ||||||||||||
Dividend payable
|
1,305 | 1,323 | 669 | 678 | ||||||||||||
12,531 | 12,703 | 11,572 | 11,830 |
|
G.
|
Fair value (cont’d)
|
|
(2)
|
Fair value hierarchy
|
|
—
|
Level 1: quoted prices (unadjusted) in active markets for identical instruments
|
|
—
|
Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly
|
|
—
|
Level 3: inputs that are not based on observable market data (unobservable inputs)
|
December 31, 2012
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
|||||||||||||
Financial assets held for trading
|
||||||||||||||||
Monetary funds and ETFs
|
962 | - | - | 962 | ||||||||||||
Marketable securities
|
403 | - | - | 403 | ||||||||||||
Derivatives not used in hedging
|
||||||||||||||||
CPI forward contract
|
- | (5 | ) | - | (5 | ) | ||||||||||
Forward contracts
|
- | (12 | ) | - | (12 | ) | ||||||||||
Available-for-sale financial assets
|
||||||||||||||||
Unmarketable shares
|
- | - | 19 | 19 | ||||||||||||
1,365 | (17 | ) | 19 | 1,367 |
|
A.
|
Defined contribution plans
|
|
(1)
|
The pension rights of Bezeq employees for the period of their employment in the civil service through January 31, 1985, are covered by a pension fund ("the Makefet Fund"), which assumed the State of Israel's obligation following an agreement between the Government of Israel, Bezeq, the Histadrut and the Makefet Fund.
|
|
(2)
|
Liabilities for employee benefits at retirement age in respect of the period of their service in Bezeq and its subsidiaries are covered in full by regular payments to pension funds and insurance companies.
|
|
(3)
|
The severance obligation to employees who leave their employment on terms entitling them to compensation is covered, for the period from February 1, 1985, by regular contributions to such pension funds and insurance companies (in accordance with Section 14 of the Severance Pay Law). Severance pay for the period of employment in the civil service through January 31, 1985, is paid by the Group, and the monies accumulated in the Makefet Fund for that period are kept in a fund that will be used for the employees' rights. For certain employees, the Group has an obligation to pay severance in excess of the amount accumulated in the compensation fund which is in the employees' names. See section B(1) below.
|
|
B.
|
Defined benefit plans
|
|
(1)
|
The severance obligation included in the statement of financial position represents the balance of the obligation not covered by contributions and/or insurance policies in accordance with the existing labor agreements, the Severance Pay Law, and the salary components which the managements of the companies believe entitle the employees to receive compensation. For this part of the obligation, there are deposits in the name of Group companies in a recognized compensation fund. The reserves in compensation funds include accrued linkage differentials and interest deposited in compensation funds, in banks and in insurance companies. Withdrawal of the reserve monies is contingent upon fulfillment of the provisions in the Severance Pay Law.
|
|
(2)
|
An obligation in accordance with the collective agreement of 2006 for employees who transferred from civil service to Bezeq, and who are entitled, following retirement, to a supplement in pension payments for the difference between the Civil Service Law and the standard policy of Makefet.
|
|
(3)
|
An obligation to a number of senior employees who are entitled to early retirement terms (pension and retirement grants) which are not dependent on the existing retirement agreements for all employees.
|
|
(4)
|
An obligation in accordance with the employment agreements of some of the senior employees in the Bezeq Group for payment of a benefit for notice upon severance.
|
|
(5)
|
Bezeq retirees receive, in addition to the pension payments, benefits which consist mainly of a holiday gift (linked to the dollar exchange rate), financing the upkeep of retiree clubs, and social activities. The Company's liability for these costs accumulates during the employment period. The Company’s financial statements include the liabilities for expected costs in the post-employment period.
|
|
C.
|
Other long-term employee benefits
|
|
D.
|
Benefits for early retirement and dismissal
|
|
E.
|
Liabilities for employee benefits
|
Convenience
|
||||||||||||
translation into
|
||||||||||||
December 31,
|
US$ (Note 2D)
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
Unfunded obligations (1)
|
185 | 198 | 53 | |||||||||
Obligations for severance pay
|
203 | 197 | 53 | |||||||||
Total obligations for defined benefit plans
|
388 | 395 | 106 | |||||||||
Fair value of plan assets and cost of past services
|
(144 | ) | (142 | ) | (38 | ) | ||||||
Total obligation for defined benefit plans
|
||||||||||||
(post-employment plans)
|
244 | 253 | 68 | |||||||||
Obligation for vacation pay
|
91 | 93 | 25 | |||||||||
Obligation for sick leave
|
118 | 106 | 28 | |||||||||
Obligation for voluntary early retirement
|
165 | 52 | 14 | |||||||||
Total obligations for employee benefits
|
618 | 504 | 135 | |||||||||
Stated in the statement of financial position as:
|
||||||||||||
Short term
|
389 | 258 | 69 | |||||||||
Long term
|
229 | 246 | 66 | |||||||||
618 | 504 | 135 |
|
(1)
|
Unfunded obligations are those obligations for which the Bezeq Group did not deposit a reserve to finance its liabilities and they include an obligation to Bezeq’s pensioners, provision for early notice, an obligation for early retirement of senior employees in Bezeq and an obligation for employees transferred from the civil service.
|
|
E.
|
Liabilities for employee benefits (cont’d)
|
Convenience
|
||||||||||||
translation into
|
||||||||||||
US$ (Note 2D)
|
||||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
1.
Change in an obligation in respect
|
||||||||||||
of defined benefit plans
|
||||||||||||
Obligation in respect of a defined benefit
|
||||||||||||
plan as at January 1
|
438 | 388 | 104 | |||||||||
Benefits paid according to the plans
|
(39 | ) | (50 | ) | (13 | ) | ||||||
Costs of current service, interest
|
||||||||||||
and exchange rate differences
|
50 | 31 | 8 | |||||||||
Retirement and curtailment of benefits
|
(21 | ) | (5 | ) | (1 | ) | ||||||
Actuarial losses (gains) charged to equity
|
(40 | ) | 31 | 8 | ||||||||
Defined benefit obligation as at December 31
|
388 | 395 | 106 | |||||||||
2.
Change in plan assets and cost of past
|
||||||||||||
service
|
||||||||||||
Fair value as at January 1
|
152 | 144 | 39 | |||||||||
Deposits
|
9 | 9 | 4 | |||||||||
Withdrawals
|
(12 | ) | (17 | ) | (5 | ) | ||||||
Expected proceeds from plan assets
|
6 | 5 | 1 | |||||||||
Actuarial losses charged to equity
|
(3 | ) | 5 | 1 | ||||||||
Amortization of past service cost,
|
(8 | ) | (4 | ) | (1 | ) | ||||||
Fair value of plan assets as at December 31
|
144 | 142 | 39 |
|
F.
|
Actuarial assumptions
|
|
(1)
|
Mortality rates are based on the rates published in Insurance Circulars 2013-3-1 of the Ministry of Finance, except for early retirement, which was calculated according to the agreement with the insurance company, including future changes in the mortality rate.
|
|
(2)
|
Churn rates were determined on the basis of the past experience of Bezeq and the subsidiaries, distinguishing between different employee populations and taking into account the number of years of employment. The churn rates include a distinction between severance with entitlement to full severance compensation and severance without entitlement to this right.
|
|
(3)
|
The real discounted rate is based on yield on government bonds at a fixed interest rate with a life equal to that of the gross liability.
|
December 31, 2010
|
December 31, 2011
|
December 31, 2012
|
|||
Average
|
Average
|
Average
|
|||
capitalization rate
|
capitalization rate
|
capitalization rate
|
|||
%
|
%
|
%
|
|||
Sick leave
|
1.9
|
2.3
|
1.6
|
||
Compensation
|
2.0
|
2.1
|
1.4
|
||
Retirement benefit – holiday gift
|
4.3
|
4.5
|
3.8
|
||
Retirement benefit – clubs and activities
|
2.9
|
2.8
|
2.2
|
||
Early notice to senior employees
|
1.5
|
1.78
|
1
|
|
(4)
|
Assumptions regarding salary increments for calculation of the liabilities were made on the basis of the management's assessments, distinguishing between the groups of employees. The main assumptions (in real terms) regarding salary increases are as follows:
|
|
(5)
|
The forecasted growth rate of the assets accumulated in all Group companies is 2% in real terms for old pension funds in the administration and 5.57% in real terms for old pension funds that are not part of the arrangement. For new, subsidized pension funds, a guarantee of 4.86% is assumed for 30% of the assets. For officers’ insurance where the severance interest is not transferred to compensation and their start date is prior to 1989, guaranteed interest is 4.25% in real terms. The growth rate in other plans is the discount interest.
|
|
(6)
|
An obligation for voluntary early retirement includes an obligation for pension and grants. The obligation for pension is calculated according to the terms of the agreement of December 2006 (see section D above) and in accordance with the agreement with the insurance company. The obligation is affected by changes in the interest rates of debentures until the purchase of the policy and payment to the insurance company.
|
|
G.
|
Other
|
|
A.
|
Composition of income tax expenses (income)
|
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
Year ended December 31,
|
US$ (Note 2D)
|
|||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||
Current tax expense
|
||||||||||||||||
For the current period
|
646 | 762 | 677 | 182 | ||||||||||||
Adjustment for prior years, net
|
- | - | 42 | 11 | ||||||||||||
646 | 762 | 719 | 193 | |||||||||||||
Deferred tax expense
|
||||||||||||||||
Creation and reversal of temporary
|
||||||||||||||||
differences
|
(256 | ) | (379 | ) | (164 | ) | (44 | ) | ||||||||
Effect of change in tax rates
|
(5 | ) | 270 | - | - | |||||||||||
(261 | ) | (109 | ) | (164 | ) | (44 | ) | |||||||||
Income tax expense
|
385 | 653 | 555 | 149 |
|
B.
|
Reconciliation between the theoretical tax on the pre-tax income and the tax expense
|
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
Year ended December 31,
|
US$ (Note 2D)
|
|||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||
Income before income tax
|
708 | 773 | 1,345 | 361 | ||||||||||||
Statutory tax rate
|
25 | % | 24 | % | 25 | % | 25 | % | ||||||||
Income tax at the statutory tax rate
|
177 | 186 | 336 | 91 | ||||||||||||
Changes in tax rate
|
(5 | ) | 272 | - | - | |||||||||||
Expenses not recognized for tax
|
||||||||||||||||
purposes
|
49 | 52 | 56 | 15 | ||||||||||||
Adjusted tax calculated for the
|
||||||||||||||||
Company’s share in equity-
|
||||||||||||||||
accounted investees
|
59 | 52 | 61 | 16 | ||||||||||||
Differences between the definition
|
||||||||||||||||
of capital and assets for Israeli tax
|
||||||||||||||||
purposes and other differences
|
46 | - | - | - | ||||||||||||
Current year tax losses and
|
||||||||||||||||
benefits for which deferred
|
||||||||||||||||
taxes were not created
|
59 | 91 | 60 | 16 | ||||||||||||
Taxes in respect of previous years
|
- | - | 42 | 11 | ||||||||||||
Income tax expenses
|
385 | 653 | 555 | 149 |
|
C.
|
Unrecognized deferred tax liabilities
|
|
D.
|
Unrecognized deferred tax assets and carry-forward tax loss
|
|
E.
|
Income tax recognized in equity
|
Year ended December 31,
|
||||||||||||||||||||||||||||
2011
|
2012
|
Convenience
|
||||||||||||||||||||||||||
Tax
|
Tax
|
translation
|
||||||||||||||||||||||||||
Before
|
expenses
|
Net of
|
Before
|
expenses
|
Net of
|
into US$
|
||||||||||||||||||||||
tax
|
(benefit)
|
tax
|
tax
|
(benefit)
|
tax
|
(Note 2D)
|
||||||||||||||||||||||
NIS
|
US$
|
|||||||||||||||||||||||||||
Defined benefit
|
||||||||||||||||||||||||||||
plan actuarial
|
||||||||||||||||||||||||||||
gains (losses), net
|
37 | (10 | ) | 27 | (25 | ) | 5 | (20 | ) | (5 | ) | |||||||||||||||||
Other items of
|
||||||||||||||||||||||||||||
comprehensive
|
||||||||||||||||||||||||||||
income
|
10 | (2 | ) | 8 | (8 | ) | 1 | (7 | ) | (2 | ) | |||||||||||||||||
47 | (12 | ) | 35 | (33 | ) | 6 | (27 | ) | (7 | ) |
|
F.
|
Recognized deferred tax assets and liabilities
|
Carry-
|
||||||||||||||||||||||||||||||||||||||||
forward
|
||||||||||||||||||||||||||||||||||||||||
tax losses | ||||||||||||||||||||||||||||||||||||||||
Property,
|
and
|
|||||||||||||||||||||||||||||||||||||||
plant
|
other | |||||||||||||||||||||||||||||||||||||||
equipment,
|
assets
|
Convenience
|
||||||||||||||||||||||||||||||||||||||
and
|
Employee
|
Share- |
and
|
translation
|
||||||||||||||||||||||||||||||||||||
intangible
|
Doubtful
|
benefits
|
based
|
deferred
|
Brand
|
Customers
|
into US$
|
|||||||||||||||||||||||||||||||||
assets
|
debts
|
plan
|
payments
|
Provisions
|
expenses
|
name
|
relationship
|
Total
|
(Note 2D)
|
|||||||||||||||||||||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||||||||||||||||||||
Balance of deferred tax asset
|
||||||||||||||||||||||||||||||||||||||||
(liability) as at December 31, 2010
|
(509 | ) | 54 | 266 | 20 | 29 | (64 | ) | (216 | ) | (878 | ) | (1,298 | ) | ||||||||||||||||||||||||||
Recognized in profit or loss
|
19 | 7 | 44 | (4 | ) | (3 | ) | (7 | ) | (83 | ) | 134 | 107 | |||||||||||||||||||||||||||
Recognized in other comprehensive
|
||||||||||||||||||||||||||||||||||||||||
income
|
- | - | (10 | ) | - | - | (2 | ) | - | - | (12 | ) | ||||||||||||||||||||||||||||
Balance of deferred tax assets
|
||||||||||||||||||||||||||||||||||||||||
(liability) as at December 31, 2011
|
(490 | ) | 61 | 300 | 16 | 26 | (73 | ) | (299 | ) | (744 | ) | (1,203 | ) | ||||||||||||||||||||||||||
Balance of deferred tax asset
|
||||||||||||||||||||||||||||||||||||||||
(liability) as at December 31, 2011
|
(490 | ) | 61 | 300 | 16 | 26 | (73 | ) | (299 | ) | (744 | ) | (1,203 | ) | (322 | ) | ||||||||||||||||||||||||
Recognized in profit or loss
|
43 | (2 | ) | (53 | ) | (16 | ) | 1 | 33 | - | 158 | 164 | 44 | |||||||||||||||||||||||||||
Recognized in other comprehensive
|
||||||||||||||||||||||||||||||||||||||||
income
|
- | - | 5 | - | - | 1 | - | - | 6 | 2 | ||||||||||||||||||||||||||||||
Balance of deferred tax assets
|
||||||||||||||||||||||||||||||||||||||||
(liability) as at December 31, 2012
|
(447 | ) | 59 | 252 | - | 27 | (39 | ) | (299 | ) | (586 | ) | (1,033 | ) | (276 | ) |
|
F.
|
Non-applicability of IFRS for tax purposes
|
G.
|
Final tax assessments
|
|
(1)
|
The Company has final tax assessments up to and including 2006.
|
|
(2)
|
Bezeq has received final tax assessments up to and including 2004.
|
|
(3)
|
Pelephone has received final tax assessments up to and including 2010.
|
|
(4)
|
Bezeq International has received final tax assessments up to and including 2008.
|
|
A.
|
Following is a detailed description of the Group's contingent liabilities at December 31, 2012, classified into groups with similar characteristics.
|
Balance of provisions
|
Amount of additional exposure
|
Amount of exposure for claims for which the amount of exposure cannot be assessed
|
||||||||||||
Claims group
|
Nature of the claims
|
NIS
|
NIS
|
NIS
|
||||||||||
Claims of employees and former employees of Group companies
|
Mainly collective and individual claims filed by employees and former employees of Bezeq in respect of recognition of various salary components as components for calculation of payments to Company employees, some of which have broad ramifications in Bezeq.
|
74 | 268 | - | ||||||||||
Customer claims
|
Mainly motions for certification of class actions concerning contentions of unlawful collection of payment and impairment of the service provided by the Group companies.
|
16 | 3,972 | 414 | ||||||||||
Supplier and communication provider claims
|
Claims filed by suppliers of goods and/or services to Group companies or by communications providers that the Group companies supply goods and/or services to or receive goods and/or services from these claims are usually for compensation for alleged damage as a result of the supply of the service and/or the product.
|
8 | 117 | - | ||||||||||
Claims for punitive damages
|
Claims for alleged physical damage or damage to property caused by Group companies (including in relation to environmental quality and radiation). The additional amount of exposure for punitive damages does not include claims for which the insurance coverage is not disputed.
|
1 | * 3,952 | 15 | ||||||||||
Claims by enterprises and companies
|
Claims alleging liability of the Group companies in respect of their activities and/or the investments made in various projects.
|
11 | 59 | - | ||||||||||
Claims by the State and authorities
|
Various claims by the State of Israel, government institutions and authorities (“the Authorities”). These are mainly procedures related to regulations relevant to the Group companies and financial disputes concerning monies paid by the Group companies to the authorities (including property taxes) or by the authorities to the Group companies.
|
22 | 174 | - | ||||||||||
132 | 8,542 | 429 |
|
*
|
Of this amount, a total of NIS 3.7 billion is for the motion for certification of a class action for which a settlement for summary dismissal was signed in January 2013, pending court approval.
|
|
B.
|
Subsequent customer claims
|
|
C.
|
Contingent claims referring to the associate DBS
|
|
A.
|
The Group companies have operating lease agreements for property and vehicles used by them. The minimum future contractual rental payments during the next five years, calculated according to the rental fees in effect as at December 31, 2012, are as follows:
|
Real estate
|
Vehicles
|
Total
|
Convenience translation into US$
(Note 2D)
|
|||||||||||||
Year ended December 31,
|
NIS
|
NIS
|
NIS
|
US$
|
||||||||||||
2013
|
184 | 63 | 247 | 66 | ||||||||||||
2014
|
185 | 46 | 231 | 62 | ||||||||||||
2015
|
141 | 11 | 152 | 41 | ||||||||||||
2016
|
74 | - | 74 | 20 | ||||||||||||
2017
|
46 | - | 46 | 12 | ||||||||||||
2018 onwards
|
80 | - | 80 | 21 | ||||||||||||
710 | 120 | 830 | 222 |
|
B.
|
Pelephone leases some of the sites from the Israel Lands Administration (“the ILA”). Pelephone has an agreement with the ILA for use of the land to establish and operate communication sites. The agreement regulates payments to which the ILA is entitled for the period through December 31, 2008. According to the agreement, at the end of the agreement period, and in the event of its annulment due to reasons set out in the agreement, the Company will evacuate the land. To the best of Pelephone's knowledge, the other cellular operators have the same agreement with the ILA. The agreement was extended to December 21, 2009 and was extended again until December 31, 2010. Since 2010, there have been negotiations with the ILA to conclude the terms for continued use of these sites.
|
|
C.
|
Pelephone uses Ericsson UMTS/HSPA infrastructure equipment and Nortel and Motorola CDMA infrastructure equipment. Pelephone has multi-annual agreements for maintenance, support and upgrade of software for the UMTS/HSPA network with Ericson. Pelephone services Motorola and Nortel equipment independently.
|
|
D.
|
Pelephone has an agreement with Hot Mobile Ltd. ("Hot Mobile"), whereby Hot Mobile will exclusively acquire from Pelephone domestic roaming services for its subscribers, on Pelephone's UMTS / HSPA network and the parties will cooperate at sites. The agreement is valid until December 31, 2014.
|
|
E.
|
Pelephone has obligations as of December 31, 2012 to acquire terminal equipment amounting to NIS 158 (as at December 31, 2011, NIS 91).
|
|
F.
|
For agreements for the purchase of property, plant and equipment, see Note 10.E above.
|
|
A.
|
For securities, liens and stipulations given by the Company and its subsidiaries in connection with loan covenants and borrowings see Note 14.
|
|
B.
|
The Group companies have guarantees of NIS 96 in favor of the Ministry of Communications to secure the terms of their licenses (mostly linked to the US$ exchange rate).
|
|
C.
|
The Group companies have bank guarantees of NIS 76 in favor of third parties.
|
|
D.
|
Bezeq provided a bank guarantee to DBS, which DBS had provided in favor of the State of Israel, according to the terms of DBS's license. The guarantee is in accordance with the proportionate rate of the Company's holdings in DBS. As at December 31, 2012, the balance of the Company's share in the guarantee is NIS 20.
|
|
E.
|
Bezeq provided a bank guarantee of NIS 66 for the loans of Teletel Communication Channels Ltd.
|
|
F.
|
For the securities, liens and stipulations of DBS see Note 13A.
|
|
A.
|
Equity
|
Authorized
|
Registered and paid up
|
|||||||
December 31
|
December 31
|
|||||||
2011 and 2012
|
2011 and 2012
|
|||||||
Number of shares
|
||||||||
Ordinary shares of NIS 0.1 par value
|
||||||||
each
|
50,000,000 | 29,889,045 |
|
B.
|
Description of the reserves |
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
Year ended December 31,
|
US$ (Note 2D)
|
|||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||
Domestic fixed line
|
||||||||||||||||
communications
|
||||||||||||||||
Fixed line telephony
|
2,202 | 2,320 | 2,179 | 584 | ||||||||||||
Internet - infrastructure
|
708 | 1,092 | 1,166 | 312 | ||||||||||||
Transmission and data
|
||||||||||||||||
communication
|
507 | 749 | 784 | 210 | ||||||||||||
Other services
|
161 | 215 | 218 | 58 | ||||||||||||
3,578 | 4,376 | 4,347 | 1,164 | |||||||||||||
Cellular
|
||||||||||||||||
Cellular services and terminal
|
||||||||||||||||
equipment
|
3,109 | 3,547 | 3,174 | 850 | ||||||||||||
Sale of terminal equipment
|
850 | 1,911 | 1,203 | 323 | ||||||||||||
3,959 | 5,458 | 4,377 | 1,173 | |||||||||||||
International communications,
|
||||||||||||||||
internet services and NEP
|
951 | 1,289 | 1,289 | 345 | ||||||||||||
Others
|
169 | 250 | 265 | 71 | ||||||||||||
8,657 | 11,373 | 10,278 | 2,753 |
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
U.S. dollars
|
||||||||||||||||
Year ended December 31,
|
(Note 2D)
|
|||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||
Salaries and incidentals:
|
||||||||||||||||
Operating
|
1,268 | 1,747 | 1,780 | 477 | ||||||||||||
General and administrative
|
495 | 727 | 637 | 171 | ||||||||||||
Share-based compensation
|
63 | 182 | 70 | 19 | ||||||||||||
Total salaries and incidentals
|
1,826 | 2,656 | 2,487 | 667 | ||||||||||||
Less - salaries recognized in
|
||||||||||||||||
investments in property, plant and
|
||||||||||||||||
equipment and in intangible assets
|
338 | 542 | 503 | 136 | ||||||||||||
1,488 | 2,114 | 1,984 | 531 |
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
Year ended December 31,
|
US$ (Note 2D)
|
|||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||
Terminal equipment and materials
|
880 | 1,693 | 1,263 | 338 | ||||||||||||
Interconnectivity and payments to
|
||||||||||||||||
domestic and international operators
|
1,384 | 910 | 900 | 241 | ||||||||||||
Maintenance of buildings and sites
|
463 | 641 | 663 | 178 | ||||||||||||
Marketing and general expenses
|
444 | 623 | 598 | 160 | ||||||||||||
Services and maintenance by
|
||||||||||||||||
sub-contractors
|
128 | 170 | 158 | 42 | ||||||||||||
Vehicle maintenance expenses
|
136 | 142 | 162 | 43 | ||||||||||||
Content services expenses
|
111 | 123 | 103 | 28 | ||||||||||||
Royalties and collection fees
|
94 | 160 | 148 | 40 | ||||||||||||
3,640 | 4,462 | 3,995 | 1,070 |
|
*
|
Less expenses of NIS 61 recognized in 2012 for investments in property, plant and equipment and intangible assets (in 2011, NIS 58 and in 2010, NIS 52).
|
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
Year ended December 31,
|
US$ (Note 2D)
|
|||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||
Provision for severance pay in
|
||||||||||||||||
early retirement
|
36 | 369 | 32 | 9 | ||||||||||||
Capital gain from sale of the
|
||||||||||||||||
Company's legacy communication
|
||||||||||||||||
business, net
|
(10 | ) | - | - | - | |||||||||||
Capital (gain) loss from sale of
|
||||||||||||||||
property plant and equipment
|
- | 6 | (26 | ) | (8 | ) | ||||||||||
Profit from copper sales
|
- | - | (54 | ) | (14 | ) | ||||||||||
Capital loss from derecognition of
|
||||||||||||||||
assets *
|
- | - | 54 | 14 | ||||||||||||
Provision for contingent
|
||||||||||||||||
liabilities, net
|
(61 | ) | (29 | ) | (17 | ) | (4 | ) | ||||||||
Expenses related to changes of
|
||||||||||||||||
Organization structure
|
31 | - | - | - | ||||||||||||
Loss (profit) from copper
|
||||||||||||||||
and other forward transactions
|
9 | (20 | ) | - | - | |||||||||||
5 | 326 | (11 | ) | (3 | ) |
*
|
In accordance with the decision of Bezeq’s Board of Directors to suspend the CRM project
|
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
Year ended December 31
|
US$ (Note 2D)
|
|||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||
Income on bank deposits,
|
||||||||||||||||
investments and others
|
(23 | ) | (39 | ) | (31 | ) | (8 | ) | ||||||||
Change in fair value of financial
|
||||||||||||||||
assets measured at fair value
|
||||||||||||||||
through profit or loss
|
(64 | ) | (100 | ) | (83 | ) | (23 | ) | ||||||||
Income in respect of credit in
|
||||||||||||||||
sales, net of discount
|
(65 | ) | (102 | ) | (147 | ) | (39 | ) | ||||||||
Income on financial assets classified
|
||||||||||||||||
as available for sale
|
- | - | (78 | ) | (21 | ) | ||||||||||
Interest and linkage differences from
|
||||||||||||||||
loans to an associate
|
(141 | ) | (189 | ) | (193 | ) | (52 | ) | ||||||||
Other finance income
|
(20 | ) | (55 | ) | (30 | ) | (8 | ) | ||||||||
Total financing income
|
(313 | ) | (485 | ) | (562 | ) | (151 | ) | ||||||||
Interest expenses on financial
|
||||||||||||||||
liabilities
|
363 | 670 | 692 | 186 | ||||||||||||
Linkage and exchange rate
|
||||||||||||||||
Differences, net
|
162 | 130 | 80 | 21 | ||||||||||||
Financing expenses for dividends
|
||||||||||||||||
payable
|
- | 83 | 52 | 14 | ||||||||||||
Change in fair value of financial
|
||||||||||||||||
assets measured at fair value
|
||||||||||||||||
through profit or loss
|
24 | 28 | 8 | 2 | ||||||||||||
Financing expenses for employee
|
||||||||||||||||
benefits, net
|
20 | 24 | 18 | 5 | ||||||||||||
Other financing expenses
|
31 | 48 | 65 | 17 | ||||||||||||
Total financing expenses
|
600 | 983 | 915 | 245 | ||||||||||||
Financing expense, net
|
287 | 498 | 353 | 94 |
Name of plan
|
Number of options granted (before forfeitures)
(in thousands)
|
Number of options in circulation as at December 31, 2012
(in thousands)
|
Weighted average of exercise price as at December 31, 2012 (NIS)
|
Weighted average of remaining contractual life
|
||||||||||||
Employee option plan of 2010 (see below)
|
69,495 | 66,938 | 5.16 | 3 | ||||||||||||
Option plan for senior managers and employees of the Group of 2007
|
65,250 | 3,089 | 2.84 | 4.25 | ||||||||||||
Phantom options plan for senior officers in the Group granted in December 2010
|
16,400 | 16,400 | 7.91 | 3 |
Options plan for
|
||||
employees 2010
|
||||
Theoretical economic value at the grant date (NIS)
|
290
|
|||
Weighted average of the fair value at the grant date
|
4.21-4.39
|
|||
Grant date
|
primarily January 2011
|
|||
Share price
|
10.45-10.62
|
|||
Exercise price (NIS)
|
7.457
|
|||
Expected volatility
|
25.7%-26.3%
|
|||
Contractual life of the option (in years)
|
2.5-4
|
|||
Risk-free interest rate (based on government bonds)
|
3.2%-4.7%
|
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
Year ended December 31
|
US$ (Note 2D)
|
|||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||
Expenses for options for equity-
|
||||||||||||||||
settled shares
|
63 | 176 | 74 | 20 | ||||||||||||
Expenses (income) for phantom
|
||||||||||||||||
options
|
- | 6 | (4 | ) | (1 | ) | ||||||||||
63 | 182 | 70 | 19 |
Year ended December 31
|
||||||||||||
2010
|
2011
|
2012
|
||||||||||
NIS
|
NIS
|
NIS
|
||||||||||
Income (loss) attributable to ordinary
|
||||||||||||
Shareholders
|
||||||||||||
Basic earnings (loss) for the year
|
(140 | ) | (219 | ) | 45 | |||||||
Effect of diluted per share in a subsidiary
|
(3 | ) | (2 | ) | (1 | ) | ||||||
Diluted earnings (loss) for the year
|
(143 | ) | (221 | ) | 44 |
Year ended December 31
|
||||||||||||
2010
|
2011
|
2012
|
||||||||||
Thousands of
|
Thousands of
|
Thousands of
|
||||||||||
shares of NIS 0.1
|
shares of NIS 0.1
|
Shares of NIS 0.1
|
||||||||||
par value
|
par value
|
par value
|
||||||||||
Weighted average number of
|
||||||||||||
ordinary shares
|
||||||||||||
Balance as at January 1
|
25,341 | 29,889 | 29,889 | |||||||||
Effect of shares issued during the year
|
||||||||||||
(private placement)
|
2,664 | - | - | |||||||||
Effect of share options exercised
|
711 | - | - | |||||||||
Weighted average number
|
||||||||||||
of ordinary shares at
|
||||||||||||
December 31 (basic and diluted)
|
28,716 | 29,889 | 29,889 |
|
A.
|
Identity of related parties
|
|
B.
|
Balances with related parties
|
Convenience
|
||||||||||||
translation
|
||||||||||||
into US$
|
||||||||||||
December 31,
|
(Note 2D)
|
|||||||||||
2011
|
2012
|
2012
|
||||||||||
NIS
|
NIS
|
US$
|
||||||||||
Receivables – associates, net
|
71 | 53 | 14 | |||||||||
Loans to an associate,
|
||||||||||||
see section C below
|
1,549 | 1,742 | 467 | |||||||||
Liabilities to related parties, net *
|
(83 | ) | (84 | ) | (23 | ) |
|
*
|
The amounts are for IGLD, its ultimate parent Eurocom, and related parties.
|
|
C.
|
Loans provided to an associate
|
|
D.
|
Transactions with related parties
|
Convenience
|
||||||||||||||||
translation
|
||||||||||||||||
into US$
|
||||||||||||||||
Year ended December 31,
|
(Note 2D)
|
|||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
NIS
|
|||||||||||||
Revenues
|
||||||||||||||||
From associates
|
145 | 217 | 221 | 59 | ||||||||||||
From related parties *
|
6 | 8 | 7 | 2 | ||||||||||||
Expenses
|
||||||||||||||||
To related parties *
|
191 | 139 | 51 | 14 | ||||||||||||
Associate to related parties *
|
106 | 146 | 95 | 25 | ||||||||||||
To associates
|
5 | 1 | 1 | - | ||||||||||||
Investments
|
||||||||||||||||
Related parties *
|
78 | 97 | 90 | 24 |
|
*
|
The amounts are for IGLD, Eurocom, and their related parties.
|
|
E.
|
Transactions with related parties
|
|
1.
|
Transactions listed in section 270(4) of the Companies Law
|
Approval date of the general meeting (after approval of Bezeq's audit committee and Board of Directors)
|
Nature of the transaction
|
Amount of the transaction
|
||
June 10, 2010
|
Bezeq's three-year agreement with Eurocom for routine management and consulting services valid through to May 31, 2013.
|
US$ 1.2 per year.
|
||
March 27, 2012
|
Amendment to DBS's agreement with Eurocom and ADB, for some of the converters (50% of the original amount that was approved).
|
Additional cost of up to US$ 1.953.
|
||
April 24, 2012
|
DBS's agreement with Eurocom and ADB to purchase power supplies and converters.
|
For power supplies: at a total cost of US$ 131thousands
For converters: at a total cost of US$ 9.8.
|
||
July 25, 2012
|
Amendment of DBS's agreement with Eurocom and ADB for some of the converters (42% of the original amount that was approved).
|
Additional maximum total cost of up to US$ 1.3.
|
||
July 25, 2012
|
DBS's agreement with Eurocom and ADB to purchase yesMaxTotal converters.
|
Total cost of US$ 20.7. In addition, there is an additional cost of up to US$ 3.245, to the extent required by the market situation.
|
||
September 6, 2012
|
Postponement of some of the payments due from DBS to Bezeq and to Bezeq International, by virtue of the prior debt arrangements. See also Note 13.A.
|
The deferred payments to Bezeq amount to NIS 26.66.
The deferred payments to Bezeq International amount to NIS 6.
|
||
October 11, 2012
|
Amendment to and extension of Pelephone's agreement with Eurocom Cellular Communications Ltd. According to the amendment, the agreement will be expanded to include products manufactured by the Chinese electronics manufacturer ZTE.
|
Annual amount of up to US$ 300.
|
||
January 21, 2013
|
Amendment to and extension of DBS's agreement with Eurocom and ADB regarding the purchase of yesMaxHd power supplies.
|
Additional cost of up to US$ 78.600 thousands.
|
||
Approved by Bezeq's Board of Directors on March 6, 2013 and subject to approval of the general meeting, for which a date has yet to be set.
|
DBS's agreement with Space Communications Ltd. for leasing space segments, in which the original agreement will be amended and extended; the agreement is valid until the end of 2028.
|
Total amount of up to US$ 227 (net including discounts for satellite segments leased in the existing agreement).
|
||
|
E.
|
Transactions with related parties (cont’d)
|
|
2.
|
Transactions that are not listed in section 270(4) of the Companies law and are not negligible
|
The date of approval of the Bezeq’s Board of Directors after receiving the approval of the audit committee
|
Nature of the transaction
|
Amount of the transaction
|
||
May 8, 2012
|
Raising of debt by DBS
|
Raising additional debt of up to US$ 450
|
|
F.
|
Agreements with the Eurocom Group and Internet Gold
|
|
1.
|
Registration rights agreement with Internet Gold
|
|
F.
|
Agreements with the Eurocom Group and Internet Gold (cont’d)
|
|
2.
|
Lease of principal offices
|
|
3.
|
Financial service agreement with Eurocom Capital Finance Ltd.
|
|
4.
|
Management services agreements
|
|
F.
|
Agreements with the Eurocom Group and Internet Gold (cont’d)
|
|
5.
|
Other agreements
|
|
G.
|
Key management personnel compensation (including directors)
|
Convenience
|
||||||||||||||||
translation into
|
||||||||||||||||
Year ended December 31
|
US$ (Note 2D)
|
|||||||||||||||
2010
|
2011
|
2012
|
2012
|
|||||||||||||
NIS
|
NIS
|
NIS
|
US$
|
|||||||||||||
Employee benefits
|
3 | 2 | 2 | 1 | ||||||||||||
Share-based payments
|
11 | - | - | - | ||||||||||||
|
14 | 2 | 2 | 1 |
A.
|
For the resolution of Bezeq's Board of Directors, subsequent to the date of the financial statements, to recommend to the general meeting to distribute a cash dividend to the shareholders, see Note 13C.
|
B.
|
On March 21, 2013 and on April 14, 2013, subsequent to the date of the financial statements, DBS issued an additional NIS 73 and NIS 26, respectively, of Series B debentures.
|
C.
|
On April 8, 2013, C.F.A. Drilling Ltd., or C.F.A., purporting to be a shareholder of Bezeq, submitted a statement of claim for a declaratory judgment against Bezeq, the Company and Mr. Shaul Elovich, to the District Court in Tel Aviv – Jaffa. In its claim, C.F.A. asserted that the Company, as the controlling shareholder in Bezeq, has a personal interest in the distribution of dividends by Bezeq. C.F.A. is seeking a declaratory judgment to the effect that: (i) the Company has a personal interest in connection with any proposed distribution of dividends at Bezeq's next general meeting; (ii) Bezeq should publicize, reasonably prior to that annual meeting, all the information made available to Bezeq's board of directors before it makes a decision whether to recommend the distribution of dividends, as well as the full minutes of the board's deliberations concerning this matter; and (iii) Bezeq should ensure the attendance at the annual meeting of the experts, if any, who delivered an opinion regarding Bezeq's solvency, in order to answer any questions that the shareholders may have prior to a decision being taking at the meeting.
|
D.
|
On April 4, 2013 and April 13 2013, respectively, the Court approved the withdrawal and dismissal of two claims filed against Bezeq in the Tel Aviv District Court together with an application for its certification as a class action, alleging that in contravention of the law, Bezeq does not include a call details record in the phone bills which it sends to its subscribers. The first application estimates the amount of the class action at NIS 154. The second application estimated the amount of the class action at NIS 131.
|
E.
|
On April 10, 2013, an appeal was filed with the Supreme Court with respect to a previous claim that on February 7, 2013 was dismissed by the Tel Aviv District Court. The claim alleged that Pelephone misled a portion of its business customers by unlawfully updating its rates. The total monetary relief sought was estimated by the petitioners at approximately NIS 380, which includes reimbursement of the amounts charged to Pelephone's business customers as a result of the updated rates and cancellation of the update.
|
Contents | |
DF-2
|
|
Financial Statements
|
|
DF-3 - DF-4
|
|
DF-5
|
|
DF-6
|
|
DF-7 - DF-8
|
|
DF-9 - DF-10
|
|
DF-11 - DF-52
|
2012
|
2011
|
|||||||||||
Note
|
NIS thousands
|
NIS thousands
|
||||||||||
Assets
|
||||||||||||
Cash and cash equivalents
|
- | 13,325 | ||||||||||
Trade receivables
|
6 | 163,043 | 159,596 | |||||||||
Other receivables
|
6 | 1,674 | 8,020 | |||||||||
Total current assets
|
164,717 | 180,941 | ||||||||||
Broadcasting rights, net
|
7 | 377,349 | 330,572 | |||||||||
Property, plant and equipment, net
|
8 | 745,365 | 675,954 | |||||||||
Intangible assets, net
|
9 | 99,864 | 94,227 | |||||||||
Total non-current assets
|
1,222,578 | 1,100,753 | ||||||||||
Total assets
|
1,387,295 | 1,281,694 |
2012
|
2011
|
|||||||||||
Note
|
NIS thousands
|
NIS thousands
|
||||||||||
Liabilities
|
||||||||||||
Credit from banks
|
10 | 69,322 | 85,998 | |||||||||
Current maturities for debentures
|
14 | 174,305 | 57,494 | |||||||||
Trade payables and service providers
|
11 | 396,572 | 409,298 | |||||||||
Other payables
|
12 | 172,412 | 167,060 | * | ||||||||
Provisions
|
13 | 6,200 | 40,647 | * | ||||||||
Total current liabilities
|
818,811 | 760,497 | ||||||||||
Debentures
|
14 | 1,364,840 | 1,120,806 | |||||||||
Bank loans
|
10 | - | 337,679 | |||||||||
Loans from shareholders
|
15 | 3,085,742 | 2,677,916 | |||||||||
Other Long-term liabilities
|
16 | 73,899 | 28,907 | * | ||||||||
Employee benefits
|
17 | 5,837 | 6,171 | |||||||||
Total non-current liabilities
|
4,530,318 | 4,171,479 | ||||||||||
Total liabilities
|
5,349,129 | 4,931,976 | ||||||||||
Capital deficit
|
||||||||||||
Share capital
|
21 | 29 | 29 | |||||||||
Share premium
|
85,557 | 85,557 | ||||||||||
Warrants
|
48,219 | 48,219 | ||||||||||
Capital reserves
|
1,537,271 | 1,537,271 | ||||||||||
Capital reserve for share-based payments
|
10,280 | 10,280 | ||||||||||
Accumulated deficit
|
(5,643,190 | ) | (5,331,638 | ) | ||||||||
Total capital deficit
|
(3,961,834 | ) | (3,650,282 | ) | ||||||||
Total liabilities and capital
deficit
|
1,387,295 | 1,281,694 |
/s/ David Efrati | /s/ Ron Eilon | /s/ Micky Neiman | ||
David Efrati
|
Ron Eilon
|
Micky Neiman
|
||
Authorized to sign on behalf of the chairman of the board
|
CEO
|
CFO
|
2012
|
2011
|
2010
|
||||||||||||||
Note
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
|||||||||||||
Revenues
|
1,635,994 | 1,618,809 | 1,582,930 | |||||||||||||
Cost of revenues
|
22 | 1,067,087 | 1,028,168 | 1,128,848 | ||||||||||||
Gross profit
|
568,907 | 590,641 | 454,082 | |||||||||||||
Selling and marketing expenses
|
23 | 166,274 | 152,737 | 143,202 | ||||||||||||
General administrative expenses
|
24 | 149,884 | 143,036 | 132,561 | ||||||||||||
Operating profit
|
252,749 | 294,868 | 178,319 | |||||||||||||
Financing expenses
|
155,431 | 168,991 | 181,584 | |||||||||||||
Financing income
|
(1,859 | ) | (23,163 | ) | (9,313 | ) | ||||||||||
Financing expenses for shareholder loans
|
407,826 | 377,529 | 318,499 | |||||||||||||
Financing expenses, net
|
25 | 561,398 | 523,357 | 490,770 | ||||||||||||
Loss before taxes on income
|
(308,649 | ) | (228,489 | ) | (312,451 | ) | ||||||||||
Taxes on income
|
26 | 1,668 | 1,128 | 1,188 | ||||||||||||
Loss for the
year
|
(310,317 | ) | (229,617 | ) | (313,639 | ) | ||||||||||
Basic and diluted loss per share (in NIS)
|
10,380 | 7,681 | 10,491 |
2012
|
2011
|
2010
|
||||||||||||||
Note
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
|||||||||||||
Loss for the period
|
(310,317 | ) | (229,617 | ) | (313,639 | ) | ||||||||||
Other items of comprehensive income:
|
||||||||||||||||
Actuarial losses from a defined benefit plan
|
17 | (1,235 | ) | (80 | ) | (1,535 | ) | |||||||||
Other comprehensive losses for the year
|
(1,235 | ) | (80 | ) | (1,535 | ) | ||||||||||
Total comprehensive loss for the year
|
(311,552 | ) | (229,697 | ) | (315,174 | ) |
Share capital
|
Share premium
|
Warrants
|
Capital reserves
|
Capital reserve for share-based payments
|
Accumulated deficit
|
Total
|
||||||||||||||||||||||||
Note
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
|||||||||||||||||||||||
Balance at January 1, 2012
|
29 | 85,557 | 48,219 | 1,537,271 | 10,280 | 5,331,638 | )) | (3,650,282 | ) | |||||||||||||||||||||
Total comprehensive loss for the year
|
||||||||||||||||||||||||||||||
Loss for the year
|
- | - | - | - | - | (310,317 | ) | (310,317 | ) | |||||||||||||||||||||
Other comprehensive loss for the year
|
- | - | - | - | - | (1,235 | ) | (1,235 | ) | |||||||||||||||||||||
Total comprehensive loss for the year
|
- | - | - | - | - | (311,552 | ) | (311,552 | ) | |||||||||||||||||||||
Balance at December 31, 2012
|
29 | 85,557 | 48,219 | 1,537,271 | 10,280 | (5,643,190 | ) | (3,961,834 | ) | |||||||||||||||||||||
Balance at January 1, 2011
|
29 | 85,557 | 48,219 | 1,537,271 | 9,391 | (5,101,941 | ) | (3,421,474 | ) | |||||||||||||||||||||
Total comprehensive loss for the year
|
||||||||||||||||||||||||||||||
Loss for the year
|
- | - | - | - | - | (229,617 | ) | (229,617 | ) | |||||||||||||||||||||
Other comprehensive loss for the year
|
- | - | - | - | - | (80 | ) | (80 | ) | |||||||||||||||||||||
Total comprehensive loss for the year
|
- | - | - | - | - | (229,697 | ) | (229,697 | ) | |||||||||||||||||||||
Transactions with owners recognized directly in equity
|
||||||||||||||||||||||||||||||
Share-based payments
|
18
|
- | - | - | - | 889 | - | 889 | ||||||||||||||||||||||
Balance at December 31, 2011
|
29 | 85,557 | 48,219 | 1,537,271 | 10,280 | (5,331,638 | ) | (3,650,282 | ) |
Share capital
|
Share premium
|
Warrants
|
Capital reserves
|
Capital reserve for share-based payments
|
Accumulated deficit
|
Total
|
|||||||||||||||||||||||
Note |
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||||||||||||||
Balance at January 1, 2010
|
29 | 85,557 | 48,219 | 1,537,271 | 6,931 | (4,786,767 | ) | (3,108,760 | ) | ||||||||||||||||||||
Total comprehensive loss for the year
|
|||||||||||||||||||||||||||||
Loss for the year
|
- | - | - | - | - | (313,639 | ) | (313,639 | ) | ||||||||||||||||||||
Other comprehensive loss for the year
|
- | - | - | - | - | (1,535 | ) | (1,535 | ) | ||||||||||||||||||||
Total comprehensive loss for the year
|
- | - | - | - | - | (315,174 | ) | (315,174 | ) | ||||||||||||||||||||
Transactions with owners recognized directly in equity
|
|||||||||||||||||||||||||||||
Share-based payments
|
18 | - | - | - | - | 2,460 | - | 2,460 | |||||||||||||||||||||
Balance at December 31, 2010
|
29 | 85,557 | 48,219 | 1,537,271 | 9,391 | (5,101,941 | ) | (3,421,474 | ) |
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Cash flows from operating activities
|
||||||||||||
Loss for the
year
|
(310,317 | ) | (229,617 | ) | (313,639 | ) | ||||||
Adjustments:
|
||||||||||||
Depreciation and amortization
|
248,250 | 276,393 | 284,732 | |||||||||
Financing expenses, net
|
548,997 | 519,716 | 465,562 | |||||||||
Loss (profit) from sale of property, plant and equipment
|
504 | (515 | ) | (35 | ) | |||||||
Share-based payments
|
-
|
889 | 2,460 | |||||||||
Income tax expenses
|
1,668 | 1,128 | 1,188 | |||||||||
Change in trade receivables
|
(3,447 | ) | 9,251 | (8,695 | ) | |||||||
Change in other receivables
|
6,346 | 3,130 | 363 | |||||||||
Change in broadcasting rights, net
|
(46,777 | ) | (26,082 | ) | (19,724 | ) | ||||||
Change in payables and other liabilities
|
(24,271 | ) | (39,411 | ) | 80,928 | |||||||
Change in employee benefits
|
(1,569 | ) | (605 | ) | (438 | ) | ||||||
729,701 | 743,894 | 806,341 | ||||||||||
Income taxes paid
|
(1,337 | ) | (1,128 | ) | (1,188 | ) | ||||||
Net cash from operating activities
|
418,047 | 513,149 | 491,514 | |||||||||
Cash flows from investing activities
|
||||||||||||
Proceeds from sale of property, plant and equipment
|
471 | 747 | 1,589 | |||||||||
Purchase of property, plant and equipment
|
(240,686 | ) | (207,741 | ) | (226,728 | ) | ||||||
Payments for software and licenses
|
(43,531 | ) | (32,181 | ) | (14,897 | ) | ||||||
Payments for subscriber acquisition
|
- | (24,414 | ) | (36,756 | ) | |||||||
Net cash used in investing activities
|
(283,746 | ) | (263,589 | ) | (276,792 | ) |
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Cash flows from
financing activities
|
||||||||||||
Repayment of loans from institutions
|
- | - | (115,731 | ) | ||||||||
Bank loans received
|
- | - | 255,000 | |||||||||
Repayment of bank loans
|
(423,235 | ) | (97,277 | ) | (580,718 | ) | ||||||
Repayment of debentures
|
(58,211 | ) | (57,271 | ) | (55,020 | ) | ||||||
Short-term bank credit, net
|
66,046 | (85,294 | ) | 41,232 | ||||||||
Payment for finance lease obligation
|
(1,554 | ) | (768 | ) | - | |||||||
Interest paid
|
(125,674 | ) | (114,178 | ) | (203,444 | ) | ||||||
Issue of debentures, net
|
395,002 | 118,553 | 443,959 | |||||||||
Net cash used in financing activities
|
(147,626 | ) | (236,235 | ) | (214,722 | ) | ||||||
Increase (Decrease) in cash and cash equivalents
|
(13,325 | ) | 13,325 | - | ||||||||
Cash and cash equivalents as at the beginning of the year
|
13,325 | - | - | |||||||||
Cash and cash equivalents as at the end of the year
|
- | 13,325 | - |
NOTE 1 – GENERAL
|
|
A.
|
Reporting entity
|
NOTE 2 - BASIS OF PREPARATION
|
|
A.
|
Definitions
|
|
(1)
|
The Company:
DBS Satellite Services (1998) Ltd.
|
|
(2)
|
Related party
: As defined in IAS 24 (2009),
Related Party Disclosures
|
|
(3)
|
Interested parties
: As defined in paragraph (1) of the definition of an “interested party” in section 1 of the Israeli Securities Law, 1968
|
|
B.
|
Statement of compliance
|
NOTE 2 - BASIS OF PREPARATION (CONTD.)
|
|
B.
|
Statement of compliance (contd.)
|
|
C.
|
Functional and presentation currency
|
|
D.
|
Basis of measurement
|
|
E.
|
Operating cycle
|
|
F.
|
Use of estimates and judgment
|
NOTE 2 - BASIS OF PREPARATION (CONTD.)
|
Estimates
|
Principal assumptions
|
Possible consequences
|
Reference
|
Useful life
|
The useful life of groups of property plant and equipment, intangible assets and broadcasting rights
|
Recording depreciation expenses in the ledgers.
|
Note 3 (B); Note 3 (C); Note 3 (D).
|
Provisions and contingent liabilities
|
Assessment of the changes of actions against the Company and measurement of the potential liabilities for the actions.
|
Cancellation or creation of a provision for an action and recognition of revenues/expenses respectively.
|
Note
13 and Note 20.
|
|
G.
|
Reclassification
|
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
|
|
A.
|
Foreign currency transactions
|
|
B.
|
Broadcasting rights
|
|
C.
|
Property, plant and equipment
|
|
(1)
|
Recognition and measurement
|
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
|
|
(2)
|
Subsequent costs
|
|
(3)
|
Depreciation
|
Years
|
||||
Broadcasting and
transmission
equipment
|
6.67;5 | |||
Installation costs *
|
1-3,15 | |||
Digital satellite decoders
|
4,5,6,8 | |||
Office furniture and equipment
|
6.67-14.2 | |||
Computers
|
3, 5 |
|
D.
|
Intangible assets
|
|
(1)
|
Acquisition of subscribers
|
|
(2)
|
Software
|
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
|
|
(3)
|
Development
|
|
(4)
|
Amortization
|
Years
|
||||
Software
and licenses
|
3,5 | |||
Subscriber acquisition costs*
|
1-3 | |||
Capitalized development costs
|
1-5 |
|
E.
|
Financial instruments
|
|
(1)
|
Non-derivative financial assets
|
|
(A)
|
Initial recognition of non-derivative financial assets
|
|
(B)
De-recognition of financial assets
|
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
|
|
(2)
|
Non-derivative financial liabilities
|
|
(A)
|
Initial recognition of financial liabilities
Debt instruments are recognized initially on the date that they are created. Financial liabilities are initially recognized at fair value plus all the attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.
|
|
(B)
|
De-recognition of financial instruments
Financial liabilities are derecognized when the obligation of the Company, as specified in the agreement, expires or when it is discharged or canceled.
|
|
(C)
|
Change in terms of debt instruments
An exchange of debt instruments having substantially different terms, between an existing borrower and lender are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability at fair value. Furthermore, a substantial modification of the terms of the existing financial liability or part of it, is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
|
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
|
|
(C)
|
Change in terms of debt instruments
(contd.)
The terms are substantially different if the discounted present value of the cash flows according to the new terms, including any commissions paid, less any commissions received and discounted using the original effective interest rate, is different by at least ten percent from the discounted present value of the remaining cash flows of the original financial liability.
In addition to the aforesaid quantitative criterion, the Company examines, inter alia, whether there have been changes also in various economic parameters inherent in the exchanged debt instruments, therefore exchanges of CPI-linked debt instruments with unlinked instruments are considered exchanges with substantially different terms even if they do not meet the aforementioned quantitative criterion.
|
|
(D)
|
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when the Company currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
|
|
(3)
|
Derivative financial instruments
|
|
(4)
|
CPI-linked assets and liabilities that are not measured at fair value
|
|
F.
|
Impairment
|
|
(1)
|
Financial assets
|
|
(2)
|
Non-monetary assets
|
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
|
|
G.
|
Employee benefits
|
|
(1)
|
Post-employment benefits
|
|
(A)
|
Defined contribution plans
|
|
(B)
|
Defined benefit plans
|
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
|
|
(2)
|
Short-term employee benefits
|
|
(3)
|
Other long-term employee benefits
|
|
(4)
|
Share-based payments
|
|
H.
|
Provisions
|
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
|
|
I.
|
Revenues
|
|
(1)
|
Revenues from services rendered are recognized in the statement of income proportionately over the term of the agreement or upon providing the service.
|
|
(2)
|
Income from rental of digital satellite decoders is attributed proportionately over the term of the agreement.
|
|
(3)
|
Receipts from customers for the installation of terminal equipment which do not provide the customers with separate value are recognized as income in the statement of income over the period of enjoyment of the economic benefits.
|
|
(4)
|
The Company charges a deposit for the digital satellite decoders rented by its customers. The customers are entitled to receive a proportional refund of the deposit upon termination of the agreement, according to the terms in the agreement. The revenues from deposit deductions are attributed to the statement of income, according to the terms of the agreements with the customers.
|
|
(5)
|
Commissions: When the Company acts in the capacity of an agent rather than as the principal in a transaction, the income recognized is the net amount of commission.
|
|
J.
|
Income tax expense
|
|
K.
|
Leased assets
|
|
L.
|
Loss per share
|
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
|
|
M.
|
Financing income and expenses
|
|
N.
|
Transactions with a controlling shareholder
|
|
O.
|
New standards and interpretations not yet adopted
|
|
(1)
|
The Company will apply the following standards and amendments to the standards (“the New Standards”) from January 1, 2013. The Company believes that the first application of these standards will not have a material effect on its financial statements:
|
|
(2)
|
IFRS 9 (2010),
Financial Instruments
(“the Standard”)
|
|
(3)
|
Amendment to IAS 32
Financial Instruments: Presentation
(“the Amendment”)
|
NOTE 4 – DETERMINATION OF FAIR VALUE
|
|
A.
|
Derivatives
|
|
B.
|
Non-derivative financial liabilities
|
NOTE 5 – THE FINANCIAL POSITION OF THE COMPANY
|
|
A.
|
Since commencing its operations, the Company has accumulated considerable losses. The Company’s losses for 2012 and 2011 amounted to NIS 310 million and NIS 230 million, respectively. As a result of these losses, the Company's capital deficit and working capital deficit at December 31, 2012 amounted to NIS 3,962 million and NIS 654 million, respectively.
|
B.
|
1.
|
In May 2012 a bond was signed by the Company and a number of institutional entities (“the Lenders”) whereby the Lenders would extend a loan to the Company in the sum of NIS 392 million (“the Bond”). The entire proceeds of the funds raised would be used to repay the long-term bank credit which the Company had obtained from the banks. The Company received the loan in July 2012 after compliance with the conditions precedent determined in the debentures.
|
|
2.
|
In October 2012, Standard & Poor's Maalot confirmed a rating of ilA- for the Company and for all its debentures with stable outlook.
|
|
3.
|
At December 31, 2012, the Company is in compliance with the financial covenants under the financing agreement and the debentures. See Note 27 for information about compliance with the covenants.
|
|
4.
|
The Company's management believes that the financial resources available to it, which include the working capital deficit and the scope of potential capital to be raised, will be sufficient for the Company’s operating needs in the coming year based on the forecasted cash flow approved by the Company’s board of directors. If additional resources are required to meet its operational requirements for the coming year, the Company will adapt its operations to preclude the need for additional resources beyond those available to it.
|
NOTE 6 – TRADE AND OTHER RECEIVABLES
|
December 31, 2012
|
December 31, 2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Trade receivables (1)
|
|
|||||||
Outstanding debts
|
36,185 | 34,395 | ||||||
Credit
card receivables
|
134,368 | 132,576 | ||||||
Less provision for doubtful debts
|
(7,510 | ) | (7,375 | ) | ||||
163,043 | 159,596 | |||||||
Other receivables (1)
|
||||||||
Prepaid expenses
|
420 | 853 | ||||||
Others
|
1,254 | 7,167 | ||||||
1,674 | 8,020 | |||||||
(1)Including trade and other receivables that are related and interested parties
|
2,326 | 1,944 |
NOTE 7 –BROADCASTING RIGHTS, NET
|
December 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Cost
|
758,847 | 621,199 | ||||||
Less - rights
used
|
381,498 | 290,627 | ||||||
377,349 | 330,572 |
NOTE 8 – PROPERTY, PLANT AND EQUIPMENT, NET
|
|
A.
|
Composition
|
Broadcasting and transmission equipment
|
installation costs
|
Digital satellite decoders
|
Office furniture and equipment (including computers)
|
Leasehold improvements
|
Total
|
|||||||||||||||||||
NIS thousands
|
||||||||||||||||||||||||
Cost
|
||||||||||||||||||||||||
Balance at January 1, 2011
|
237,123 | 1,554,996 | * | 1,643,899 | * | 94,642 | 45,644 | 3,576,304 | ||||||||||||||||
Additions during the year
|
6,980 | 77,449 | 127,461 | 13,731 | 1,338 | 226,959 | ||||||||||||||||||
Disposals during the year
|
- | (158 | ) | (502 | ) | (839 | ) | - | (1,499 | ) | ||||||||||||||
Balance at December 31, 2011
|
244,103 | 1,632,287 | * | 1,770,858 | * | 107,534 | 46,982 | 3,801,764 | ||||||||||||||||
Additions during the year
|
9,862 | 89,458 | 158,280 | 15,653 | 3,151 | 276,404 | ||||||||||||||||||
Disposals during the year
|
- | (428 | ) | (203,250 | ) | (184 | ) | - | (203,862 | ) | ||||||||||||||
Balance at December 31, 2012
|
253,965 | 1,721,317 | 1,725,888 | 123,003 | 50,133 | 3,874,306 | ||||||||||||||||||
Accumulated depreciation
|
||||||||||||||||||||||||
Balance at January 1, 2011
|
198,287 | 1,301,187 | * | 1,303,673 | * | 64,785 | 32,484 | 2,900,416 | ||||||||||||||||
Additions during the year
|
13,468 | 91,505 | 109,460 | 10,156 | 2,072 | 226,661 | ||||||||||||||||||
Disposals during the year
|
- | (158 | ) | (291 | ) | (818 | ) | - | (1,267 | ) | ||||||||||||||
Balance at December 31, 2011
|
211,754 | 1,392,534 | * | 1,412,842 | * | 74,123 | 34,557 | 3,125,810 | ||||||||||||||||
Additions during the year
|
12,053 | 83,644 | 97,826 | 10,448 | 2,047 | 206,018 | ||||||||||||||||||
Disposals during the year
|
- | (428 | ) | (202,399 | ) | (60 | ) | - | (202,887 | ) | ||||||||||||||
Balance at December 31, 2012
|
223,807 | 1,475,750 | 1,308,269 | 84,511 | 36,604 | 3,128,941 | ||||||||||||||||||
Carrying amount
|
||||||||||||||||||||||||
At January 1, 2011
|
38,836 | 253,809 | * | 340,226 | * | 29,857 | 13,160 | 675,888 | ||||||||||||||||
At December 31, 2011
|
32,349 | 239,753 | * | 350,016 | * | 33,411 | 12,425 | 675,954 | ||||||||||||||||
At December 31, 2012
|
30,158 | 245,567 | 417,619 | 38,492 | 13,529 | 745,365 |
|
B.
|
Collateral
|
|
C.
|
Credit acquisitions of property, plant and equipment
|
NOTE 9 – INTANGIBLE ASSETS, NET
|
Subscribers acquisition costs
|
Software licenses
|
Total
|
||||||||||
NIS thousands
|
||||||||||||
Cost
|
||||||||||||
Balance at January 1, 2011
|
253,754 | 180,629 | 434,383 | |||||||||
Additions during the year
|
21,240 | 39,950 | 61,190 | |||||||||
Balance at December 31, 2011
|
274,994 | 220,579 | 495,573 | |||||||||
Additions during the year
|
- | 47,869 | 47,869 | |||||||||
Disposals during the year
|
(119,707 | ) | - | (119,707 | ) | |||||||
Balance at December 31, 2012
|
155,287 | 268,448 | 423,735 | |||||||||
Accumulated depreciation
|
||||||||||||
Balance at January 1, 2011
|
219,436 | 132,178 | 351,614 | |||||||||
Additions during the year
|
34,692 | 15,040 | 49,732 | |||||||||
Balance at December 31, 2011
|
254,128 | 147,218 | 401,346 | |||||||||
Additions during the year
|
18,903 | 23,329 | 42,232 | |||||||||
Disposals during the year
|
(119,707 | ) | - | (119,707 | ) | |||||||
Balance at December 31, 2012
|
153,324 | 170,547 | 323,871 | |||||||||
Carrying amount
|
||||||||||||
At January 1, 2011
|
34,318 | 48,451 | 82,769 | |||||||||
At January 1, 2012
|
20,866 | 73,361 | 94,227 | |||||||||
At December 31, 2012
|
1,963 | 97,901 | 99,864 |
NOTE 10 - BANK CREDIT
|
December 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Short-term credit
|
69,322 | 441 | ||||||
Current maturities of bank loans
|
- | 85,557 | ||||||
Long-term loans from banks
|
- | 337,679 | ||||||
69,322 | 423,677 |
NOTE 11 – SUPPLIERS AND SERVICE PROVIDERS
|
December 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Open accounts
|
335,436 | 363,312 | ||||||
Notes and checks
|
61,136 | 45,986 | ||||||
396,572 | 409,298 | |||||||
Including related and interested parties suppliers
|
89,441 | 119,055 |
NOTE 12 – OTHER PAYABLES
|
December 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Employees and institutions with respect to wages
|
30,366 | 30,743 | ||||||
Provisions for vacation and convalescence pay
|
10,732 | 10,952 | ||||||
Interest payable for debentures
|
33,800 | 29,839 | ||||||
Deposits from customers, net
|
2,411 | 4,283 | ||||||
Institutions
|
40,227 | 39,061 | ||||||
Prepaid income
|
23,305 | 17,009 | ||||||
Others
|
31,571 | 35,173 | ||||||
172,412 | 167,060 |
NOTE 13 - PROVISIONS
|
December 31,
|
||||
2012
|
||||
NIS thousands
|
||||
Balance at January 1, 2012
|
40,647 | * | ||
Provisions created during the period
|
4,301 | |||
Provisions realized during the period
|
(31,889 | ) | ||
Provisions eliminated during the period
|
(6,884 | ) | ||
Effect of time lapse (linkage differentials)
|
25 | |||
Balance at December 31, 2012
|
6,200 |
NOTE 14 – DEBENTURES
|
December 31, 2012
|
|||||
% of nominal interest and linkage*
|
Redemption year
|
Redemption of original par value
|
Par value
|
Accounting value
|
|
NIS thousands
|
|||||
Debenture A
|
Linked + 8.4%
|
2012 – 2013
2014 – 2017
|
8%
17%
|
471,428
|
552,006
|
Debenture B
|
Linked + 5.85%
|
2013 – 2017
2018 – 2019
|
14%
15%
|
576,621
|
596,313
|
2012 Bond
|
Linked + 6.4%
|
2013 – 2017
2018 - 2022
|
8%
12%
|
392,000
|
390,826
|
|
A
.
|
The
Company
has a series of bonds which were issued to institutional investors in 2007 and were listed on the TACT-institutional system of the Tel Aviv Stock Exchange (“the Debentures (Series A”)) pursuant to a deed of trust between the Company and Hermetic Trust (1975) Ltd. (“Trustee A” and “Deed of Trust A”), respectively).
|
|
Deed of Trust A stipulates that the Company may register first liens in favor of holders of additional debentures which it might issue and/or add them to liens in favor of the trustee without agreement from the trustee, provided that the ratio between the Company's total debt (after issue of the above debentures and including the proceeds thereof) at the end of the quarter preceding the issue, and its EBITDA in the 12 months ending at the end of the last calendar quarter does not exceed 6.5. Deed of Trust A defines total debt as the Company's debts which are secured by a first lien, unlimited in amount, on all the Company's assets pari passu with the collateral created by the Company in favor of the holders of Debentures (Series A).
|
|
Moreover, Deed of Trust A defines various events (such as insolvency proceedings, breach and exercise of liens on most of the Company's assets), which, should they occur after the warning period stipulated in the deed, will allow immediate call for repayment, pursuant to the provisions in the Deed of Trust, and the right to immediate repayment of the bank collateral, or immediate repayment of another series of debentures issued by the Company, if its balance for settlement exceeds the amount set out in the deed.
|
|
In order to enable the rating of the Debentures (Series A) the Company
committed
towards S&P Maalot (and only to it) that it would not make repayment on account of the shareholder loans before the end of the life of the Debentures (Series A).
|
|
B.
|
The Company has a series of bonds which were issued to institutional investors in 2010 and were listed on the TACT-institutional system of the Tel Aviv Stock Exchange and expanded in 2011 and in 2012 (“the Debentures (Series B”)) pursuant to a deed of trust between the Company and Hermetic Trust (1975) Ltd. (“Trustee B” and “Deed of Trust B”), respectively).
|
NOTE 14 – DEBENTURES (CONTD.)
|
|
B.
|
(contd.)
|
NOTE 14 – DEBENTURES (CONTD.)
|
|
C.
|
In May 2012 a bond was signed by the Company and a number of institutional entities (“the Lenders”) whereby the Lenders extended a loan to the Company in the sum of NIS 392 million (“the 2012 Bond”). The loan was extended to the Company in July 2012, after compliance with the conditions precedent set out in the 2012 Bond and was used (together with the proceeds of the expansion of the Debentures (Series B) which was implemented in that year) to repay the long-term bank credit which the Company had received from the banks up to that date.
|
December 31, 2012
|
||||
NIS thousands
|
||||
2013
|
174,305 | |||
2014
|
239,916 | |||
2015
|
239,916 | |||
2016
|
239,916 | |||
2017
|
239,916 | |||
2018 and onwards
|
418,308 | |||
1,552,277 |
NOTE 15 – LOANS FROM SHAREHOLDERS
|
|
A.
|
Interest and |
December 31,
|
December 31,
|
|||||||
linkage |
2012
|
2011
|
|||||||
NIS thousands
|
NIS thousands
|
||||||||
Balance of the loans based on their nominal terms:
|
|
||||||||
Old shareholder loans (1)
|
Linked
|
2,340,213 | 2,306,939 | ||||||
New shareholder loans (2)
|
|||||||||
Loans granted until April 27, 2003
|
Linked and bearing 5.5% interest
|
439,974 | 411,047 | ||||||
Loans granted after April 27, 2003
|
Linked and bearing 11% interest
|
1,620,177 | 1,438,455 | ||||||
4,400,364 | 4,156,441 | ||||||||
Less – excess of amounts of loans over their fair value upon receipt, after cumulative reduction (at the effective interest rate) (3)
|
(1,314,622 | ) | (1,478,525 | ) | |||||
3,085,742 | 2,677,916 |
|
(1)
|
The loans do not have a repayment date.
|
|
(2)
|
The loans extended by some of the Company's shareholders from July 10, 2002 ("the New Shareholder Loans"), have preference over the Old Shareholder Loans. In accordance with the agreement, the New Shareholder Loans will be eligible for full settlement by the Company before any dividend is distributed by the Company and/or the repayment of the Old Shareholder Loans extended to the Company by the shareholders, and subject to the Company's cash flows and liabilities under the agreements with the banks and with some debenture holders. The new loans also have no repayment dates.
|
|
(3)
|
The shareholder loans are presented in the financial statements at their fair value when they are received. The fair value of the loans is determined according to the current value of the expected cash flows for repayment of the loans, taking into consideration the dates on which the shareholders may make a first demand for repayment of the loans (in accordance with the restrictions in the agreements with the banks and debenture holders), and the interest rates applicable to loans with similar risks upon receipt of the loans.
|
NOTE 15 – LOANS FROM SHAREHOLDERS (CONTD.)
|
|
A.
|
(contd.)
|
|
B.
|
In accordance with the agreement between the Company and its shareholders, the shareholders that provided the new shareholder loans were awarded rights to receive additional shares in the Company or warrants exercisable into Company shares pro rata to their contributions.
|
NOTE 16 – OTHER LONG-TERM LIABILITIES
|
December 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Open debts
|
56,900 | 18,767 | ||||||
Advance revenues
|
16,999 | 10,140 | ||||||
Total other long-term trade
liabilities
|
73,899 | 28,907 | ||||||
Open debts with related parties (1)
|
36,923 | 16,681 |
(1)
|
In September 2012 agreements were approved to defer part of the payments owed by the Company to Bezeq and Bezeq International by virtue of the previous debt restructuring arrangements between the Company and between them (NIS 27 million and NIS 6 million, respectively). Under the agreements the payments will be deferred for 18 months and in this period the payments will bear interest of prime + 4%.
|
|
* Reclassified – see Note 2.G regarding a change in classification.
|
NOTE 17 – EMPLOYEE BENEFITS
|
December 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Current value of obligations
|
10,210 | 11,797 | ||||||
Fair value of plan assets
|
(4,373 | ) | (5,626 | ) | ||||
Liability recognized for a defined benefit plan
|
5,837 | 6,171 | ||||||
Other liabilities
|
11,962 | 14,869 | ||||||
Total employee benefits
|
17,799 | 21,040 | ||||||
Presented under the following items:
|
||||||||
Other payables
|
11,962 | 14,869 | ||||||
Long-term employee benefits
|
5,837 | 6,171 | ||||||
17,799 | 21,040 |
|
A.
|
Change in the current value of the defined benefit obligations
|
2012
|
2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Balance of obligation in respect of a defined benefit plan at January 1
|
11,797 | 11,891 | ||||||
Current service cost
|
947 | 1,300 | ||||||
Financing expenses with respect to obligations
|
420 | 544 | ||||||
Actuarial losses (gains) recognized in other comprehensive income
|
2,276 | (307 | ) | |||||
Benefits paid according to the plan
|
(5,230 | ) | (1,631 | ) | ||||
Balance of obligation at end of year
|
10,210 | 11,797 |
NOTE 17 – EMPLOYEE BENEFITS (CONTD.)
|
|
B.
|
Change in plan assets
|
2012
|
2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Fair value of plan assets at January 1
|
5,626 | 5,195 | ||||||
Amounts deposited in the plan
|
945 | 649 | ||||||
Expected return on plan assets
|
193 | 256 | ||||||
Actuarial gains (losses) recognized in other comprehensive income
|
1,041 | (387 | ) | |||||
Benefits paid according to the plan
|
(3,432 | ) | (87 | ) | ||||
Fair value of plan assets at end of year
|
4,373 | 5,626 |
|
C.
|
Expense recognized in profit or loss
|
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Current service cost
|
947 | 1,300 | 1,346 | |||||||||
Interest for obligation
|
420 | 544 | 650 | |||||||||
Expected return on plan assets
|
(193 | ) | (256 | ) | (353 | ) | ||||||
1,174 | 1,588 | 1,643 |
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Cost of sales
|
520 | 715 | 738 | |||||||||
Selling
and marketing expenses
|
324 | 442 | 460 | |||||||||
General and administrative expenses
|
103 | 143 | 148 | |||||||||
947 | 1,300 | 1,346 |
NOTE 17 – EMPLOYEE BENEFITS (CONTD.)
|
|
D.
|
Actuarial gains and losses recognized directly in other comprehensive income
|
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Amount accrued at January 1
|
4,123 | 4,043 | 2,508 | |||||||||
Amount recognized during the year
|
1,235 | 80 | 1,535 | |||||||||
Amount accrued at December 31
|
5,358 | 4,123 | 4,043 |
|
E.
|
Main actuarial assumptions
|
2012
|
2011
|
2010
|
||||||||||
%
|
%
|
%
|
||||||||||
Discount rate at December 31
|
0.6 | 1.85 | 1.7 | |||||||||
Future salary increases
|
2 | 2 | 2 |
|
F.
|
Historical information
|
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Present value of the defined benefit obligation
|
10,210 | 11,797 | 11,891 | |||||||||
Fair value of plan assets
|
(4,373 | ) | (5,626 | ) | (5,195 | ) | ||||||
Deficit in the plan
|
5,837 | 6,171 | 6,696 |
|
G.
|
Post-employment benefit plans – defined contribution plan
|
Year ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Amount recognized as an expense in respect of a defined deposit plan
|
12,349 | 11,771 | 9,526 |
NOTE 18 – SHARE-BASED PAYMENTS
|
NOTE 19 – COMMITMENTS
|
|
1.
|
At December 31, 2012, the Company has agreements for the acquisition of broadcasting rights. In the year ended December 31, 2012, acquisition of these rights amounted to NIS 192 million.
|
|
2.
|
At December 31, 2012, the Company has agreements for the acquisition of channels. In the year ended December 31, 2012, expenses for use of channels acquired by the Company amounted to NIS 286 million.
|
|
3.
|
The Company has operational leasing contracts for the buildings it occupies. The primary lease expires in 2014, with an option to extend the lease for another five years. The rental fees are linked to the CPI. The Company also has several other leasing contracts for various periods.
The expected rent for the forthcoming years, calculated according to the rent on December 31, 2012, is as follows:
|
NIS thousands
|
||||
2013
|
10,735 | |||
2014 to 2016
|
11,727 |
|
4.
|
Operating lease
The Company has a number of operating lease agreements for periods of up to 36 months for the vehicles it uses. The balance of the contractual annual lease payments, calculated according to the payments in effect at December 31, 2012, is NIS 16 million.
|
|
5.
|
Royalties
In accordance with the terms of the license, the Company has a liability to pay royalties to the State of Israel, calculated on the basis of income from broadcasting services as defined in the relevant regulations.
In accordance with the Communications Regulations 2006, the rates of applicable royalties are as follows: 2011 – 1%, 2011 – 1.75%, 2012 – 1.75%. From 2013, the rate of royalties is 0%.
|
|
6.
|
Agreement with NDS Limited ("NDS"): The Company entered into several agreements with NDS to acquire services in respect of the Company's encoding, broadcasting and receiving systems and hardware for these services. In 2012 and 2011, the Company's payments to NDS amounted to NIS 38 million and NIS 35 million, respectively.
|
NOTE 19 – COMMITMENTS (CONTD.)
|
|
7.
|
In August 2000, the Company entered into in a three-way contract to purchase decoders from Eurocom Marketing (1986) Ltd. ("Eurocom") and Advanced Digital Broadcast Ltd ("ADB"). Eurocom is an interested party of the Company.
In 2012 and 2011, the Company's payments to Eurocom for the purchase of decoders amounted to NIS 89 and NIS 102 million, respectively.
The Company purchases HD Zapper decoders from another supplier under an agreement from August 2011. In 2012 the Company’s payments to this supplier totaled NIS 19 million while the Company has not yet paid this supplier for 2011.
|
|
8.
|
The Company entered into an agreement with Space Communications Ltd. to receive space segment capacity. The agreements are not dependent on the use of specific space segments and Space Communications Ltd. has the ability to supply the service by means of other space segments which meet the Company's requirements. The transaction is therefore presented as a transaction for the receipt of services. Space is an interested party of the Company.
In 2012 and 2011, the Company's payments to Space amounted to NIS 108 million and NIS 100 million, respectively.
|
|
9.
|
In October 2012 the Company signed a settlement agreement with the Union of Composers, Songwriters and Publishers of Israeli Music Ltd. ("ACUM"), regulating the disputes which had arisen between ACUM and the Company in relation to the sum of additional royalties owed by the Company (over and above the advance payment already made) for the years 2003 to 2011. The settlement agreement also determines the annual royalty rates to be paid by the Company for the years 2012 to 2016.
|
NOTE 20 – CONTINGENT LIABILITIES
|
|
1.
|
Guarantees
|
|
2.
|
Legal claims
|
|
A.
|
Employee claims
|
|
B.
|
Customer claims
|
NOTE 20 – CONTINGENT LIABILITIES (CONTD.)
|
|
2.
|
Legal claims (contd.)
|
|
C.
|
Supplier and communication provider claims
|
NOTE 21 – EQUITY
|
|
A.
|
Share capital
|
December 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
Number of shares and amount in NIS thousands
|
||||||||
Issued and paid in share capital
|
29 | 29 | ||||||
Registered capital
|
39 | 39 |
|
B.
|
Warrants for shareholders
|
NOTE 22 – COST OF REVENUES
|
Year ended December 31
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Wages, salaries and incidentals
|
145,811 | 148,746 | 148,545 | |||||||||
Content costs
|
317,301 | 277,505 | 350,688 | |||||||||
Utilized broadcasting rights
|
153,959 | 147,116 | 168,799 | |||||||||
Use of space segments
|
92,348 | 85,278 | 89,990 | |||||||||
Depreciation and amortization
|
201,541 | 220,180 | 237,260 | |||||||||
Car allowance
|
21,406 | 26,601 | 25,409 | |||||||||
Royalties
|
16,948 | 17,438 | 10,944 | |||||||||
Other
|
117,773 | 105,304 | 97,213 | |||||||||
1,067,087 | 1,028,168 | 1,128,848 |
NOTE 23 – SELLING AND MARKETING EXPENSES
|
Year ended December 31
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Wages, salaries and incidentals
|
61,665 | 41,662 | 29,805 | |||||||||
Advertising
|
70,435 | 61,846 | 67,624 | |||||||||
Marketing consultation
|
1,728 | 1,662 | 1,729 | |||||||||
Car allowance
|
9,180 | 8,561 | 8,786 | |||||||||
Depreciation and amortization
|
19,181 | 34,829 | 32,165 | |||||||||
Other
|
4,085 | 4,177 | 3,093 | |||||||||
166,274 | 152,737 | 143,202 |
NOTE 24 – GENERAL AND ADMINISTRATIVE EXPENSES
|
Year ended December 31
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Wages, salaries and incidentals
|
61,103 | 57,073 | 54,347 | |||||||||
Share-based payment
|
- | 889 | 2,460 | |||||||||
Professional consultation and fees
|
11,196 | 11,107 | 10,100 | |||||||||
Rental and maintenance fees
|
15,734 | 13,983 | 13,181 | |||||||||
Depreciation and amortization
|
27,528 | 21,384 | 15,307 | |||||||||
Provisions for doubtful and bad debts
|
1,116 | 1,933 | 805 | |||||||||
Subcontractors (mainly for system maintenance)
|
17,534 | 20,661 | 20,462 | |||||||||
Other
|
15,673 | 16,006 | 15,899 | |||||||||
149,884 | 143,036 | 132,561 |
NOTE 25 - FINANCING EXPENSES, NET
|
|
Recognized in profit or loss
|
Year ended December 31
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Income from interest on bank deposits
|
(817 | ) | (981 | ) | (316 | ) | ||||||
Change in fair value of financial assets at fair value through profit and loss
|
(140 | ) | (5,378 | ) | (351 | ) | ||||||
Other financing income
|
(902 | ) | (16,804 | ) | (8,646 | ) | ||||||
Financing income recognized in profit and loss
|
(1,859 | ) | (23,163 | ) | (9,313 | ) | ||||||
Expenses for shareholder loans
|
243,923 | 263,263 | 228,464 | |||||||||
Expenses for discounting of shareholder loans
|
163,904 | 114,266 | 90,035 | |||||||||
Change in fair value of financial assets at fair value through profit and loss
|
361 | 4,250 | 7,244 | |||||||||
Interest expenses for financial liabilities
|
110,250 | 114,649 | 127,544 | |||||||||
Expenses for linkage differences
|
21,887 | 31,283 | 19,449 | |||||||||
Expenses from exchange rate changes
|
6,021 | 6,221 | 277 | |||||||||
Other financing expenses
|
16,911 | 12,588 | 27,070 | |||||||||
Financing expenses recognized in profit and loss
|
563,257 | 546,520 | 500,083 | |||||||||
Net financing expenses recognized in profit and loss
|
561,398 | 523,357 | 490,770 |
NOTE 26 – INCOME TAX
|
|
B.
|
Tax assessments
|
|
C.
|
Effective tax rate
|
|
A.
|
The Company’s secured liabilities and guarantees are as follows:
|
December 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Debentures
|
1,539,145 | 1,178,300 | ||||||
Credit from banks (1)
|
69,322 | 423,677 | ||||||
Guarantees
|
41,709 | 41,302 |
|
1.
|
The Company is a party to a financing agreement with a bank consortium from May 23, 2001, which was amended and re-expressed in July 2012 (respectively: “the Bank Financing Agreement” or “the Financing Agreement” or “the Banks”). When the amended Financing Agreement took effect, the Company repaid all the long-term bank credit granted to it until that date, (see Note 14).
|
|
Under the Financing Agreement a current credit facility of NIS 170 million was granted to the Company until the end of 2015 as well as a hedging facility of USD 10 million. Use of these frameworks facilities is restricted to the Company's total working capital requirements calculated on the basis of the formula determined in the amended Financing Agreement which is dependent on the balance of the Company's receivables, its unused broadcasting rights, the depreciated cost of the decoders and its balance of payables pursuant to the financial statements.
|
|
Under the amended Financing Agreement, the Company has to comply with two financial covenants similar to the 2012 Bond every quarter – see Note 14 (C).
|
|
Under the amended Financing Agreement there are restrictions relating to repayment of shareholder loans and distributions which are set out in the 2012 Bond (as described in Note 14), This is instead of the restrictions which had been applicable until now in relation to repayment of shareholder loans and the prohibition on distributions.
|
|
The amended Financing Agreement also sets out grounds for immediate repayment, including various breaches of the Financing Agreement, engaging in non-communications activity, liquidation and receivership proceedings against the Company, cancellation or suspension of the broadcasting license, unauthorized changes of ownership, breach of material agreements defined in the Financing Agreement, immediate recall or the existence of grounds for immediate recall of amounts owed by the Company to debenture holders, other banks or financial institutions as well as non-compliance with the financial covenants set forth in the Financing Agreement. The amended Financing Agreement also stipulates that the creation of liens and raising of debt secured by liens (excluding exceptional instances) is conditional upon the receipt of consent from the banks.
The Financing Agreement also determines mechanisms for the raising and lowering of interest rates.
|
B.
|
1.
The Company created the following liens in favor of each one of Trustee A, Trustee B and the Lenders pursuant to the 2012 Bond (“the Institutional Lenders”):
|
|
1.1
|
Floating first liens, unlimited in amount, on all the Company's assets (excluding exceptions arising from the Communications Law), which contain a condition limiting the creation of additional liens (subject to the exceptions stipulated in the Financing Agreements);
|
|
1.2
|
Fixed first liens, unlimited in amount, on the Company's rights and assets including its rights under material agreements to which it is party, its unissued registered capital, its goodwill, certain intellectual property rights and insurance rights to which it is entitled under the insurance policy issued for it. These fixed liens will not apply to the exceptions arising from the provisions of the Communications Law.
|
|
2.
|
The Collateral is in the form of first liens equal (pari passu) to each other. The creation by the Company of additional liens in favor of the banks is subject to consent from the Institutional Lenders unless these liens are also recorded in favor of the Institutional Lenders. In the event that the Collateral is realized and/or the assets secured by the Collateral are realized, including by holders of other securities who receive a lien on those assets, the receipts from the exercise will be distributed pro rata among all the holders of the Collateral, whereby each holder will receive a proportionate share of the receipts equal to the proportionate share of the debt owed to it (as defined in the Financing and Debenture Agreements) divided by the total debt secured by said assets.
|
C.
|
Under the provisions of Deed of Trust B, if Bezeq gives Trustee B a guarantee for the Company's liabilities to the holders of Debentures (Series B), and as long as Bezeq's rating does not drop below its rating or its equivalent in another rating company (the higher of the two), then, henceforth the Collateral created by the Company in favor of Trustee B will be canceled, the
restriction
on the expansion of the series and the issue of additional securities secured by the same Collateral will be canceled, the restriction on the repayment of shareholder loans and distribution of dividends will be canceled, and some of the grounds for immediate repayment available to Trustee B under Deed of Trust B will also be canceled. Moreover, increases in interest caused by a rating downgrade, if any, will also be canceled.
|
NOTE 28 - FINANCIAL RISK MANAGEMENT
|
|
A.
|
General
|
|
·
|
Credit risk
|
|
·
|
Liquidity risk
|
|
·
|
Market risk
|
|
B.
|
Credit risk
|
|
C.
|
Liquidity risk
|
|
D.
|
Market risk
|
NOTE 29 - FINANCIAL INSTRUMENTS
|
|
A.
|
Credit risk
|
|
(1)
|
Exposure to credit risk
|
December 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
NIS thousands
|
||||||||
Trade receivables
|
163,043 | 159,596 | ||||||
Other receivables
|
1,254 | 7,167 | ||||||
164,297 | 166,763 |
|
(2)
|
Aging of debts and impairment losses
|
December 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
NIS thousands
|
||||||||
Not past due
|
154,240 | 154,211 | ||||||
Past due up to one year
|
8,984 | 8,749 | ||||||
Past due one to two years
|
2,106 | 4,788 | ||||||
Past due more than two years
|
6,477 | 6,390 | ||||||
171,807 | 174,138 | |||||||
Less provision for doubtful debts
|
(7,510 | ) | (7,375 | ) | ||||
Total
|
164,297 | 166,763 |
|
(3)
|
Changes in provision for doubtful and bad debts:
|
December 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
NIS thousands
|
||||||||
Balance at January 1
|
7,375 | 7,700 | ||||||
Increase (Decrease)
|
135 | (325 | ) | |||||
Balance at December 31
|
7,510 | 7,375 |
NOTE 29 - FINANCIAL INSTRUMENTS (CONTD.)
|
|
B.
|
Liquidity risk
|
December 31, 2012
|
||||||||||||||||||||||||||||
Carrying amount
|
Contractual cash flows
|
6 months or less
|
6-12 months
|
1-2 years
|
2-5 years
|
More than five years
|
||||||||||||||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||||||||||||||
Non-derivative financial liabilities:
|
||||||||||||||||||||||||||||
Credit from banks at variable interest
– on call
|
69,322 | 69,322 | 69,322 | |||||||||||||||||||||||||
Debentures, including accrued interest
|
1,572,945 | 1,987,962 | 85,754 | 194,999 | 334,506 | 900,536 | 472,168 | |||||||||||||||||||||
Loans from shareholders
|
3,085,742 | 4,400,364 | - | - | - | - | 4,400,364 | |||||||||||||||||||||
4,728,009 | 6,457,648 | 155,076 | 194,999 | 334,506 | 900,356 | 4,872,532 |
NOTE 29 - FINANCIAL INSTRUMENTS (CONTD.)
|
|
B.
|
Liquidity risk (contd.)
|
December 31, 2011
|
||||||||||||||||||||||||||||
Carrying amount
|
Contractual cash flows
|
6 months or less
|
6-12 months
|
1-2 years
|
2-5 years
|
More than five years
|
||||||||||||||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||||||||||||||
Non-derivative financial liabilities:
|
||||||||||||||||||||||||||||
Credit from banks at variable interest – on call
|
441 | 441 | 441 | - | - | - | - | |||||||||||||||||||||
Credit from banks at variable interest – long-term loan
|
86,334 | 97,392 | 12,558 | 13,123 | 25,220 | 46,491 | - | |||||||||||||||||||||
Credit from banks at fixed interest
|
343,017 | 393,446 | 36,062 | 55,655 | 106,607 | 195,122 | - | |||||||||||||||||||||
Debentures, including accrued interest
|
1,208,140 | 1,556,143 | 42,633 | 99,850 | 219,217 | 776,955 | 417,488 | |||||||||||||||||||||
Loans from shareholders
|
2,677,916 | 4,156,469 | - | - | - | - | 4,156,469 | |||||||||||||||||||||
4,315,848 | 6,203,891 | 91,694 | 168,628 | 351,044 | 1,018,568 | 4,573,957 |
NOTE 29 - FINANCIAL INSTRUMENTS (CONTD.)
|
|
C.
|
CPI and foreign currency risks
|
|
(1)
|
Foreign currency and CPI risk for the Company’s financial instruments are as follows:
|
December 31, 2012
|
||||||||||||||||||||
Unlinked
|
CPI-linked
|
In foreign currency or foreign currency linked (mainly USD)
|
Non-monetary items
|
Total
|
||||||||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||||||||
Current assets
|
||||||||||||||||||||
Trade receivables
|
161,722 | - | 1,321 | - | 163,043 | |||||||||||||||
Other receivables
|
1,252 | 2 | - | 420 | 1,674 | |||||||||||||||
Total current assets
|
162,974 | 2 | 1,321 | 420 | 164,717 | |||||||||||||||
Current liabilities
|
||||||||||||||||||||
Credit from banks
|
69,322 | - | - | - | 69,322 | |||||||||||||||
Current maturities for debentures
|
- | 174,305 | - | - | 174,305 | |||||||||||||||
Suppliers and service providers
|
252,250 | 1,404 | 142,918 | - | 396,572 | |||||||||||||||
Other payables
|
112,897 | 36,210 | - | 23,305 | 172,412 | |||||||||||||||
Provisions
|
1,299 | 4,901 | - | - | 6,200 | |||||||||||||||
Total current liabilities
|
435,768 | 216,820 | 142,918 | 23,305 | 818,811 | |||||||||||||||
Non-current liabilities
|
||||||||||||||||||||
Debentures
|
- | 1,364,840 | - | - | 1,364,840 | |||||||||||||||
Shareholder loans
|
- | 3,085,742 | - | - | 3,085,742 | |||||||||||||||
Other long-term liabilities
|
56,159 | 741 | - | 16,999 | 73,899 | |||||||||||||||
Total non-current liabilities
|
56,159 | 4,451,323 | - | 16,999 | 4,524,481 | |||||||||||||||
Surplus liabilities over assets
|
328,953 | 4,668,141 | 141,597 | 39,884 | 5,178,575 |
NOTE 29 - FINANCIAL INSTRUMENTS (CONTD.)
|
|
C.
|
CPI and foreign currency risks (contd.)
|
|
(1)
|
Foreign currency and CPI risk for the Company’s financial instruments are as follows: (contd.)
|
December 31, 2011*
|
||||||||||||||||||||
Unlinked
|
CPI-linked
|
In foreign currency or foreign currency linked (mainly USD)
|
Non-monetary items
|
Total
|
||||||||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||||||||
Current assets
|
||||||||||||||||||||
Cash and cash equivalents
|
13,325 | - | - | - | 13,325 | |||||||||||||||
Trade receivables
|
159,128 | - | 468 | - | 159,596 | |||||||||||||||
Other receivables
|
7,165 | 2 | - | 853 | 8,020 | |||||||||||||||
Total current assets
|
179,618 | 2 | 468 | 853 | 180,941 | |||||||||||||||
Current liabilities
|
||||||||||||||||||||
Borrowings from banks
|
85,998 | - | - | - | 85,998 | |||||||||||||||
Current maturities for debentures
|
- | 57,494 | - | - | 57,494 | |||||||||||||||
Suppliers and service providers
|
277,987 | 7,004 | 124,307 | - | 409,298 | |||||||||||||||
Other payables
|
93,759 | 40,238 | 16,054 | 17,009 | 167,060 | |||||||||||||||
Provisions
|
34,690 | 5,957 | - | - | 40,647 | |||||||||||||||
Total current liabilities
|
492,434 | 110,693 | 140,361 | 17,009 | 760,497 | |||||||||||||||
Non-current liabilities
|
||||||||||||||||||||
Debentures
|
- | 1,120,806 | - | - | 1,120,806 | |||||||||||||||
Bank loans
|
337,679 | - | - | - | 337,679 | |||||||||||||||
Shareholder loans
|
- | 2,677,916 | - | - | 2,677,916 | |||||||||||||||
Other long-term liabilities
|
16,681 | 2,085 | - | 10,141 | 28,907 | |||||||||||||||
Total non-current liabilities
|
354,360 | 3,800,807 | - | 10,141 | 4,165,308 | |||||||||||||||
Surplus liabilities over assets
|
667,176 | 3,911,498 | 139,893 | 26,297 | 4,744,864 |
|
(2)
|
CPI and material currencies:
|
December 31
,
|
December 31,
|
Change (%)
|
Change (%)
|
|||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
CPI in points
|
117.87 | 115.97 | 1.64 | 2.16 | ||||||||||||
USD exchange rate per 1 USD
|
3.733 | 3.821 | (2.3 | ) | 7.7 | |||||||||||
Euro exchange rate per 1 Euro
|
4.921 | 4.938 | (0.34 | ) | 4.2 |
NOTE 29 - FINANCIAL INSTRUMENTS (CONTD.)
|
|
D.
|
Interest rate risk
|
Carrying amount
|
Carrying amount
|
|||||||
2012
|
2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Fixed-interest instruments
|
|
|||||||
Other receivables
|
271 | - | ||||||
Financial liabilities
|
3,678,513 | 4,199,234 | ||||||
Total
|
3,678,242 | 4,199,234 | ||||||
Variable-interest instruments
|
||||||||
Financial liabilities
|
36,923 | 86,775 |
|
E.
|
Fair value compared to carrying amount
|
2012
|
2011
|
|||||||||||||||
Carrying amount
|
Fair value
|
Carrying amount
|
Fair value
|
|||||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
|||||||||||||
Bank loans
|
69,322 | 69,322 | 423,235 | 405,664 | ||||||||||||
Debentures, including accrued interest
|
1,572,945 | 1,706,884 | 1,208,140 | 1,138,728 | ||||||||||||
1,642,267 | 1,776,206 | 1,631,375 | 1,544,392 |
|
F.
|
Derivative financial instruments
|
NOTE 29 - FINANCIAL INSTRUMENTS (CONTD.)
|
|
G.
|
Sensitivity analysis
|
|
(1)
|
Sensitivity to changes in the CPI
|
Deviation rate from inflationary target
|
10% | 5% | (5%) | (10%) | ||||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
|||||||||||||
Effect on equity and net profit
|
(9,600 | ) | (4,800 | ) | 4,800 | 9,600 |
Deviation rate from inflationary
target
|
10% | 5% | (5%) | (10%) | ||||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
|||||||||||||
Effect on equity and net profit
|
(7,680 | ) | (3,840 | ) | 3,840 | 7,680 |
|
(2)
|
Sensitivity analysis of changes in exchange rates
|
Rate of change in NIS/USD
|
10% | 5% | (5%) | (10%) | ||||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
|||||||||||||
Effect on equity and net profit
|
(13,876 | ) | (6,938 | ) | 6,938 | 13,876 |
Rate of change in NIS/USD
|
10% | 5% | (5%) | (10%) | ||||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
NIS thousands
|
|||||||||||||
Effect on equity and net profit
|
(13,990 | ) | (6,995 | ) | 6,995 | 13,990 |
NOTE 30 – TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
|
|
A.
|
Transactions with interested and related parties
|
December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
NIS thousands
|
NIS thousands
|
NIS thousands
|
||||||||||
Revenues
|
376 | 1,446 | 1,165 | |||||||||
Cost of revenues (1)
|
104,129 | 98,729 | 101,251 | |||||||||
General and administrative expenses
|
4,015 | 2,075 | 2,376 | |||||||||
Financing expenses
|
412,495 | 384,074 | 320,032 | |||||||||
Salary and benefits for interested parties employed by the Company
|
2,815 | 3,682 | 5,802 |
|
(1)
|
The expenses consist primarily of space leasing costs from an interested party, (see Note 19).
|
|
B.
|
Balances with related parties
|
December 31, 2012
|
December 31, 2011
|
|||||||
NIS thousands
|
NIS thousands
|
|||||||
Loans from shareholder
(see Note 15)
|
3,085,742 | 2,677,916 | ||||||
Current liabilities
|
89,441 | 119,055 | ||||||
Non-current liabilities
|
36,923 | 16,681 | ||||||
Receivables and debtit balances
|
2,326 | 1,944 |
|
B COMMUNICATIONS LTD.
|
||
|
|
|
|
|
By:
|
/s/ Doron Turgeman |
|
|
|
Doron Turgeman
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
By:
|
/s/ Ehud Yahalom |
|
|
|
Ehud Yahalom
|
|
|
|
Principal Financial Officer
|
|
1.
|
Interpretation
|
2.
|
Company purposes
|
3.
|
Limitation of liability
|
4.
|
Articles of Association
|
5.
|
Share capital
|
6.
|
Recapitalization; change in rights
|
7.
|
Ownership of shares
|
8.
|
Share certificates
|
9.
|
Transfer and transmission of shares
|
10.
|
Rights attached to shares
|
11.
|
Corporate bodies of the Company
|
12.
|
The general meeting and its powers
|
13.
|
Annual general meetings
|
14.
|
Extraordinary meetings
|
15.
|
Notices of general meeting
|
16.
|
Proceedings at the general meeting
|
17.
|
Chairman of the general meeting
|
18.
|
Voting at the general meeting
|
19.
|
Resolutions at the general meeting
|
20.
|
Number and appointment of directors
|
21.
|
Remuneration of directors
|
22.
|
Powers of the board of directors
|
23.
|
Chairman of the board of directors
|
24.
|
Convening the board of directors
|
25.
|
Meeting of the board of directors
|
26.
|
Voting at the board of directors
|
27.
|
Committees of the board of directors
|
28.
|
Audit committee
|
29.
|
General manager
|
30.
|
Officers of the company
|
31.
|
Liability insurance, indemnification and exemption
|
32.
|
Internal auditor and auditor
|
33.
|
Distribution, dividend distribution and bonus shares
|
34.
|
Calls of shares
|
35.
|
Forfeiture
|
36.
|
Register of Shareholders
|
37.
|
Register of substantial shareholders and additional register of shareholders outside Israel
|
38.
|
Stamp, seal and signature rights
|
39.
|
Accounts
|
40.
|
Charitable contributions
|
41.
|
Minutes
|
42.
|
Notices
|
43.
|
Liquidation
|
44.
|
Exceptional Holdings; Compliance with the Communications Order
|
1.
|
Interpretation
|
“These Articles” or “the Articles”
|
|
Shall mean these Articles of Association as set forth herein or as amended by the shareholders from time to time;
|
||
"Administrative Proceeding"
|
A proceeding instituted pursuant to (a) Chapter H3 of the Securities Law, “Imposition of Monetary Sanctions by the Securities Authority”; (b) Chapter H4 of the Securities Law, “Imposition of Administrative Enforcement Sanctions by the Enforcement Committee”; (c) Chapter I1 of the Securities Law, “Arrangement for the Avoidance of Proceedings or Termination of Proceedings, which is Subject to Conditions”; or (d) Chapter I4(d) of the Companies Law;
|
|||
The “Company”
|
|
Shall mean B Communications Ltd.;
|
||
The “Board of Directors”
|
|
Shall mean the Board of Directors of the Company, appointed in accordance with the provisions of these Articles;
|
||
The “Companies Law” or the “Law”
|
|
The Companies Law 5759-1999, as amended from time to time;
|
||
The "Communications Law"
|
-
|
The Israeli Communications Law (Telecommunications and Broadcasting), 1982;
|
||
The "Communications Order"
|
The Israeli Communications Order (Telecommunication and Broadcasting) (Determination of Essential Service Provided by "BEZEQ" - the Israel Telecommunication Corp., Limited), 5757-1997, issued by the Israeli Minister of Communications, as amended from time to time;
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The “Securities Law”
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Shall mean the Securities Law, 5728-1968, as amended from time to time;
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The “Office”
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Shall mean the office of the Company, as registered from time to time;
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The “Shareholders Register”
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Shall mean the shareholders register that should be maintained in accordance with the Law and the provisions of these Articles;
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“Writing”
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Shall mean print, photocopy, telegram, telex, facsimile, email and any other form of writing, creation or imprint of words in a visible form;
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“Ordinary Resolution”
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A resolution adopted at a general meeting (whether annual or extraordinary) by a majority of the voters (without taking into account abstentions);
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"Bezeq"
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"Bezeq" the Israeli Telecommunications Corporation Ltd.;
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“Exceptional Holdings (or Excess Holdings)”
(Hakhzakot Khorgot)
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Shall have the meaning assigned to such term in the Communications Order, for so long as the Communications Order applies to the Company;
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“Means of Control”
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Any of the following: (1) the right to vote at a General Meeting of the Company; (2) the right to appoint a Director or General Manager of the Company; (3) the right to participate in the profits of the Company; or (4) the right to a share of the remaining assets of the Company after payment of its debts upon liquidation;
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The "Ministers"
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-
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Shall have the meaning assigned to such term in the Communications Order;
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"Principal Shareholder"
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-
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A Person holding, directly or indirectly, 5% or more of the issued share capital of the Company.
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2.
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Company Purposes
The Company may engage in any lawful activity.
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3.
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Limitation of Liability
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(a)
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The liability of a shareholder of the Company shall be limited to the amount due by such holder in respect of his shares, and in any event no less than the nominal value of each of such holder’s shares.
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(b)
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In the event that the Company issues shares for a consideration lower than their nominal value, as stipulated in Section 304 of the Law (the “
Reduced Consideration
”), the holder of such shares shall only be liable for payment of the Reduced Consideration with respect to shares issued to him as mentioned above.
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4.
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Articles of Association
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(a)
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The Company may amend the Articles by an Ordinary Resolution at the general meeting of the Company, subject to Article 20(l).
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(b)
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Any amendment of the Articles abrogating the rights of any particular class of shares shall require consent of the meeting of shareholders of such class. Notwithstanding the provisions of this section, an alteration of the Articles requiring a shareholder to purchase further shares or to increase the scope of his liability shall not bind the shareholder without his consent.
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5.
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Share Capital
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(a)
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The registered share capital of the Company is NIS 5,000,000, divided into 50,000,000 ordinary shares, nominal value NIS 0.1 each (the “
Shares
” or “
Ordinary Shares
”).
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(b)
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All Ordinary Shares rank pari passu with one another for all intents and purposes, and each Ordinary Share confers upon its holder the following rights:
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[1]
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The right to be invited to and participate in the general meetings of shareholders of the Company, and the right to one vote with respect to every Ordinary Share at each general meeting of the Company in which the holder participates;
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[2]
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The right to receive dividends and bonus shares if and when distributed, pro rata to the nominal value of the Shares, and regardless of any premium paid with respect thereto;
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[3]
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The right to participate in the distribution of the Company’s assets after liquidation, according to such holder’s pro rata holding out of the Company’s issued and outstanding share capital;
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(c)
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Notwithstanding the above, the Company may create shares of different classes as provided in these Articles and in accordance with the law.
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6.
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Recapitalization; Change in Rights
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(a)
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The general meeting of shareholders of the Company may, by an Ordinary Resolution, and subject to the provisions of Section 46B of the Securities Law and subject to any other applicable law:
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[1]
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Increase its share capital by an amount as may be resolved, by the creation of new shares, under the terms and which will confer the rights as may be resolved. Such a resolution may be adopted regardless of whether all the existing shares have been issued or resolved to have been issued.
Unless otherwise resolved in the resolution of the general meeting to increase the share capital, any new share capital shall be deemed part of the Company’s original share capital and shall be subject to the same Articles with regard to calls on shares, liens, transfer, ownership, forfeiture or any other provisions governing the original share capital;
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[2]
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To consolidate any or all of the share capital of the Company and to divide it into shares of larger nominal value, and if the Shares have no nominal value – into a smaller number of Shares, provided however that this does not alter the proportion of the holdings of issued share capital;
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[3]
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To divide any or all of the share capital of the Company into Shares of smaller nominal value, and if the Shares have no nominal value – into a smaller number of Shares, provided however that this does not alter the proportion of the holdings of issued share capital;
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[4]
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Change, cancel, convert, extend, add to or otherwise alter the rights, preferences, privileges, restrictions and provisions, whether attached at such time to Company Shares or not;
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[5]
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Cancel unissued registered share capital, provided that there is no obligation by the Company, including a conditional obligation, to issue any of these Shares;
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[6]
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To reduce the share capital in the manner, under the terms and subject to the authorizations as required by the Law;
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(b)
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The creation or issuance of additional Shares of the same class shall not be deemed an abrogation or change of the rights of such particular class of Shares, except as provided in the terms of issuance of such Shares.
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(c)
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Any amendment, conversion, cancellation, expansion, addition to or other change in the rights, preferences, privileges, restrictions or provisions attached to any particular class of shares issued to shareholders of the Company, shall require the written consent of holders of all issued shares of such particular class, or authorization by an Ordinary Resolution adopted at an Extraordinary Meeting of such class.
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(d)
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The provisions of these Articles relating to general meetings shall,
mutatis mutandis
, apply to any general meeting of the holders of a particular class of shares.
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(e)
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In order to effectuate any such resolution, the Board of Directors may settle any difficulty that may arise, at its discretion. Without derogating from the powers of the Board of Directors as mentioned above, in the event that a capital consolidation creates fractional shares, the Board of Directors may:
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[1]
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Sell all the fractional shares, and for this purpose appoint a trustee in whose name the share certificates with respect to such fractional shares shall be issued and who will sell these shares, and the proceeds of the sale, less commission and expenses, shall be divided among the entitled shareholders;
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[2]
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To issue to each shareholder who would have, after the consolidation, been entitled to a fractional share, paid-up shares of the class that such holder had prior to the consolidation, in such number that together with the fractional share, will create one whole share, and such issuance shall be deemed to have been effected immediately prior to the consolidation;
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[3]
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To determine that the shareholders shall not be entitled to receive a consolidated share with respect to a fractional consolidated share arising from the consolidation of half (or less) the number of shares whose consolidation creates one whole consolidated share, and that they shall be entitled to receive a consolidated share with respect to a fractional consolidated share arising from the consolidation of more than half of the number of shares whose consolidation creates one whole consolidated share;
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[4]
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In the event that action in accordance with Sections (2) or (3) above requires the issuance of additional shares, the payment with respect to such shares shall be effected in the same manner as the payment of bonus shares. Consolidation and subdivision as stated above shall not be deemed alteration of the rights attached to the consolidated or subdivided shares.
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(f)
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In the event of consolidation of shares into shares of greater nominal value, the Board of Directors may determine arrangements in order to settle any difficulty that may arise in connection with such consolidation, and in particular may determine which shares shall be consolidated into any particular share, and in the event of consolidation of shares that are owned by several holders, the Board of Directors may determine the arrangements for the sale of the consolidated share, the method of sale and the method in which the net proceeds shall be divided, and to appoint a person who will effect the transfer, and any action carried out by such person shall have full force and effect and may not be challenged.
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(g)
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The Board of Directors shall be responsible for the securities of the Company and may issue or grant such securities at its discretion, subject to the law and the provisions of these Articles. The Board of Directors may:
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[1]
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Issue or grant shares and other securities, convertible or exercisable into shares, up to the Company’s registered share capital, including the issuance (or otherwise handle them) for cash or non-cash consideration, subject to such conditions and terms, and whether at a premium, nominal value or discount, and at such dates as the Board of Directors may see fit;
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[2]
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Resolve to issue a series of debentures, as part of the power of the Board of Directors to take loans on behalf of the Company, and up to the limit of such power;
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(h)
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Unless the Company otherwise resolves in an Ordinary Resolution, in the event that a private placement is offered to a shareholder of the Company, there is no obligation to make a similar offer to all other shareholders of the Company. The Board of Directors may offer securities of the Company to any person at its discretion, whether or not any or all of the Offerees are holders of securities of the Company, and all in accordance with the provisions of the law, these Articles and the agreements by which the Company is bound at the time of such issuance.
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(i)
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Upon issuance of shares, the Board of Directors may designate different terms for different shareholders with respect to the consideration, the calls on shares and/or the dates of payment.
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7.
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Ownership of Shares
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(a)
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The Company shall be entitled to treat the person registered as the holder of any share, as the absolute owner thereof, and accordingly, shall not be bound to acknowledge any trust or other right, whether at law or in equity, of any other person to or in respect of such share, except subject to an order by a competent court or as otherwise required by law. The foregoing shall not apply to a nominee company, as defined by law.
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(b)
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In the event that the Company receives an application to be registered as a shareholder from a person who has shares registered to his name with a member of the stock exchange, and such shares are registered in the Register of Shareholders in the name of a nominee company, the Company shall register such person in the Register of Shareholders subject to all of the following conditions:
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[1]
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The applicant provided the Company with an undertaking from such stock exchange member to notify the Company of the applicant’s new holdings immediately upon performance of any action that alters his holdings in the relevant shares;
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[2]
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The applicant has provided the Company with a written undertaking to notify the Company of any such actions;
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(c)
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If two or more persons are registered together as holders of a share, each one of them shall be permitted to give receipts binding all the joint holders for dividends, shares, bonus shares, share certificates, debentures, warrants or other monies or rights received from the Company in connection with the share, even if such dividends, shares, bonus shares, share certificates, debentures, warrants or other monies or rights were delivered to another of the joint holders.
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(d)
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The Company may at any time pay commission to any person with respect to his conditional or unconditional signature or agreement sign on any share, debenture or series of debentures of the Company or with respect to his conditional or unconditional consent to cause any third party to sign any share, debenture or series of debentures of the Company, all in accordance with the provisions of the law.
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(e) | ||
[1]
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The executors or administrators of a deceased shareholder, or in the absence of same, his entitled heirs, shall be the only persons recognized by the Company as having any title to or interest in the shares registered in the name of such holder.
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[2]
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In case of a share jointly registered to several holders, then, subject to the provisions of the law, the surviving joint holders alone shall be recognized by the Company as having any title to or interest in the share.
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[3]
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A joint holder may transfer his joint-ownership in accordance with the provisions of these Articles.
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[4]
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In case of a shareholder that is a corporate entity under receivership or liquidation, the Company may recognize the receiver or liquidator of such shareholder as having title or interest in such holder’s shares, and in the case of a legally incompetent, the Company may recognize his guardian, or, if such person who is in bankruptcy, his trustee.
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(f)
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Any person becoming entitled to a share in consequence of the death of a shareholder, upon producing evidence of the grant of probate or letters of administration or declaration of succession, demonstrating that such person is entitled to the shares of the deceased shareholder, may elect either to be registered himself as the holder of the share or, subject to Board of Directors approval in accordance with these Articles, transfer such shares.
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8.
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Share Certificates
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(a)
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Each share certificate issued by the Company shall bear the seal of the Company and the signatures of two directors, or the signature of the general manager of the Company and one director or such other person as the Board of Directors may designate.
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(b)
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Each shareholder shall be entitled to receive from the Company, within six months from the date of issuance or registration of transfer, one share certificate in respect of all of the shares registered in his name and fully paid up, or, if approved by the Board of Directors, several share certificates, each for one or more of such shares.
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(c)
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Each share certificate shall denote the serial numbers of the shares represented thereby and any other detail that the Board of Directors may deem important or that must be denoted in accordance with the law.
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(d)
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A share certificate denoting two or more persons as joint owners of the shares represented thereby shall be delivered to the person first named on the Register of Shareholders in respect of such joint ownership, and the Company shall not be obligated to issue more than one certificate to all joint holders; a certificate delivered to any one of the joint holders shall be deemed to have been delivered to all of them.
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(e)
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A share certificate defaced, lost or destroyed may be replaced upon furnishing of evidence to the satisfaction of the Board of Directors, proving such defacement, loss or destruction and subject to the submission to the Company of securities against all possible damages as the Board of Directors may think fit, and all against payment, if imposed.
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(f)
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The Company may issue share warrants in place of registered shares. Where a share warrant is issued in place of a share registered under a person’s name, the share shall be registered in the Register of Shareholders as a bearer share, and the name of the shareholder shall be removed from the Register of Shareholders.
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(g)
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A shareholder in lawful possession of a share warrant may return the warrant to the Company for the purpose of its cancellation and conversion into a share registered under his name; upon cancellation, the name of the shareholder shall be entered in the Register of Shareholders, noting the number of shares registered under his name.
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9.
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Transfer and Transmission of Shares
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(a)
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No transfer of shares of the Company shall be entered in the Register of Shareholders except subject to one of the alternatives stipulated in Section 299 of the Companies Law, as provided in Article 36(d) herein.
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(b)
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A deed of transfer with respect to a share of the Company shall be signed by the transferor and the transferee, and the transferor shall be deemed the shareholder as long as the transferee has not been entered in the Register of Shareholders with respect to the transferred share.
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(c)
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The deed of transfer shall be in the following form or in any form as similar to the following as possible, or in any other form as may be approved by the Board of Directors:
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Transferor
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Transferee
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Witness
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Witness
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(d)
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Together with the deed of transfer, the Company should also receive any other document (including the certificate of the transferred share) as the Board of Directors may require for this purpose. In the event that the transfer is approved, all such documents shall remain with the Company.
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(e)
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A transfer of shares that have not been fully paid up shall have no effect unless authorized by the Board of Directors. The Board of Directors may, at its absolute discretion and without being required to provide any explanation, withhold its consent to a transfer of shares that have not been fully paid up.
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(f)
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Every deed of transfer shall be submitted to the Office for registration. Registered deeds of transfer shall remain in the hands of the Company; deeds of transfer that the Board of Directors shall refuse to register due to reasons stipulated in these Articles or by law, shall be returned, upon demand, to the person that submitted them, together with the share certificate (if submitted).
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10.
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Rights Attached to Shares
In addition to the rights of shareholders as stipulated in Article 5(b) above, each shareholder of the Company shall be entitled to the following:
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(a)
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Shareholders shall have the right to inspect the following documents of the Company:
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[1]
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Minutes of the general meetings;
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[2]
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The Register of Shareholders and the register of substantial shareholders of the Company;
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[3]
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These Articles, as amended from time to time;
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[4]
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Any document which the company is required to file under the Law and under any law with the Companies Registry or the Securities Authority, available for public inspection at the Companies Registry or the Securities Authority, as the case may be;
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(b)
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A shareholder shall be entitled to require from the Company inspection of any document in its possession, indicating for what purpose, in event that the document relates to an act or transaction requiring the consent of the general meeting under the provisions of sections 255 and 268 to 275 of the Law.
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(c)
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The Company may refuse the request of the shareholder if in its opinion the request was not made in good faith or the documents requested contain a commercial secret or a patent, or disclosure of the documents could prejudice the best interest of the Company in some other way.
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11.
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Corporate bodies of the Company
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(a)
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The corporate bodies of the Company are:
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[1]
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The general meeting of shareholders;
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[2]
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The Board of Directors;
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[3]
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The general manager;
The acts and intentions of a company’s corporate body shall be the acts and intentions of the Company.
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(b)
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The corporate bodies of the Company shall have the following powers:
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[1]
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The general meeting shall have the powers stipulated in Article 12 herein.
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[2]
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The Board of Directors shall have the powers stipulated in Article 22 herein.
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[3]
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The general manager shall have the powers stipulated in Article 29 herein.
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(c)
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Unless otherwise expressly stated in these Articles, the Board of Directors may delegate any power of the Company that is not assigned to the Board by law or by these Articles, to any other corporate body of the Company.
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(d)
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The general meeting may assume powers conferred on the Board of Directors and/or any other corporate body of the Company with respect to any matter that is essential for the proper management of the Company and/or any action that in the discretion of the general meeting is required for the best interest of the Company and/or any matter whatsoever provided that such powers are assumed for a period that is required under the circumstances.
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(e)
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The Board of Directors may assume powers conferred on the general manager with respect to any matter that is essential for the proper management of the Company and/or any action that in the discretion of the Board of Directors is required for the best interest of the Company and/or any matter whatsoever provided that such powers are assumed for a period that is required under the circumstances.
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12.
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The General Meeting and its Powers
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(a)
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Resolutions of the company in respect of the following matters shall be passed by the general meeting:
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[1]
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Revisions of the Articles, as provided in Article 4 above;
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[2]
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Exercise of the powers of the Board of Directors in the event that the Board of Directors is unable to exercise such powers, as provided in Section 52(a) of the Companies Law or as set forth in Section 11(e) above;
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[3]
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Appointment of the Company’s auditor, the terms under which he shall be retained and termination of his appointment in accordance with the provisions of Article 32 herein;
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[4]
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Appointment of outside directors in accordance with the provisions of Section 239 of the Companies Law and Article 20(i) herein;
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[5]
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Approval of actions and transactions requiring approval of the general meeting in accordance with the law;
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[6]
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Increase or reduction of the registered share capital, as provided in Article 6 above;
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[7]
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Merger, in accordance with Section 320(a) of the Companies Law;
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(b)
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The provisions of the law with respect to the dates on which the general meeting should convene, the method by which it should be convened, the business to be considered at a general meeting, quorum, notices, voting, minutes, etc., shall apply to general meetings, extraordinary meetings and class meetings, unless otherwise expressly stated in these Articles, and in accordance with the provisions of the law.
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13.
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Annual General Meeting
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(a)
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The Company shall hold an annual general meeting every year no later than on the expiry of fifteen months from the previous annual general meeting.
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(b)
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The agenda at an annual general meeting shall include:
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[1]
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a discussion of the financial reports and of the report of the Board of Directors;
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[2]
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appointment of directors and setting their remuneration;
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[3]
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appointment of an auditor;
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[4]
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any matter included in the agenda by the Board of Directors;
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[5]
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Any matter that the Board of Directors was requested to include in the agenda by one or more shareholders with at least one percent of the voting rights at the general meeting, provided that it is appropriate to discuss such a matter in the general meeting;
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14.
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Extraordinary Meetings
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(a)
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The Board of Directors may resolve to convene an extraordinary general meeting, and shall so convene at the demand of any one of the following:
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[1]
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two directors or one-quarter of the directors in office;
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[2]
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one or more shareholders with at least five percent of the issued share capital and at least one percent of the voting rights in the company, or one or more shareholders with at least five percent of the voting rights in the Company.
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(b)
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The agenda at an extraordinary general meeting shall be fixed by the Board of Directors and shall also include matters in respect of which the convening of the extraordinary general meeting is required under Article 14(a) above, as well as any matter requested by a shareholder as provided in Article 13(b)(5) above.
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(c)
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In the event that the Board of Directors is required to convene an extraordinary meeting as stipulated in Article 14(a) above, the Board of Directors shall, within twenty one days from receiving such requirement, call the meeting as stipulated below for a date as will be designated in the notice that will be provided to the shareholders in accordance with Article 15 herein.
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15.
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Notices of General Meetings
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(a)
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The Company shall designate the date of record with respect to entitlement to receive notices of general meetings and participate and vote at such meetings, in accordance with the Companies Law and the regulations promulgated thereunder.
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(b)
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Subject to the provisions of Section 69 of the Companies Law, notice of a general meeting of shareholders shall be provided to all eligible shareholders only by publication in two daily Hebrew language newspapers in Israel that have a reasonably-sized readership.
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16.
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Proceedings at the General Meeting
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(a)
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The general meeting may discuss any business in accordance with the Law and these Articles, and any matter on the agenda as detailed in the notice calling such meeting.
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(b)
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The quorum for any shareholders meeting shall include the presence, in person or by proxy, of shareholders holding or representing, in the aggregate, at least one third of the voting rights.
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(c)
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No business shall be considered or determined at a general meeting, unless the requisite quorum is present within half an hour from the time appointed for the general meeting. If within half an hour from the time appointed for the general meeting a quorum is not present, the general meeting shall stand adjourned to the same day one week thereafter, at the same time and place, or to such other time as designated in the notice for such meeting (“
Adjourned Meeting
”).
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(d)
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If within half an hour from the time appointed for the Adjourned Meeting a quorum as stipulated in Article 16(b) is not present, any number of shareholders present shall represent a quorum.
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(e)
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Notwithstanding the provisions of Article 16(d) above, if a general meeting is convened following demand of shareholders as provided in Article 14(a)(2) above or in accordance with Section 64 of the Law, the Adjourned Meeting shall take place only if there are present at least the number of shareholders required to convene a meeting as provided in Article 14(a)(2) above.
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(f)
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A general meeting in which a quorum is present may resolve to adjourn the meeting or the discussion or the vote on a matter included in the agenda to such other time and place as it may determine; only matters that were on the agenda and in respect of which no resolution was passed shall be discussed at the adjourned meeting.
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(g)
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If a general meeting is adjourned as stipulated in Article 16(f) above for more than twenty one days, notices for the adjourned meeting shall be given in accordance with Article 15 above.
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(h)
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If a general meting is adjourned without changing the agenda for no more than 21 days, notices and invitations for the adjourned meeting shall be given as soon as possible and in any event no later than seventy two hours before the time designated for the Adjourned Meeting; such notices and invitations shall be made in accordance with Sections 67 and 69(a) of the Companies Law, mutatis mutandis.
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17.
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Chairman of the General Meeting
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(a)
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The general meeting shall be chaired by the chairman of the Board of Directors or by a person that he has appointed in writing for this purpose, whether in general or for a specific meeting.
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(b)
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If the Board of Directors has no chair or if he is not present and has not appointed a chairman for the meeting, the meeting shall choose one of the directors present to be the chairman of such meeting, and if none of the directors is present, the meeting shall choose one of the participants to chair the meeting.
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18.
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Voting at the General Meeting
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(a)
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Subject and without prejudice to the rights or restrictions attached at any given time to any particular class of shares of the Company, each member shall have the right to one vote for each share that confer voting rights which he holds or with respect to which he acts as proxy. A shareholder shall be entitled to participate in and vote at a general meeting, himself or by proxy, subject to presentation to the Company of evidence of ownership as stipulated in the Articles, as of the date of record designated in the notice of the meeting and in accordance with the Companies Law and the regulations promulgated thereunder.
No holder of Ordinary Shares shall be entitled to participate and vote in any General Meeting (or to be counted as part of the quorum thereat): (i) unless all calls and other sums payable by him in respect of his shares in the Company have been paid, except if the allotment conditions of the shares provide otherwise, and/or (ii) in respect of any Exceptional Holdings, and/or in respect of Undisclosed Holdings as set forth in Article 45.
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(b)
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A corporation that is a shareholder of the Company may, in accordance with a resolution of its directors or any other managing body of such corporation, empower such person as it may designate to represent it at any general meeting. A person designated as mentioned above may, in accordance with the authorization, exercise the same rights that the represented corporation would have been entitled to exercise.
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(c)
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In case of a shareholder who is a minor, a conservatee, bankrupt or legally incompetent, or in case of a corporation, if the corporation is in receivership or liquidation, such shareholder may vote through its trustees, receivers, natural or legal guardians, as relevant, and these persons may vote themselves or by proxy.
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(d)
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If two or more persons are registered as joint owners of any share and are present at and participate in a vote, the vote of the senior amongst the joint owners attending and voting shall be taken into account, and the votes of the other joint holders will be disregarded. For this purpose seniority shall be determined by the order in which the names stand on the Register of Shareholders.
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(e)
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A shareholder may appoint as proxy a person who is not a shareholder of the Company. The instrument appointing a proxy to participate in and vote at a general meeting on behalf of a shareholder, shall be in writing and signed by the appointing shareholder or by his lawful representative appointed in writing, or, where the appointing party is a corporate entity, the document shall bear binding signatures as required in accordance with the articles of association of such corporate entity. If the appointing entity is a corporate entity, certification by an attorney shall be attached to the instrument appointing the proxy, confirming that the proxy was executed in accordance with the articles of association of the corporation.
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(f)
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A vote made in accordance with the terms of the proxy shall be valid even if before the vote, the person appointing the proxy died or was declared bankrupt or legally incompetent or canceled the proxy or transferred the share with respect to which the proxy was made, or, in case of a corporation, if a receiver or liquidator was appointed
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for the corporation, all unless written notice of such change was received at the Office at least one day before the meeting, or, if received at the place designated for the meeting, before the time designated for the meeting.
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(g)
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A proxy and power of attorney or any other certificate (as relevant) evidencing ownership, or a copy certified by a notary or an attorney, shall be deposited in a place designated for this purpose by the Board of Directors within 48 hours before the general meeting.
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(h)
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A shareholder holding more than one share shall be entitled to appoint more than one proxy, subject to the following provisions:
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[1]
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The proxy will specify the class and number of shares with respect to which it is given;
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[2]
|
In the event that the number of share of any given class designated in the proxies made by a single shareholder exceeds the number of shares of such class actually held by such shareholder, all the proxies made by such shareholder with respect to the difference shall be null and void, but the votes with respect to shares held by such shareholder shall remain effective;
|
[3]
|
In the event that a shareholder designates a proxy and the proxy instrument does not specify the number or class of shares with respect to which it is given, the proxy shall be deemed to have been made with respect to all of the shares held by such shareholder on the date on which the proxy was deposited with the Company or delivered to the chairman of the meeting, as the case may be. In the event that the proxy is given with respect to a number of shares that is smaller than the number of shares actually held by the appointing shareholder, the shareholder shall be deemed to have abstained from the vote with respect to the balance of the shares, and the proxy shall only be valid with respect to the number of shares stipulated therein.
|
(i)
|
The appointment of a proxy (whether for a specific meeting or otherwise) shall be in writing and shall be in the following form or in any other similar form authorized by the Company's Board of Directors, depending on the circumstances:
|
(j)
|
Subject to the provisions of applicable law, the Secretary of the Company may, in his discretion, disqualify proxies, proxy cards, written ballots or any other similar instruments, and notify the shareholder who submitted such proxy, proxy card, written ballot, authorization or similar instrument, in the following cases:
|
[1]
|
If the Secretary reasonably suspects that they are forged;
|
[2]
|
If the Secretary reasonably suspects that they are falsified, or given with respect to shares for which one or more proxies or written ballots have been given and not withdrawn; or
|
[3]
|
If there is no indication on such proxy, proxy card, written ballot or similar instrument as to whether or not the holdings in the Company or the vote of such shareholder require the approval of the Ministers pursuant to the Communications Law or the Communications Order or are regarded as Exceptional Holdings.
|
19.
|
Resolutions at the General Meeting
|
(a)
|
Any proposed resolution put to vote at a general meeting shall be decided by a show of hands.
|
(b)
|
Resolutions at the general meeting, including with regard to mergers, shall be decided by an ordinary majority, subject to the provisions of the law that require a special majority.
|
(c)
|
A declaration by the chairman of the general meeting that a proposed resolution has been unanimously adopted or rejected, or carried by a particular majority, shall constitute a
prima facie
evidence of the adoption or rejection, respectively, of same resolution.
|
20.
|
Number and Appointment of the Directors
|
(a)
|
The number of the members of the Board of Directors shall be as determined from time to time by the general meeting, provided however that the Board of Directors (including outside directors) shall consist of not less than two nor more than ten directors. At least two of the members of the Board of Directors shall be outside directors.
|
(b)
|
Except for outside directors, the directors of the Company shall be appointed by an Ordinary Resolution at the annual general meeting and shall remain in office until the end of the following annual general meeting; however, as long as no other director has been appointed in their stead, presiding directors shall remain in office, unless their office is vacated by operation of law or in accordance with these Articles.
|
(c)
|
The Company shall only appoint as directors such persons who are competent to serve as directors in accordance with the law.
|
(d)
|
Subject to the provisions of the law, a director may hold another office under or may be engaged by the Company, whether with or without remuneration, or under or by any other company in which the Company holds shares or any other interest, and may enter into any contract with the Company whether as buyer, seller or otherwise, and no such contract or any other contract or agreement executed by or on behalf of the Company and from which any benefit arises to the director shall be undermined [because of this reason alone], nor shall any director owe the Company any explanation regarding any profit arising from such office, engagement, contract or agreement, only because he is a director or because of the fiduciary relationship in connection therewith, provided that the director has complied with the provisions of the law regarding a personal interest.
|
(e)
|
[Reserved].
|
(f)
|
A director whose term terminates, can be reappointed.
|
(g)
|
In the event that the office of a director is vacated, regardless of the reason, the directors in office may appoint another director for the vacancy, and such director shall serve in office until the end of the term that his predecessor would have served if his office were not vacated. As long as the number of directors does not exceed the maximum permissible number, the directors may appoint additional directors up to the maximum; such appointment shall be in force until the next general meeting at which directors are appointed.
|
(h)
|
The Company may approve the appointment of a director such that his term shall commence at a later time than the appointment.
|
(i)
|
Outside directors shall be appointed in accordance with the law. Without prejudice to the foregoing, the Company may approve the appointment of an outside director for two additional three-year terms, in accordance with the provisions of the law.
|
|
(j)
|
A director may appoint an alternate, all in accordance with the provisions of Section 237 of the Law. Alternate directors shall be subject to the provisions of the Law and the provisions of these Articles that apply to directors of the Company, and the office of an alternate director shall be vacated under the circumstances set forth by law or in these Articles that would cause the office of the appointing director to terminate.
|
(k)
|
The office of a director other than an outside director shall be vacated, ipso facto, under any of the circumstances set forth in Section 228(a) of the Law, and on any of the following events:
|
[1]
|
On his death.
|
[2]
|
On the date he is declared legally incapacitated
|
[3]
|
Without prejudice to the above, the general meeting shall be entitled to remove any director from office by an Ordinary Resolution, all subject to applicable law. The Board shall be entitled to remove from office any director appointed by the board.
|
|
|
The provisions of Article 20(b) and 20(k)(3) above shall not be modified without the prior written consent of the Israeli Minister of Communications.
|
21.
|
Remuneration of Directors
|
(a)
|
No director shall be paid any remuneration by the Company for his services as director unless otherwise will be prescribed by the Company. Each director shall be entitled to reimbursement of his reasonable travel and other expenses incurred in the course of his duty as a director including expenses in relation to participation in Board of Directors meetings.
|
(b)
|
A director who provides the Company with special services or exerts special efforts for one of the Company's purposes, shall be entitled to remuneration by the Company in an amount to be prescribed by the Company, and this remuneration shall be added to or come instead of the fixed remuneration, if any.
|
(c)
|
Outside directors shall be entitled to remuneration and reimbursement as provided by law. Without prejudice to the above, consideration shall not include the grant of an exemption, an undertaking to indemnify, or insurance pursuant to the provisions of the law and of these Articles, as provided in Article 31 herein.
|
22.
|
Powers of the Board of Directors
|
(a)
|
Without derogating from the powers conferred on the Board of Directors under these Articles, the Board of Directors shall outline the policy of the company and shall supervise the performance of the functions and acts of the general manager, and:
|
[1]
|
shall determine the Company’s plans of action, principles for funding them and the priorities between them;
|
[2]
|
shall examine the Company’s financial status, and shall set the credit limits that the Company be entitled to operate;
|
[3]
|
shall determine the organizational structure of the Company and its wage policy;
|
[4]
|
may resolve to issue debenture series;
|
[5]
|
shall be responsible for preparing financial reports and certifying them;
|
[6]
|
shall report to the annual general meeting on the position of the Company’s affairs and on the outcome of its business activities as provided in Section 173 of the Companies Law;
|
[7]
|
shall appoint and remove the general manager;
|
[8]
|
shall decide on acts and transactions requiring its approval pursuant to the provisions of Sections 255 and 268 to 275 of the Companies Law;
|
[9]
|
may issue shares and securities convertible to shares up to the limit of the registered share capital of the Company, in accordance with the provisions of Article 6(g) above;
|
[10]
|
may resolve to effect a distribution as provided in Article 33 herein;
|
[11]
|
shall give its opinion on special tender offers as provided in Section 329 of the Companies Law;
|
[12]
|
shall designate the minimum number of directors that must have accounting and financial expertise, in accordance with Section 240 of the Companies Law; the Board of Directors will designate such minimum number taking into account, among other things, the type and size of the Company, and the scope and complexity of its operations, and subject to the number of directors stipulated in the Articles.
|
(b)
|
The powers of the Board of Directors under Articles 22(a)(1) through 22(a)(12) may not be delegated to the general manager, except as provided in Section 288(b)(2) of the Companies Law.
|
(c)
|
Without prejudice to the powers conferred on the Board of Directors by law or in accordance with these Articles, the Board of Directors is hereby granted additional powers, as follows:
|
[1]
|
To appoint any person, persons or corporation to hold in trust for the Company any asset of the Company or in which the Company has an interest, or for any other purpose, and to perform and effectuate all actions and things required in connection with such trust, and see to the payment of such trustee or trustees;
|
[2]
|
To open, manage, defend, settle or abandon any litigation initiated by or against the Company or its officials or otherwise relating to Company matters, and to settle with regard to or extend the timetable for the payment or satisfaction of any debt, claims or demands owing by or to the Company;
|
[3]
|
Submit to arbitration any claim or demand by or against the Company;
|
[4]
|
Appoint, and, at the discretion of the Board of Directors, remove or suspend the general manager, any officer, other employee or representative, whether employed on a permanent or temporary basis or for special services, as the Board of Directors may from time to time determine, and to define their authorities and responsibilities and their remuneration, and to require assurances, under such cases and of such amounts as the Board of Directors may deem fit.
|
[5]
|
The Board of Directors may, on an ad hoc or permanent basis, authorize the general manager to appoint officers and other employees, define their authorities and responsibilities and determine their remuneration and terms of employment.
|
[6]
|
At any time and from time to time, the Board of Directors may appoint, under a power of attorney, any person to be the representative of the Company for such purposes and with such powers, authorities and discretion (not to exceed such powers, authorities and discretion granted to the Board of Directors under these Articles) and for such period and subject to such terms as the Board of Directors may deem fit from time to time, and any such appointment may, if the Board of Directors so deems fit, be conferred on the members of any local Board of Directors that is established or any member of such Board of Directors, or to any company or its members, its Board of Directors, its representatives, or the managers of any company or firm or to any person designated by any company or firm or in any other way to any group of persons appointed by the Board of Directors, whether appointed directly or indirectly.
|
[7]
|
The Board of Directors may appoint an attorney or attorneys in Israel or abroad to represent the Company before any court, arbitrator, judicial and quasi-judicial bodies, local and central government agencies and offices in Israel and abroad, and grant such attorney such powers as the Board of Directors may deem appropriate, including the power to delegate his powers, in full or in part, to another person or persons. The Board of Directors may delegate this power to the general manager on an ad hoc or permanent basis.
|
[8]
|
From time to time and at its discretion, the Board of Directors may secure and borrow any amount of money in such manner and under such terms and timetable as it may deem fit, including by issuance of debentures or debenture series, whether secured or otherwise, or by creating a mortgage, pledge or any other security interest over the enterprise or any or all of the Company assets, whether in existence at such time or in the future, including the share capital on which calls have not yet been made and share capital on which calls have been made but which has not yet been paid up.
|
23.
|
Chairman of the Board of Directors
|
(a)
|
The Board of Directors will elect one of its member as chairman of the Board of Directors.
|
(b)
|
The chairman of the Board of Directors shall be elected by the directors at the first Board of Directors meeting after the annual general meeting or after the Board of Directors meeting at which he was appointed to serve as a director, and shall serve as chairman of the Board of Directors as long as the Board of Directors has not otherwise resolved or until he no longer serves as a director.
|
(c)
|
The chairman of the Board of Directors shall not have an additional or casting rate at a meeting of the board.
|
24.
|
Convening the Board of Directors
|
(a)
|
The Board of Directors shall meet according to the needs of the Company, and in any event at least once every three months.
|
(b)
|
The Chairman of the Board of Directors may convene a meeting of the Board of Directors at any time, and shall do so at the demand of any of the following:
|
[1]
|
Two directors;
|
[2]
|
One director – under the circumstances set forth in Section 257 of the Law;
|
(c)
|
Without prejudice to the foregoing, the Chairman of the Board of Directors shall convene the Board of Directors in the event that Board of Directors action is required subsequent to a notice or report by the general manager in accordance with Section 122(d) of the Law, or a report by the Company’s auditor in accordance with Section 169 of the Law.
|
(d)
|
Where a meeting of the Board of Directors is not convened within fourteen days of the date of demand as provided in Article 24(b) above, or of the date of notice or report of the general manager or the auditor pursuant to Article 24(c) above, each of the persons enumerated in such Articles may convene a meeting of the Board of Directors to discuss the matter specified in the demand, notice or report, as the case may be.
|
(e)
|
Notice of a meeting of the Board of Directors shall be delivered to all members at a reasonable time prior to the date of the meeting.
|
(f)
|
Such notice shall be delivered to the address of each director as made known to the Company in advance, and it shall state the date of the meeting and the place at which it will convene, as well as a reasonably detailed statement of all of the matters on the agenda.
|
(g)
|
Notwithstanding the provisions of Article 24(e),
in urgent cases, the Board of Directors may be convened to meet without notice, by the consent of a majority of the directors.
|
25.
|
Meeting of the Board of Directors
|
(a)
|
The agenda for meetings of the Board of Directors shall be determined by the chairman of the Board of Directors and shall include matters determined by the chairman of the Board of Directors, matters determined as provided in Articles 24(b) and 24(c) above, any matter that a director or the general manager requests the chairman of the Board of Directors to include in the agenda, at a reasonable time prior to the convening of a meeting of the Board of Directors.
|
(b)
|
The chairman of the Board of Directors shall direct the meetings of the Board of Directors. Where the chairman of the Board of Directors is not present at the meeting, the Board of Directors shall elect another of its number to direct the meeting and to sign the minutes of the meeting.
|
(c)
|
The Board of Directors may hold meetings using any means of telecommunication such that all directors participating in the meeting can hear each other simultaneously.
|
(d)
|
The Board of Directors may pass resolutions even without actually convening, provided that all of the directors entitled to participate in the discussion and vote on the matter brought up for resolution have agreed not to convene for this matter.
|
(e)
|
Where resolutions are passed in accordance with the provisions of Article 25(d) above, the chairman of the Board of Directors shall prepare and sign minutes of the resolutions, including the resolution not to convene.
|
(f)
|
The chairman of the Board of Directors shall be responsible for the implementation of these provisions.
|
(g)
|
A majority of the members of the Board of Directors shall constitute a quorum.
|
(h)
|
Any meeting of the Board of Directors in which a quorum is present may exercise all the powers, powers of attorney and discretions conferred at such time on or generally exercised by the Board of Directors.
|
26.
|
Voting at the Board of Directors
|
(a)
|
Each director shall have one vote at meetings of the Board of Directors.
|
(b)
|
Resolutions of the Board of Directors shall be passed by ordinary majority; the chairman of the Board of Directors shall not have an additional vote.
|
(c)
|
A director, in his capacity as such, shall not be party to a voting agreement, and a voting agreement shall be considered to be a breach of fiduciary duty.
|
(d)
|
Minutes approved and signed by the director who chaired the meeting shall serve as prima facie evidence of its contents.
|
27.
|
Committees of the Board of Directors
|
(a)
|
The Board of Directors may appoint subcommittees. Only directors of the Company may serve as members of subcommittees to which the Board of Directors has delegated any of its powers. Advisory subcommittees may include also non-directors as members (“
Subcommittee
”).
|
(b)
|
A resolution passed or an act done by a Subcommittee in accordance with powers delegated by the Board of Directors, shall be considered as a resolution passed or an act done by the Board of Directors.
|
(c)
|
Subcommittees shall provide reports on a current basis to the Board of Directors regarding their resolutions or recommendations.
The Board of Directors shall be informed of resolutions or recommendations of a Subcommittee that requires Board approval, a
reasonable time before the discussion by the Board of such resolutions or recommendations.
|
(d)
|
Articles 24 through 26 shall apply,
mutatis mutandis
, to the convening of meetings of Subcommittees and the proceedings at such meetings.
|
(e)
|
The Board of Directors may not delegate its powers to a Subcommittee with regard to the following matters:
|
[1]
|
determining the Company’s general policy;
|
[2]
|
distribution, as defined in Section 1 of the Law, unless in respect of purchase of shares of the Company in a framework outlined by the Company in advance;
|
[3]
|
determining the position of the Board of Directors in respect of a matter requiring approval of the general meeting or the giving of an opinion as provided in section 329 of the Law;
|
[4]
|
appointing directors, if the Board of Directors is entitled to so appoint;
|
[5]
|
issuance or grant of shares or securities convertible into shares or realizable as shares, or debenture series, except as set forth in Section 288(b) of the Law;
|
[6]
|
Approval of financial reports;
|
[7]
|
approval of transactions and acts requiring the approval of the Board of Directors pursuant to the provisions of sections 255 and 268 to 275 of the Law.
With respect to the foregoing matters, the Board of Directors may only appoint advisory committees.
|
(f)
|
The Board of Directors may abrogate the resolution of a Subcommittee appointed by it; however, such abrogation shall not prejudice the validity of a resolution of a Subcommittee pursuant to which the Company has acted towards another person who was unaware of the abrogation.
|
28.
|
Audit Committee
|
(a)
|
The Board of Directors shall appoint from its members an audit committee, and the provisions of Article 27 shall apply thereto,
mutatis mutandis.
|
(b)
|
There shall be no less than three members of the audit committee, and its members shall be appointed in accordance with the provisions of Section 115 of the Law.
|
(c)
|
The internal auditor of the Company shall receive notices of the holding of meetings of the audit committee and shall be entitled to take part in them. The internal auditor may request that the chairman of the audit committee convene the committee to discuss such matter as he may specify in his request, and the chairman of the audit committee shall convene the committee within a reasonable time from the date of the request, if he finds reason to do so.
|
(d)
|
A notice of the holding of a meeting of the audit committee at which a matter relating to the audit of financial reports is to be dealt with shall be sent to the auditor who may participate in the meeting.
|
(e)
|
The audit committee will locate defects in the company’s business administration,
inter alia
by consulting with the Company’s internal auditor or with the auditor, and to make proposals to the Board of Directors regarding ways of correcting such defects. The audit committee will also decide whether to approve acts and transactions requiring the approval of the audit committee under sections 255 and 268 to 275 of the Law. In addition, the audit committee will perform all such additional duties as set forth in Section 117 of the Companies Law.
|
|
29.
|
General Manager
|
(a)
|
The Board of Directors may, from time to time, appoint one or more persons, whether or not directors, as general manager(s) of the Company, either for a definite period or without any limitation of time, and may from time to time, and subject to the terms of any agreement that may be executed between such general manager(s) and the Company, remove him or them from office and appoint another or others in his or their stead.
|
(b)
|
The general manager shall be liable for the current administration of the affairs of the Company, within the scope of the policies determined by the Board of Directors, and subject to its supervision. The general manager shall have all managerial and executive powers granted by law or in these Articles, all managerial and executive powers not granted by law or by these Articles to any other corporate body of the Company, and any other power delegated by the Board of Directors.
|
(c)
|
The general manager shall provide the Board of Directors reports of the Company’s routine operations. Such reports will be of such scope and shall be made at such times as directed by the Board of Directors.
|
(d)
|
The remuneration and other terms of the general manager shall be determined by the Board of Directors from time to time, subject to the terms of any agreement executed between him and the Company and subject to the provisions of the law, and may be paid as a salary, as a commission based on dividends, profits or turnover, or as a percentage of the profits, or any combination thereof. Where the law requires approval of the general meeting for an agreement with an officer, any such agreement shall be subject to such approval.
|
(e)
|
Subject to the provisions of the law, and in particular Section 92 of the Companies Law, the Board of Directors may from time to time delegate to the person acting as general manager at such time, the powers conferred on it in accordance with these Articles, at the discretion of the Board of Directors, and may delegate powers that shall be exercised for such purposes and needs and in such times and under such restrictions as the Board of Directors may deem appropriate. The Board of Directors may determine that powers delegated to the general manager shall be exercised exclusive by the general manager or by both the general manager and the Board of Directors, and may from time to time cancel, change and replace any or all of these powers.
|
(f)
|
The general manager may, subject to Board of Directors approval, delegate some of its powers to another person reporting to him.
|
(g)
|
The general manager shall provide the Board of Directors reports of the Company’s routine operations. Such reports will be of such scope and shall be made at such times as directed by the Board of Directors. The chairman of the Board of Directors may, at his initiative or by resolution of the Board of Directors, require the general manager to provide a report regarding the business of the Company.
|
30.
|
Officers of the Company
The Board of Directors may from time to time appoint and remove, and, subject to the provisions of the law and Article 23(c)(5) above, authorize the general manager on an ad hoc or permanent basis to appoint other officers and other employees, define their authorities and responsibilities and fix their remuneration and terms of employment.
|
31.
|
Liability Insurance, Indemnity and Exemption
|
(a)
|
Subject to the provisions of the Companies Law, the Company may enter into a contract to insure the liability of an officer for an obligation imposed upon him due to an act or omission performed by him by virtue of his being an officer, in any of the following instances:
|
[1]
|
breach of duty of care towards the Company or towards any other person;
|
[2]
|
breach of the duty of loyalty to the Company, while acting in good faith and having reasonable cause to assume that such action would not prejudice the interests of the Company;
|
[3]
|
a financial obligation imposed on him in favor of another person;
|
[4]
|
expenses, including reasonable litigation expenses and legal fees, incurred by an officer as a result of an Administrative Proceeding instituted against the officer.
|
|
[5]
|
payments to an injured party imposed on the officer pursuant to Section 52ND(a)(1)(a) of the Securities Law.
|
|
In the event that the insurance contract covers the liability of the Company as well, the officer shall have precedence over the Company in collecting the insurance payments.
|
(b)
|
Subject to the provisions of the Companies Law, the Company may indemnify an officer for a liability or an expense as detailed in below, imposed or incurred by him in such capacity:
|
[1]
|
any financial obligation imposed on him in favor of another person by, or expended by him as a result of, a court judgment, including a settlement or an arbitrator’s award approved by court;
|
[2]
|
all reasonable litigation expenses, including attorneys’ fees, expended by the officer - (i) due to an investigation or a proceeding instituted against him by an authority qualified to administrate such investigation or proceeding, where such investigation or proceeding is “concluded without the filing of an indictment against the officer” (as defined in the Companies Law) and “without any financial obligation imposed on the officer in lieu of criminal proceedings” (as defined in the Companies Law), or that is concluded without indictment of the officer but with a financial obligation imposed on him in lieu of criminal proceedings with respect to a crime that does not require proof of mens rea (criminal intent), or - (ii) in connection with a monetary sanction ("
Itzum Caspi
") .
|
[3]
|
all reasonable litigation expenses, including attorneys’ fees, expended by an officer or charged to him by a court, in a proceeding instituted against him by the Company or on its behalf or by another person, or in any criminal proceedings in which he is acquitted, or in any criminal proceedings of a crime which does not require proof of
mens rea
(criminal intent) in which he is convicted.
|
[4]
|
The Company may covenant to indemnify prospectively, as set forth in Section [1] above, provided, however, that such indemnification will be limited to matters which are deemed by the Company’s Board of Directors, based on the activity of the Company at the time of the covenant, to be foreseeable, and to an amount or criteria that the Board of Directors has determined as reasonable under the circumstances and in any event in an aggregate amount for all officers of the Company not to exceed 25% of the Company’s equity (on a consolidated basis) according to the Company's consolidated financial statements most recently published prior to the date of the indemnification payment, and provided further that the covenant to indemnify shall state the events that in the opinion of the Board of Directors are foreseeable given the Company’s actual activity at the time of the covenant and the amount or criteria that the Board of Directors has determined to be reasonable under the circumstances; with respect to events enumerated in Sections [2] and [3] above, the Company may also agree to provide indemnification retroactively; and all in accordance with Section 260(b) of the Law.
|
[5]
|
expenses, including reasonable litigation expenses and legal fees, incurred by an officer as a result of an Administrative Proceeding instituted against the officer.
|
[6]
|
payments to an injured party pursuant to Section 52ND(a)(1)(a) of the Securities Law.
|
(c)
|
The foregoing shall not limit the Company in any way with regard to engaging in an insurance or indemnification agreement:
|
[1]
|
With respect to persons who are not officers of the Company, including employees, contractors or consultants of the Company;
|
[2]
|
With respect to officers of the Company – to the extent such insurance or indemnification are not expressly prohibited by law.
|
(d)
|
Subject to the provisions of the Law, the Company may, before the event, fully or partially exempt an officer from liability with respect to the breach of the duty of care.
|
(e)
|
Notwithstanding the provisions of Section [d] above, the Company may not, before the event, exempt a director from his liability with respect to breach of the duty of care in distribution (as defined in the Companies Law).
|
32.
|
Internal Auditor and Auditor
|
(a)
|
|
[1]
|
The Board of Directors shall appoint an internal auditor at the proposal of the audit committee.
|
[2]
|
The internal auditor shall report to the chairman of the Board of Directors.
|
[3]
|
The internal auditor shall submit a proposal for an annual or periodic work plan to the audit committee, which shall approve it subject to such amendments as they see fit.
|
[4]
|
The internal auditor shall submit a report of his findings to the chairman of the Board of Directors, to the general manager and to the chairman of the audit committee; a report relating to matters audited pursuant to section 150 of the Law shall be provided to whoever charged the internal auditor with carrying out the audit.
|
[5]
|
The office of an internal auditor shall not be terminated except in accordance with the provisions of Section 153 of the Law.
|
(b)
|
|
[1]
|
The general meeting shall appoint an auditor for the Company. The auditor shall continue to serve until the end of next annual meeting after the annual meeting that appointed him. The general meeting may appoint an auditor to serve as such for longer than a year, all subject to the provisions of Section 154(b) of the Law.
|
[2]
|
The Company may appoint several auditors to perform the audit jointly.
|
[3]
|
The auditor’s fees shall be fixed by the general meeting appointing the auditor, or, if the general meeting did not fix the fees or has authorized the Board of Directors to do so, by the Board of Directors. The Board of Directors shall fix the auditor’s fees with respect to other services provided to the Company. The Board of Directors shall report to the general meeting of the terms of engagement of the auditor with respect to additional services, including payments and obligations of the Company toward the auditor.
|
33.
|
Distribution, Dividend Distribution and Bonus Shares
|
(a)
|
Distribution, dividend distribution and issuance of bonus shares shall be made in accordance with the provisions of the Law and these Articles, as follows:
|
[1]
|
The Board of Directors may resolve to make a distribution, distribute dividend or issue bonus shares.
|
[2]
|
Dividend distribution to shareholders of the Company shall be made to all shareholders pro rata to the nominal value of each share, unless these Articles, as amended, expressly stipulate preferences with respect to dividend distribution.
|
[3]
|
The Board of Directors may deduct from any dividend or other moneys payable to any shareholder in respect of a share any and all sums of money then payable by him to the Company in respect of such share, whether or not such payment by the shareholder has already become due.
|
(b)
|
The Company may issue redeemable securities, all subject to the provisions of Section 312 of the Law and as will be determined in the terms of issuance of such redeemable securities. The power to issue redeemable securities is conferred upon the Board of Directors.
|
(c)
|
The Board of Directors may, as it deems useful and appropriate, appoint trustee or notables to hold in trust dividends, shares or other benefits of any kind uncollected over a certain period of time by holders of bearer shares or by registered shareholders who did not notify the Company of a change of address and did not contact the Company to collect such dividend, shares or benefits, over such period of time. Such notables or trustees shall be appointed in order to liquidate, collect or receive such dividends, shares and benefits, and execute unissued shares offered to the shareholders, but will not be entitled to transfer, assign or vote the shares with respect to which they were appointed or to transfer or assign any such benefits that they hold in trust. The terms of any such trust or appointment of notables shall stipulate that upon the first demand by a share with respect to which such trustee or notables were appointed, they shall return the relevant share and all the benefits held in trust to such shareholder or to any other person as the Company may instruct. All actions and arrangements effected by such trustees or/and any agreement between them and the Board of Directors shall be binding upon all the relevant parties.
|
(d)
|
The Board of Directors may from time to time determine the method of payment of dividend or distribution of bonus shares or any other benefits, and the arrangements with respect thereto, both to holders of registered shares and to holders of bearer shares. Without prejudice to the above, the Board may effect payment of any dividend or moneys with respect to shares, by delivery of check by mail to the shareholder's address as entered in the Register of Shareholders.
|
34.
|
Calls on Shares
|
(a)
|
The Board of Directors may, from time to time, at its discretion or subject to the terms stipulated upon issuance of the relevant shares, make calls upon shareholders to perform payment of any amount of the consideration of their shares not yet paid, provided that such shareholders receive at least fourteen days' notice for each call. Each shareholder shall pay to the Company the amount of every call so made upon him at the time(s) and place(s) designated in such call.
|
(b)
|
The joint holders of a share shall be bound jointly and severally to pay all calls and installments in respect thereof.
|
(c)
|
The shareholder or the person to whom the share was issued shall owe the Company indexation and interest, as will be determined by the Board of Directors, with respect to any amount not paid when due. Interest will accrue from the date designated for payment and until actual payment. The Board of Directors may waive indexation or interest in full or in part.
|
(d)
|
Any sum which by the terms of issuance of a share becomes payable upon issuance or at a fixed date, whether on account of the nominal value of the share or by way of premiums, shall for the purposes of these Articles be deemed to be a call duly made and payable on the date on which by the terms of the issuance the same become payable, and in the event of default, all of the provisions of these Articles with respect to indexation, interest and costs, forfeiture, etc., and all the other relevant provisions hereof shall apply, as if such sum had been payable by virtue of a call duly made and notified.
|
(e)
|
The Board of Directors may, if it deems fit, receive from any shareholder willing to advance the same, all or any part of the moneys uncalled and unpaid upon any shares held by him, and may, as may be agreed between the Board of Directors and the shareholder, pay such shareholder, in addition to any dividend (if any) paid with respect to the paid-up portion of the share with respect to which early payment has been made, interest and indexation with respect to such early payment or to any portion thereof exceeding the amount which at any given time has been called.
|
35.
|
Forfeiture
|
(a)
|
In the event that any shareholder (“
Debtor
”) fails to pay when due any amount payable pursuant to a call in accordance with the provisions of Article 34 above, the Board of Directors may at any time thereafter resolve that any of the shares with respect to which the Debtor has received the call shall be forfeited.
|
(b)
|
In accordance with the provisions of the law, forfeiture of a share shall, cause all rights in the Company and all demands toward it with respect to such share to terminate,
ipso facto
.
|
(c)
|
Forfeiture will extend to any dividend with respect to such share, unpaid before forfeiture, even if already declared.
|
(d)
|
A forfeited share may be sold, reallocated or otherwise disposed of on such terms and in such manner as the Board of Directors may deem fit, with or without any amount paid or deemed to have been paid on the share. Until sold, forfeited shares shall be dormant, as defined in Section 308 of the Law.
|
(e)
|
In the event that the proceeds of the sale of forfeited shares exceeds the consideration owed by the Debtor, the Debtor shall be entitled to the difference, provided that the amount retained by the Company shall not be less than the full consideration owing by the Debtor plus the cost of the sale.
|
(f)
|
The Board of Directors shall be entitled, although not obligated, at any time to collect forfeited money or any part thereof.
|
36.
|
Register of Shareholders
|
(a)
|
The Company shall maintain a shareholders’ register, which will include the following details:
|
[1]
|
The name, identity number and address of each shareholder, as provided to the Company;
|
[2]
|
The number and class of shares held by each shareholder, noting the nominal value of such shares, and if any amount is still due with respect to any share – such amount should also be noted;
|
[3]
|
The date of issuance or transfer of the shares to the current shareholder, as relevant;
|
[4]
|
If the shares have serial numbers, the Company shall, next to the name of each shareholder, note the serial numbers of his shares;
|
(b)
|
In the event that the Company has dormant shares, as stated in Section 308 of the Law, the Register of Shareholders shall also note the number of dormant shares and the date on which they became dormant, all based on the information available to the Company. The Register of Shareholders should also specify the number of shares of the Company that, in accordance with Section 309(b) or 333(b) of the Law, do not grant voting rights, and the date on which they because shares of this kind.
|
(c)
|
In the event that the Company maintains an additional register of shareholders, as provided in Article 37 herein, and in the event that the shares registered there have serial numbers, such serial numbers shall be registered in the additional register.
|
(d)
|
The Company shall alter the registration of ownership of shares in the Register of Shareholders as provided in section Article 36(a), in each of the following circumstances:
|
[1]
|
a deed of transfer of the share was delivered to the Company, signed by the transferor and the transferee, and any requirements of the Articles, the Communications Law, the Communications Order, so long as the Communications Order applies to the Company, with respect to the transfer of shares have been complied with;
|
[2]
|
a court order requiring the amendment of the Register of Shareholders was delivered to the Company;
|
[3]
|
it has been proven to the Company that the legal conditions (including under the Articles, the Communications Law and the Communications Order, so long as the Communications Order applies to the Company) for assigning the right have been satisfied;
|
[4]
|
any other condition that is sufficient under the Articles, the Communications Law, the Communications Order, so long as the Communications Order applies to the Company, for registration of a change in the Register of Shareholders has been satisfied.
|
(e)
|
The Company may close the Register of Shareholders for a reasonable time, not to exceed 30 days, as may be designated by the Board of Directors. The Company shall publish notice of closing the Register of Shareholders at least 7 days ahead of time.
|
37.
|
Register of Substantial Shareholders and Additional Register of Shareholders outside Israel
|
(a)
|
Reports received by the Company pursuant to the Securities Law relating to the holdings of substantial shareholders of shares in the Company shall be kept in the register of substantial shareholders.
|
(b)
|
The Company may keep an additional register of shareholders outside of Israel, subject to the provisions of Section 138 of the Law.
|
38.
|
Stamp, Seal and Signature Rights
|
(a)
|
The Company may designate a seal or rubber stamps, and the Board shall provide for their safe custody;
|
(b)
|
The Board of Directors may authorize any person to sign on behalf of and act in the name of the Company, and the actions and signature of such person shall be binding upon the Company, provided that such actions and signature are not ultra vires;
|
(c)
|
The Board of Directors may use and maintain a seal for use outside of Israel, and instruct as to how it is to be used.
|
39.
|
Accounts
The Board of Directors shall cause accurate books of accounts to be maintained and financial reports to be published in accordance with Sections 171 through 175 of the Companies Law and in accordance with the provisions of any other applicable law.
|
40.
|
Charitable Contributions
The Company may make contributions of reasonable sums to worthy purposes even if such contributions are not made on the basis of business considerations. The Board of Directors shall be authorized to implement this Article.
|
41.
|
Minutes
The Company shall keep minutes of the proceedings at the general meeting, class meetings, meetings of the Board of Directors and meetings of Subcommittees, and shall keep them at its registered office or at any other address of which it has notified the Registrar, for a period of seven years from the date of such meeting.
|
42.
|
Notices
|
(a)
|
Notices and other documents that are to be delivered to any or all of the shareholders can be delivered by the Company to each of the shareholders in person or by duly stamped registered mail, addressed to the registered address of the shareholder in the Register of Shareholders, or by publication of a notice to shareholders or holders of rights of any kind in two daily Hebrew-language newspapers in Israel that have a reasonably-sized readership. Such publication shall be in lieu of personal delivery or delivery by registered mail.
|
(b)
|
If two or more persons are joint holders of a share, notices with respect to such share shall be delivered to the person first named on the Register of Shareholders in respect of such joint ownership, and any notice delivered in this manner shall be deemed sufficient. In the alternative, notice can be delivered by publication in two daily Hebrew-language newspapers in Israel that have a reasonably-sized readership.
|
(c)
|
Any shareholder registered in the Register of Shareholders, whether according to an address in Israel or abroad, and who from time to time gives the Company notice of an address for notices to be delivered to him, shall be entitled to receive notices in accordance with these Articles at such address. A shareholder shall not be entitled to receive notices at any address except as mentioned above.
|
(d)
|
A notice may be given by the Company to the persons entitled to a share in consequence of the death, bankruptcy or legal incompetence of a member, or, in case of a corporation, to the receiver or liquidator, by sending it through the mail by a prepaid letter to the address, if any, supplied for the purpose by the persons claiming to be so entitled, or – until such an address has been so supplied – by giving the notice in any manner in which the same might have been given if the death, bankruptcy, legal incompetence, liquidation or receivership had not occurred
|
(e)
|
Any notice or other document delivered or sent by mail shall be deemed to have been received within two business days from dispatch at the post office; proof that a letter containing the notice or document has been addressed to the address according to Company records and has been delivered to the post office with the correct stamp, shall be deemed proof of delivery.
|
(f)
|
Subject to the provisions of the law, wherever notice of a certain number of days should be given or where notice should be given that will be effective for a specific period of time, such number of days or period shall be inclusive of the date of delivery.
|
43.
|
Liquidation
In the event that the Company is liquidated, whether voluntarily or otherwise, the remaining assets after satisfaction of debt shall be distributed, in accordance with the law and subject to preferred rights that may be attached to shares, according to the following order:
|
(a)
|
Repayment of share capital: pari passu, pro rata to the share capital paid up on the nominal value of the shares.
|
(b)
|
The remainder: pari passu, pro rata to the share capital paid up on the nominal value of the shares, and for this purpose any uncalled amount shall be deemed to have been paid up, and any amount with respect to which a call has been made and which has not been paid as of the commencement of liquidation, shall not, for the purpose of this distribution, be deemed part of the paid up share capital.
|
44.
|
Exceptional Holdings; Compliance with the Communications Law and the Communications Order
The following provisions of this Article 44 shall apply for as long as and to the extent that the Communications Order applies to the Company:
|
(a)
|
To the extent practicable, the existence of Exceptional Holdings shall be indicated in a Register of Shareholders with a notation that such holdings have been classified as Exceptional Holdings immediately upon the Company’s learning of the same. The Company shall send a notice of any Exceptional Holdings to the registered holder of the Exceptional Holdings and to the Ministers immediately upon the Company becoming aware of such event.
|
(b)
|
Exceptional Holdings shall be subject to the provisions of the Communications Order applicable to Exceptional Holdings (including, without limitation, Section 8 thereof), and without derogating from the foregoing, shall not entitle the holder thereof to any rights in respect of such holdings, unless and to the extent that the entitlement of holders to rights in respect of such Exceptional Holdings is permissible under the Communications Order. Therefore, any action taken or claim made on the basis of a right deriving from Exceptional Holdings shall have no effect from the time that the Company becomes aware thereof, except and to the extent that the Communications Order provides otherwise.
|
(c)
|
Exceptional Holdings shall not have any voting rights at a General Meeting. Any shareholder participating in a General Meeting shall certify to the Company prior to the vote or, if the shareholder is voting by a proxy or any similar instrument, on such proxy card or similar instrument, as to whether or not his holdings in the Company or his vote require the approval of the Ministers pursuant to the Communications Law and the Communications Order; in the event that any shareholder does not provide such certification as aforesaid, he shall not be entitled to vote at a General Meeting and his vote shall not be counted for quorum purposes.
|
(d)
|
No Director shall be appointed, elected or removed by virtue of Exceptional Holdings. In the event a Director is appointed, elected or removed by virtue of Exceptional Holdings, such appointment, election or removal shall have no effect.
|
|
(e)
|
Without derogating from any other provision of the Communications Order, any person holding such number of shares of the Company that requires approval under the Communications Order, shall notify the Company, Bezeq and the Ministers thereof in writing, no later than 48 hours from the date of acquiring such holding.
|
(f)
|
The shareholders of the Company shall at all times comply with the terms of the Communications Law and the Communications Order. Nothing herein shall be construed as requiring or permitting the performance of any acts that are inconsistent with the terms of the Communications Law or the Communications Order. If any of these Articles shall be found to be inconsistent with the terms of the Communications Law or the Communications Order, the inconsistent provisions of such article shall be null and void, but the validity, legality or enforceability of provisions of other provisions shall not be affected thereby.
|
45.
|
Reports by Principal Shareholders
The following provisions of this Article 45 shall apply for as long as the Communications Order applies to the Company:
|
(a)
|
Any person who after acquiring, directly or indirectly, shares in the Company becomes a Principal Shareholder, shall, no later than 48 hours after becoming a Principal Shareholder, notify the Company thereof, by written notice specifying the number of the shares held by such Shareholder and the date on which such Shareholder became a Principal Shareholder.
The Company shall send a notice to the Ministers of any shareholder becoming a Principal Shareholder within 48 hours of the Company
becoming aware of such event
|
|
(b)
|
Any person who ceases to be a Principal Shareholder, shall, no later than 48 hours thereof, notify the Company, in writing, of the date on which such person ceased to be a Principal Shareholder.
|
|
(c)
|
A Principal Shareholder shall notify the Company in writing of any aggregate change in its holdings of shares in the Company
amounting to 1% or more of the outstanding share capital of the Company, from the last notice of holdings provided by such Principal Shareholder to the Company, by registered or certified mail, within fourteen (14) days after such change. The Company shall send a notice to the Ministers of such change in the holdings of a Principal Shareholder within 48 hours of the Company becoming aware of such event
|
(d)
|
In the event a Principal Shareholder fails to provide the notice required pursuant to the provisions of this Article 45 ("
Undisclosed Holdings
"), then until such Principal Shareholder notifies the Company of such Undisclosed Holdings pursuant to the provisions of this Article 45, the following provisions shall apply to such Undisclosed Holdings:
|
(i)
|
the Principal Shareholder shall not be entitled to any rights in respect of such shares, and the applicable provisions of Section 8 of the Communications Order with regard to Exceptional Holdings, as may be amended from time to time, shall apply to such Undisclosed Holdings;
|
(ii)
|
In addition, and without derogating from the foregoing, such Undisclosed Holdings shall be deemed “dormant shares” as defined in Section 308 of the Companies Law.
|
(e)
|
The provisions of this Article 45 shall not derogate from any other legal duty of a Shareholder to disclose its holdings or beneficial ownership of the Company's shares or Means of Control.
|
1.
|
I have reviewed this annual report on Form 20-F of B Communications Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
|
4.
|
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
|
5.
|
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent function):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
|
1.
|
I have reviewed this annual report on Form 20-F of B Communications Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
|
4.
|
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
|
5.
|
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent function):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
|