Internet Gold Reports its Financial Results for the Second Quarter of 2014

  Internet Gold Reports its Financial Results for the Second Quarter of 2014

           - Improved cash position through restructuring of debt -

Business Wire

RAMAT GAN, Israel -- August 7, 2014

Internet Gold – Golden Lines Ltd. (NASDAQ Global Market and TASE: IGLD) today
reported its financial results for the second quarter ended June 30, 2014.

Bezeq’s Results: For the second quarter of 2014, the Bezeq Group reported
revenues of NIS 2.3 billion ($654 million) and operating profit of NIS 1.2
billion ($359 million). Bezeq’s EBITDA for the second quarter totaled NIS 1.6
billion ($452 million), representing an EBITDA margin of 69.0%. Net income for
the period attributable to Bezeq’s shareholders totaled NIS 810 million ($236
million). Bezeq's cash flow from operating activities during the period
totaled NIS 1.1 billion ($312 million).

Yad2 Transaction: On May 20, 2014, Bezeq concluded the sale of Coral-Tel Ltd.
("Yad2"), a company fully controlled by Bezeq through its ownership of Walla!
Communications Ltd., that is engaged in the operation of a second-hand sales
web site, for a total consideration of approximately NIS 805 million ($234
million). As a result, Bezeq recorded a one-time capital gain of NIS 582
million ($169 million) before tax that was reported under other operating
income.

Cash Position: As of June 30, 2014,  Internet Gold’s unconsolidated cash and
cash equivalents and short term investments totaled NIS 418 million ($122
million), its unconsolidated gross debt was NIS 1.2 billion ($348 million) and
its unconsolidated net debt was NIS 779 million ($226 million).

Internet Gold's Unconsolidated Balance Sheet Data^(1)

In millions                            Convenience       
                                             translation into
                                             U.S. dollars
                                             (Note A)
                         June 30,            June 30,             December 31,
                         2013      2014      2014                 2013
                         NIS       NIS       US$                  NIS
Short term               147       72        21                   129
liabilities
Long term                906       1,125     327                  931
liabilities
Total liabilities        1,053     1,197     348                  1,060
Cash and cash            291       418       122                  329
equivalents
Total net debt           762       779       226                  731

(1) Does not include the balance sheet of B Communications and its
subsidiaries.

Internet Gold’s Series D Debentures: In June 2014, Internet Gold completed a
private placement of NIS 219 million par value of its Series D Debentures to
certain institutional investors in Israel in exchange for NIS 107 million par
value and NIS 95 million par value of its outstanding Series B Debentures and
Series C Debentures, respectively (approximately 51% and 12% of the
outstanding Series B Debentures and Series C Debentures, respectively).

Dividend from Bezeq: On March 5, 2014, Bezeq's Board of Directors resolved to
recommend to its General Meeting of Shareholders the distribution of a cash
dividend of NIS 802 million ($233 million). On March 27, 2014, Bezeq's
shareholders approved the dividend distribution and on April 23, 2014 B
Communications received its share totaling approximately NIS 248 million ($72
million).

On August 6, 2014, the Board of Directors of Bezeq resolved to recommend to
the General Meeting of Shareholders the distribution of 100% of its profits
for the first half of 2014 as a cash dividend to shareholders in the amount of
NIS 1,267 million ($369 million). The record date for the distribution of the
dividend, which is subject to shareholder approval, will be September 15, 2014
and the payment date will be October 2, 2014. B Communications’ share of the
dividend distribution, if approved, is expected to be approximately NIS 391
million ($114 million).

Internet Gold’s Second Quarter Consolidated Financial Results

Internet Gold's consolidated revenues for the second quarter of 2014 totaled
NIS 2,250 million ($654 million), a 4.3% decrease compared with NIS 2,351
million reported in the second quarter of 2013. For both the current and the
prior-year periods, Internet Gold’s consolidated revenues consisted entirely
of Bezeq’s revenues.

Internet Gold's consolidated operating income for the second quarter of 2014
totaled NIS 1,039 million ($302 million), an 88.9% increase compared with NIS
550 million reported in the second quarter of 2013. The increase was primarily
attributed to Bezeq's Yad2 transaction that resulted in NIS 582 million ($169
million) of other operating income in the second quarter of 2014.

Internet Gold's consolidated net income for the second quarter of 2014 totaled
NIS 532 million ($155 million), a 111.1% increase compared with NIS 252
million reported in the second quarter of 2013. The increase was primarily
attributed to the sale of Yad2 by Bezeq during the second quarter of 2014.

Internet Gold’s Second Quarter Unconsolidated Financial Results

As of June 30, 2014 Internet Gold held approximately 67% of B Communications
outstanding shares. Accordingly, Internet Gold's interest in B Communications’
net income for the second quarter of 2014 totaled NIS 72 million ($21
million), a 132.2% increase compared with NIS 31 million reported in the
second quarter of 2013.

Internet Gold’s unconsolidated net financial expenses for the second quarter
of 2014 totaled NIS 39 million ($11 million) compared to NIS 18 million in the
second quarter of 2013. These expenses consist of NIS 31 million ($9 million)
of interest and CPI linkage expenses related to Internet Gold's
publicly-traded debentures, NIS 2 million ($1 million) of financial expenses
generated by short term investments and NIS 6 million ($2 million) of non-cash
financial expenses related to the revaluation of the option issued to Norisha
Holdings Ltd. to purchase B Communications shares. In accordance with IAS 39,
such option must be revalued each quarter until it vests, which occurred
during the quarter. As a non-cash item, any expense or income resulting from
this revaluation does not affect cash-flow.

Internet Gold's net income attributable to shareholders for the second quarter
of 2014 was NIS 32 million ($9 million) compared to net income of NIS 13
million in the second quarter of 2013.

In millions
                                           Convenience   
                                                 translation
                                                 into
                             Quarter ended       U.S. dollars     Year ended
                             June 30,            (Note A)         December 31,
                             2013      2014      2014             2013
                             NIS       NIS       US$              NIS
Revenues                     -         -         -                -
Financial expenses, net      (18 )     (39 )     (11     )        (76     )
Other expenses               -         (1  )     (1      )        (4      )
Interest in BCOM's net       31       72       21              106     
income
Net income                   13       32       9               26      

Comments of Management

Commenting on the results, Doron Turgeman, CEO of Internet Gold, said, “We are
very pleased with the financial results of the second quarter of 2014. During
the second quarter, we carried on with the process of improving our debt
structure. The issuance of our long-term Series D Debentures together with our
debenture exchange transactions extended the average duration of our debt from
2.5 years to 3.5 years while significantly improving our repayment schedule
and debt structure. According to the assumptions of our current work plan, we
have sufficient cash balances to fully service our outstanding debt until
2018. We are very pleased with Bezeq, which continues to generate a steady
return that enhances our overall financial position and capabilities.”

Bezeq Group Results (Consolidated)

To provide further insight into its results, the Company is providing the
following summary of the consolidated financial report of the Bezeq Group for
the second quarter ended June 30, 2014. For a full discussion of Bezeq’s
results for the second quarter of 2014, please refer to its website:
http://ir.bezeq.co.il.

Bezeq Group (consolidated)                  Q2 2014   Q2 2013   % change
                                              (NIS millions)
                                                                      
Revenues                                      2,250       2,351       -4.3   %
Operating profit                              1,234       744         65.9   %
EBITDA                                        1,553       1,070       45.1   %
EBITDA margin                                 69.0  %     45.5  %
Net profit attributable to Bezeq's            810         473         71.2   %
shareholders
Diluted EPS (NIS)                           0.29     0.17     70.6   %
Cash flow from operating activities           1,064       1,102       -3.4   %
Payments for investments                      323         301         7.3    %
Free cash flow^1                            787      924      -14.8  %
Net debt/EBITDA (end of period)^2           1.54     1.83     

     Free cash flow is defined as cash flow from operating activities less net
^1  payments for investments. The net proceeds from the sale of "Yad2" (net
     of tax) are presented as part of cash flow from investment activities,
     and the sale therefore had no effect on the free cash flow of the Group.
^2   EBITDA in this calculation refers to the trailing twelve months.
     

Revenues of the Bezeq Group in the second quarter of 2014 amounted to NIS 2.25
billion ($654 million) compared with NIS 2.35 billion in the corresponding
quarter of 2013, a decrease of 4.3%. The reduction in the Bezeq Group revenues
was primarily related to a decrease in revenues from cellular services due to
the challenging competitive environment in the cellular market as well as a
reduction in the revenues of Bezeq Fixed Line which were influenced by a
decrease in fixed call termination rates.

Salary expenses of the Bezeq Group in the second quarter of 2014 amounted to
NIS 443 million ($129 million) compared with NIS 468 million in the
corresponding quarter of 2013, a decrease of 5.3%. The decrease in the Bezeq
Group salary expenses was primarily due to streamlining at Bezeq Fixed Line
and Pelephone as well as a reduction in share based payments.

Operating expenses of the Bezeq Group in the second quarter of 2014 amounted
to NIS 822 million ($239 million) compared with NIS 831 million in the
corresponding quarter of 2013, a decrease of 1.1%. The decrease in the Bezeq
Group operating expenses was primarily due to a reduction in equipment and
interconnect expenses. The decrease was partially offset by an increase in
building maintenance expenses due to a one-time reduction in the corresponding
quarter of 2013 as a result of a change in estimates of lease payments for
building sites.

Profitability metrics of the Bezeq Group in the second quarter of 2014 were
influenced by the one-time NIS 582 million ($169 million) gain from the sale
of Coral Tel Ltd., the operator of the "Yad2" web site.

Operating profit of the Bezeq Group in the second quarter of 2014 amounted to
NIS 1.23 billion ($359 million) compared with NIS 744 million in the
corresponding quarter of 2013, an increase of 65.9%.

Earnings before interest, taxes, depreciation and amortization (EBITDA) of the
Bezeq Group in the second quarter of 2014 amounted to NIS 1.55 billion ($452
million) (EBITDA margin of 69.0%) compared with NIS 1.07 billion (EBITDA
margin of 45.5%) in the corresponding quarter of 2013, an increase of 45.1%.

Net profit attributable to Bezeq's shareholders in the second quarter of 2014
amounted to NIS 810 million ($236 million) compared with NIS 473 million in
the corresponding quarter of 2013, an increase of 71.2%.

Operating cash flow of the Bezeq Group in the second quarter of 2014 amounted
to NIS 1.06 billion ($309 million) compared with NIS 1.10 billion in the
corresponding quarter of 2013, a decrease of 3.4%. The Bezeq Group positive
trend of stable and strong cash flows continued in the second quarter of 2014.
Bezeq Group's financial strength and stable cash flows are primarily a result
of the Bezeq Group's leading market positions as well as the diversification
of its operating activities and revenue sources.

Payments for investments (Capex) of the Bezeq Group in the second quarter of
2014 amounted to NIS 323 million ($94 million) compared with NIS 301 million
in the corresponding quarter of 2013, an increase of 7.3%. The increase was
primarily due to the continued acceleration of the nationwide roll-out of
Bezeq’s fiber optic network.

Free cash flow of the Bezeq Group in the second quarter of 2014 amounted to
NIS 787 million ($229 million) compared with NIS 924 million in the
corresponding quarter of 2013, a decrease of 14.8%. The decrease in the Bezeq
Group free cash flow was primarily due to an increase in investments as well
as a decrease in proceeds from the sale of real estate due to timing
differences. It should be noted that the net proceeds from the sale of "Yad2"
(net of tax) are classified as cash flow from investment activities, and the
sale therefore is not included in the free cash flow of the Group.

Net financial debt of the Bezeq Group amounted to NIS 6.95 billion ($2
Billion) at June 30, 2014 compared with NIS 7.93 billion as of June 30, 2013.
At the end of June 2014, the Bezeq Group net financial debt to EBITDA was
1.54, compared with 1.83 at the end of June 2013.

Notes:

     Convenience Translation to Dollars: For the convenience of the reader,
     certain of the reported NIS figures of June 30, 2014 have been presented
     in millions of U.S. dollars, translated at the representative rate of
A.  exchange as of June 30, 2014 (NIS 3.438 = U.S. Dollar 1.00). The U.S.
     dollar ($) amounts presented should not be construed as representing
     amounts receivable or payable in U.S. dollars or convertible into U.S.
     dollars, unless otherwise indicated.

     Use of non-IFRS Measurements: We and the Bezeq Group’s management
     regularly use supplemental non-IFRS financial measures internally to
B.   understand, manage and evaluate its business and make operating
     decisions. We believe these non-IFRS financial measures provide
     consistent and comparable measures to help investors understand the Bezeq
     Group’s current and future operating cash flow performance.

     These non-IFRS financial measures may differ materially from the non-IFRS
     financial measures used by other companies.

     EBITDA is a non-IFRS financial measure generally defined as earnings
     before interest, taxes, depreciation and amortization. The Bezeq Group
     defines EBITDA as net income before financial income (expenses), net,
     impairment and other charges, expenses recorded for stock compensation in
     accordance with IFRS 2, income tax expenses and depreciation and
     amortization. We present the Bezeq Group’s EBITDA as a supplemental
     performance measure because we believe that it facilitates operating
     performance comparisons from period to period and company to company by
     backing out potential differences caused by variations in capital
     structure, tax positions (such as the impact of changes in effective tax
     rates or net operating losses) and the age of, and depreciation expenses
     associated with, fixed assets (affecting relative depreciation expense).

     EBITDA should not be considered in isolation or as a substitute for net
     income or other statement of operations or cash flow data prepared in
     accordance with IFRS as a measure of profitability or liquidity. EBITDA
     does not take into account our debt service requirements and other
     commitments, including capital expenditures, and, accordingly, is not
     necessarily indicative of amounts that may be available for discretionary
     uses. In addition, EBITDA, as presented in this press release, may not be
     comparable to similarly titled measures reported by other companies due
     to differences in the way that these measures are calculated.

     Reconciliation between the Bezeq Group’s results on an IFRS and non-IFRS
     basis is provided in a table immediately following the Company's
     consolidated results. Non-IFRS financial measures consist of IFRS
     financial measures adjusted to exclude amortization of acquired
     intangible assets, as well as certain business combination accounting
     entries. The purpose of such adjustments is to give an indication of the
     Bezeq Group’s performance exclusive of non-cash charges and other items
     that are considered by management to be outside of its core operating
     results. The Bezeq Group’s non-IFRS financial measures are not meant to
     be considered in isolation or as a substitute for comparable IFRS
     measures, and should be read only in conjunction with its consolidated
     financial statements prepared in accordance with IFRS.

About Internet Gold

Internet Gold is a telecommunications-oriented holding company which is a
controlled subsidiary of Eurocom Communications Ltd. Internet Gold’s primary
holding is its controlling interest in B Communications Ltd. (TASE and Nasdaq:
BCOM), which in turn holds the controlling interest in Bezeq, The Israel
Telecommunication Corp., Israel’s largest telecommunications provider (TASE:
BEZQ). Internet Gold’s shares are traded on NASDAQ and the TASE under the
symbol IGLD. For more information, please visit the following Internet sites:

www.igld.com

www.bcommunications.co.il

www.ir.bezeq.co.il

Forward-Looking Statements

This press release contains forward-looking statements that are subject to
risks and uncertainties. Factors that could cause actual results to differ
materially from these forward-looking statements include, but are not limited
to, general business conditions in the industry, changes in the regulatory and
legal compliance environments, the failure to manage growth and other risks
detailed from time to time in B Communications' filings with the Securities
Exchange Commission. These documents contain and identify other important
factors that could cause actual results to differ materially from those
contained in our projections or forward-looking statements. Stockholders and
other readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on which they are
made. We undertake no obligation to update publicly or revise any
forward-looking statement.

Internet Gold – Golden Lines Ltd.
Consolidated Statements of Financial Position as at
(In millions)

                                    Convenience              
                                        translation
                                        into
                                        U.S. dollars
                                        (Note A)
                            June 30     June 30           June 30     December
                                                                      31
                            2014        2014              2013        2013
                            NIS         US$               NIS         NIS
Assets
Cash and cash               796         232               778         867
equivalents
Restricted cash             73          21                -           -
Investments, including
derivative financial        2,645       769               2,266       1,868
instruments
Trade receivables, net      2,335       679               2,863       2,651
Other receivables           329         96                337         346
Inventory                   89          26                142         117
Assets classified as        135         39                238         218
held-for-sale
                                                                      
Total current assets        6,401       1,862             6,624       6,067
                                                                      
Investments, including
derivative financial        80          23                89          81
instruments
Long-term trade and         587         171               817         652
other receivables
Property, plant and         6,542       1,903             6,626       6,541
equipment
Intangible assets           6,175       1,796             6,966       6,613
Deferred and other          370         108               394         381
expenses
Investment in
equity-accounted            1,014       295               1,015       1,015
investee (mainly loans)
Deferred tax assets         35          10                66          60
                                                                      
Total non-current           14,803      4,306             15,973      15,343
assets
                                                                      
Total assets                21,204      6,168             22,597      21,410
                                                                      
                                                                      

Internet Gold – Golden Lines Ltd.
Consolidated Statements of Financial Position as at (cont’d)
(In millions)
                                                           
                                     Convenience
                                     translation
                                     into
                                     U.S. dollars
                                     (Note A)
                        June 30      June 30           June 30      December
                                                                    31
                        2014         2014              2013         2013
                        NIS          US$               NIS          NIS
Liabilities
Short-term bank
credit, current
maturities of           1,605        467               1,622        1,566
long-term
liabilities and
debentures
Trade payables          639          186               686          721
Other payables,
including
derivative              701          204               707          776
financial
instruments
Dividend payable        -            -                 338          -
Current tax             727          211               732          659
liabilities
Provisions              134          39                124          125
Employee benefits       378         110              273         257     
Total current           4,184       1,217            4,482       4,104   
liabilities
                                                                    
Debentures              8,885        2,585             6,326        6,954
Bank loans              3,453        1,004             6,227        5,223
Loans from
institutions and        -            -                 542          548
others
Employee benefits       229          67                256          234
Other liabilities       304          88                86           94
Provisions              68           20                67           68
Deferred tax            899         261              1,063       1,032   
liabilities
Total non-current       13,838      4,025            14,567      14,153  
liabilities
                                                                    
Total liabilities       18,022      5,242            19,049      18,257  
                                                                    
Equity
Total equity
attributable to         (187   )     (54       )       (57    )     (86     )
equity holders of
the Company
Non-controlling         3,369       980              3,605       3,239   
interests
                                                                    
Total equity            3,182       926              3,548       3,153   
                                                                    
Total liabilities       21,204      6,168            22,597      21,410  
and equity
                                                                            
                                                                            

Internet Gold – Golden Lines Ltd.
Consolidated Statements of Income for the
(In millions, except per share data)

                   Six months period ended               Three months period ended           Year
                                                                                                   ended
                     June 30,                                June 30,                              December
                                                                                                   31,
                               Convenience                         Convenience  
                                 translation                             translation
                                 into                                    into
                                 U.S.                                    U.S.
                                 dollars                                 dollars
                                 (Note A)                                (Note A)
                     2014        2014            2013        2014        2014            2013      2013
                     NIS         US$             NIS         NIS         US$             NIS       NIS
Revenues             4,561      1,327          4,756      2,250      654            2,351     9,563
                                                                                                   
Cost and
expenses
Depreciation and     941         274             981         472         137             489       2,014
amortization
Salaries             891         259             970         443         129             469       1,874
General and
operating            1,695       493             1,720       824         240             831       3,586
expenses
Other operating
expenses             (536  )     (156    )       (29   )     (528  )     (154    )       12        57
(income), net
                                                                                                   
                     2,991      870            3,642      1,211      352            1,801     7,531
                                                                                                   
Operating income     1,570       457             1,114       1,039       302             550       2,032
                                                                                                   
Financing            515        150            174        165        48             98        396
expenses, net

Income after
financing            1,055       307             940         874         254             452       1,636
expenses, net

Share of losses
in                   98         29             107        79         23             67        252
equity-accounted
investee
                                                                                                   
Income before        957         278             833         795         231             385       1,384
income tax
                                                                                                   
Income tax           394        114            286        263        76             133       524
                                                                                                   
Net income for       563        164            547        532        155            252       860
the period
                                                                                                   
Income (loss)
attributable to:
Owners of the        (112  )     (32     )       50          32          9               13        26
company
Non-controlling      675        196            497        500        146            239       834
interests
                                                                                                   
Net income for       563        164            547        532        155            252       860
the period
                                                                                                   
Earnings per
share
Basic income         (5.82 )     (1.69   )       2.58       1.68       0.49           0.60      1.33
(loss) per share
Diluted income       (5.89 )     (1.71   )       2.57       1.63       0.47           0.60      1.26
(loss) per share
                                                                                                   
                                                                                                   

Internet Gold – Golden Lines Ltd.
Reconciliation for NON-IFRS Measures

EBITDA

The following is a reconciliation of the Bezeq Group’s operating income to
EBITDA:

In millions

                                 Three months period ended June 30
                                                  Convenience     
                                                    translation
                                                    into
                                                    U.S. dollars
                                                    (Note A)
                                   2014             2014                2013
                                   NIS              US$                 NIS
                                                                        
Operating income                   1,234            359                 744
Depreciation and                   319              93                  326
amortization
                                                                        
EBITDA                             1,553            452                 1,070
                                                                        
                                                                        

Free Cash Flow

The following table shows the calculation of the Bezeq Group’s free cash flow:

In millions
                                       
                                          Three months period ended June 30
                                                    Convenience   
                                                      translation
                                                      into
                                                      U.S. dollars
                                                      (Note A)
                                          2014        2014             2013
                                          NIS         US$              NIS
                                                                       
Cash flow from operating activities       1,064       310              1,102
Purchase of property, plant and           (281  )     (82     )        (252  )
equipment
Investment in intangible assets and       (42   )     (12     )        (49   )
deferred expenses
Proceeds from the sale of property,       46         13              123   
plant and equipment
                                                                       
Free cash flow                            787        229             924   
                                                                             
                                                                             

   Designated disclosure with respect to the Company's projected cash flows

In accordance with the "hybrid model disclosure requirements" promulgated by
the Israeli Securities Authority that are applicable to Internet Gold - Golden
Lines Ltd. (the "Company"), the following is a report of the Company’s
projected cash flows and a disclosure of the examination by the Company’s
board of directors of the Company’s liquidity in accordance with regulations
10(b)(1)(d) and 10(b)(14) of the Securities Regulations (Immediate and
Periodic Notices) 5730-1970:

  *The Company’s un-reviewed financial statements as of and for the quarter
    ended June 30, 2014, reflect that the Company had an equity deficit of NIS
    187 million as of such date.
  *The Company’s board of directors reviewed the Company’s outstanding debt
    obligations, its existing and anticipated cash resources and needs that
    were included in the framework of the projected cash flow report for the
    period from July 1, 2014 until December 31, 2014, for the period from
    January 1, 2015 until December 31, 2015 and for the period from January 1,
    2016 until June 30, 2016 described below. The board of directors also
    examined the assumptions and projections that were included in the report
    and determined that such assumptions and projections are reasonable and
    appropriate.
  *Based on the foregoing, the Company’s board of directors determined that
    the Company does not have a liquidity problem and that there is no
    reasonable doubt that for the duration of the period covered by the
    projected cash flows statement the Company will not meet its existing and
    anticipated liabilities when due.

The following is the projected cash flow of the Company and the assumptions
upon which it is based:

                                                For the           For the
                             For the period     period            period
                             from July 1,       from January      from January
                           2014             1,              1,
                             until December     2015 until        2016 until
                             31, 2014           December 31,      June
                                                2015              30, 2016
                             NIS millions       NIS millions      NIS millions
Opening balance:
Cash and cash                92                25               25      
equivalents^(1)
                                                                  
Independent sources:
Cash flows from
investing activities:
Proceeds from the sale
of marketable                29                14               164     
securities^(2)(3)
Cash provided by             29                14               164     
investing activities
                                                                  
Sources from Subsidiary:
Dividends from               -                 110              53      
subsidiary^(4)
                                                                  
Projected liabilities
(projected uses):
Cash flows used in           (2       )         (4       )        (2      )
operating activities^(5)
                                                                  
Cash flows from
financing activities:
Repayments of                (62      )         (63      )        (187    )
debentures^(6)
Interest payments^(6)        (32      )         (57      )        (28     )
Cash used in financing       (94      )         (120     )        (215    )
activities
                                                                  
Closing balance:
Cash and cash                25                25               25      
equivalents^(1)
                                                                          

Assumptions and explanations pertaining to the above table:

      Cash flows include the Company’s projected cash flows and do not include
(1)  the consolidation of projected cash flows from the Company’s subsidiary,
      B Communications Ltd. (“B Communications”) or from Bezeq - The Israel
      Telecommunications Corp. Ltd. (“Bezeq”).

      In addition to the cash balances it maintains, the Company also invests
      in low-risk, high liquidity marketable securities that are used to
      finance its operations. The Company’s investment policy was reviewed by
(2)   the Company’s audit committee and by a credit rating agency. As of July
      1, 2014, the Company’s investments in marketable securities totaled NIS
      326 million and by June 30, 2016 this balance is expected to be NIS 137
      million. For details on the investment policy see item (3) below.

      For the purposes of calculating cash flows from investments in
      marketable securities, the Company assumed an annual yield of 3% on the
      average balance of its investments in marketable securities during the
      period. This assumption is based on the Company’s investment policy,
      whereby at least 50% of the its cash balances will be invested in
(3)   government bonds or cash on-call deposits; up to 35% will be invested in
      corporate bonds with a rating higher than A- and an average rating
      higher than AA-; and up to 15% will be invested in shares and/or
      corporate bonds with a rating lower than A-. The assumption is also
      based on yields historically achieved by the Company from its
      investments in marketable securities and on management’s assessment of
      the probability of achieving such yield during the period.

      The following are the benchmarks used by the Company and a sensitivity
      analysis of the above assessments:

                                In 2013 and in 2012 the Company generated
                                yields of 5.5% and 6.9%, respectively, on its
      A.                       cash and marketable securities portfolio. The
                                Company does not anticipate that there will be
                                any material changes to its investment policy
                                in the projected periods.

                                The following table shows the expected profit
                                in NIS millions from investments in cash and
      B.                        marketable securities in the projected periods
                                under a scenario of a 5% annual yield and a
                                scenario of a -2% annual yield:

    Period\Annual yield            5  %     -2 %
        1 – six moth profit (loss)         8            (3 )
        2 – annual profit (loss)           15           (6 )
        3 – six moth profit (loss)         8            (3 )
                                                           

(4)  Assumption of the receipt of a dividend from B Communications during the
      period is based on the following:

      According to what it believes to be a conservative estimate, the
      Company’s management anticipates that while no dividend will be received
      from B Communications in 2014, dividends should be received in the
      eighteen month period ending June 30, 2016. The Company’s management
      anticipates that B Communications’ retained earnings balance will be at
      least NIS 245 million at December 31, 2015. This assumption is based on
      market forecasts of the estimated net profits of Bezeq during the
      projected periods and on B Communications’ anticipated financing
      expenses and the continued amortization of its purchase price allocation
      ("PPA") costs. Amortization of PPA costs are expected to decrease
      significantly from one year to the next because of the accelerated
      depreciation method that was adopted by B Communications at the time of
      its acquisition of the controlling interest in Bezeq.

      B Communications does not have a dividend distribution policy.
      Nevertheless, the Company assumes that there is a high probability that
      B Communications will distribute most of its retained earnings balance
      as a dividend, based, among other things, on B Communications’ December
      2013 distribution of its retained earnings balance.

      Accordingly, the Company’s management believes that B Communications
      will act in the same manner it did in 2013, and that it will distribute
      most of its retained earnings balance, as long as this balance meets the
      criteria for distributions under Israeli law and that B Communications
      will have the resources to service its debt for a period of at least 18
      months. This assumption does not contradict the restrictions on
      distributing dividends under applicable law and other restrictions
      applicable to B Communications.

      The cash flows from the Company’s current operations include the
(5)   administrative operating costs and costs associated with the Company
      being a publicly dual-listed company traded on the NASDAQ Global Market
      and on the Tel Aviv Stock Exchange.

      The repayment of principal and interest are based on the repayment
(6)   schedule for the Company’s outstanding debentures, in addition to an
      assumed annual 2% increase in the Consumer Price Index.
      

Assumptions and explanations that were included in earlier projected cash
flows:

In June 2014, the Company completed a private placement of NIS 219 million par
value of its Series D Debentures to certain institutional investors in Israel
in exchange for NIS 107 million par value and NIS 95 million par value of its
outstanding Series B Debentures and Series C Debentures, respectively
(approximately 51% and 12% of the outstanding Series B Debentures and Series C
Debentures, respectively). The exchange was carried out in order to improve
the Company's financial position by extending the average duration of its debt
from 2.5 years to 3.5 years.

In past reported projected cash flows the Company assumed debt and interest
payments according to its debt repayment schedule prior to the aforementioned
exchange. Based on its prior debt schedule cash flow used in financing
activities would have been NIS 159 million for the period from July 1, 2014
until December 31, 2014, NIS 178 million for the period from January 1, 2015
until December 31, 2015 and NIS 236 million for the period from January 1,
2016 until June 30, 2016.

Amendment to Share Purchase Agreement - Norisha Holdings Limited ("Norisha")

As previously reported, Pursuant to an amendment to the Share Purchase
Agreement dated May 29, 2014, the Share Purchase Agreement was revised in
order to permit Norisha to pay the Exercise Price through a “cashless
exercise.” The Company's Board of Directors stated, among others, that selling
fewer B Communications shares to Norisha through the “cashless exercise” is a
positive step that will reduce the dilutive effect on the Company’s ownership
interest in B Communications.

In the previously reported projected cash flows for the year end 2013, the
Company assumed Norisha would exercise the option granted to it under the
original agreement and purchase the additional 892,935 shares at an exercise
price of NIS 31.59 per share (the exercise price stated in the agreement,
adjusted for the dividend paid in December 2013) and included NIS 28 million
of projected proceeds as cash inflow in its projected cash flows.

The Company has additional cash generating abilities that for conservative
reasons were not taken in to account in the projected cash flow detailed
above. The following describes the Company's assumptions regarding these
scenarios:

Note: Even if the above assumptions are not realized, the Company has
additional means to finance its operations and meet its obligations.

     All of the Company's shares in B Communications are free and clear of any
     encumbrance. If necessary, the Company can sell some of these shares, and
A.  will still remain the controlling shareholder of B Communications. This
     ability to sell shares of B Communications is supported by a similar
     transaction carried out in 2013, when shares in B Communications were
     sold to Norisha Holdings Ltd.
     
     The Company has financial flexibility and quick access to capital markets
B.   that enable it to raise funds within a short period of time. This is
     evident from the bond issues that the Company has completed in the past
     few years.

The Company’s board of directors has reviewed the Company’s liabilities, its
existing and anticipated cash resources and needs that were included in the
framework of the projected cash flow report, examined their scope and
feasibility, as well as the timing of their receipt, and found that all such
assumptions and the projections were reasonable and appropriate.

The Company’s board of directors examined the Company’s anticipated resources
and liabilities, and considering the financial data in the above cash flow
report and management’s explanations of such data determined that the Company
does not have a liquidity problem and that there is no reasonable doubt that
for the duration of the projected period for which cash flow information has
been provided the Company will not meet its existing and anticipated
liabilities when due.

The information detailed above, concerning the Company’s cash flow forecast,
and particularly concerning the projected dividend and yield on securities,
are forward looking information as defined in the Securities Law, 5728-1968.
This information includes forecasts, subjective assessments, estimates, etc.
and is based, among other things, on objective market forecasts and reviews
issued to the public, and relies, among other things, on the company
management’s past experience. Furthermore, some of the said information is
based on future data and internal estimates by the Company’s management made
at the current time, and there is no certainty that they will materialize, in
whole or in part, due to factors that are not in the Company’s control. It is
hereby clarified that there is a likelihood that said forward looking
information will not be realized, in whole or in part, both with respect to
the Company’s forecasts and with respect to the working assumptions on which
they are based.

Contact:

Internet Gold – Golden Lines Ltd.
Idit Cohen - IR Manager
Tel: +972-3-924-0000
idit@igld.com
or
Investor relations contacts:
Hadas Friedman - Investor Relations
Tel: +972-3-516-7620
Hadas@km-ir.co.il
 
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