Bezeq The Corporation Ltd. Notice of the convening of an Extraordinary General Meeting and Transaction Report, in accordance with the Securities Regulations (Transaction between a Company and a Controlling Shareholder therein) 2001 and

pursuantU to the Securities Regulations (Periodic and Immediate Reports), 5730-1970

1. Pursuant to the Securities Regulations (Periodic and Immediate Reports) 1970 and Securities Regulations (Transaction between a Company and a Controlling Shareholder therein) 2001 ("the Controlling Shareholders Regulations"), notice is hereby given of the convening of an extraordinary general meeting of the shareholders of the Company at which the topics laid out hereunder in this report will be discussed. The extraordinary general meeting will be held on October 11, 2012 at 11:00 a.m. at the Company's offices at 2 Azrieli Center (Triangle Tower, 27th floor), in .

2. CompanyU name: U – The Israel Corp. Ltd. ("the Company" or "Bezeq"). The subsidiary - Communications Ltd. ("Pelephone") 3. Summary of the issues and resolutions on the agenda for the general meeting and a description of the main points:

3.1 AppointmentU of a directors To appoint Mr. Yair David as a director of the Company (from among employees 1 - attached herewith is a declaration of Mr. David's eligibility)P0F .P

3.2 LetterU of Indemnification To approve, subject to the approval of his appointment as a director of the Company, providing Mr. Yair David with a letter of indemnification identical to the letters of indemnification approved for the other directors of the Company. 3.3 Supply and maintenance services for products manufactured by Nokia and ZTE Extending, expanding and amending the engagement of Pelephone with Eurocom Cellular Communications Ltd. ("Eurocom Communications"), which was approved by the general shareholders meeting on June 10, 2010 and which deals with regulating the purchase and supply of Nokia products to Pelephone ("Products" - terminal equipment, spare parts and accessories). As part of the amendment, the engagement will be expanded to also include products manufactured by the Chinese electronics manufacturer, ZTE which is expected to market cellular terminal equipment in Israel via its new official representative, Eurocom Communications, and all as specified in the body of the report. The term of the agreement will be extended by three years from the date of expiry of the existing agreement (i.e. through to December 31, 2015).

4. U Name of the controlling shareholder who has a personal interest in the transaction and 2 the nature of such personal interest concerning issue 3.3 aboveUP1F :PU B Communications Ltd. ("B Com"), the controlling shareholder of the Company, has a personal interest in the transaction because Eurocom Cellular Communications Ltd. (a 3 party to the transaction) is an affiliate of B ComP2F .P

1 For further information concerning the candidate for serving as a director in accordance with Regulation 26 of the Securities Regulations (Periodic and Immediate Reports), 1970, see section 3 of the voting ballot attached to this report. 2 See details of the nature of the personal interest of directors considered to be controlling shareholders in section 5 below. 3 Eurocom Cellular Communications Ltd. is a company controlled by Eurocom Communications Ltd. ("Eurocom Communications") which is a controlling shareholder (through holdings) B Communications (the controlling shareholder of the Company).

5. PersonalU interest for directors with regard to issue 3.3 above: - as the controlling shareholder (through holdings) of Eurocom Communications; Or Elovitch, the son of Shaul Elovitch; Orna Elovitch, the wife of Or Elovitch and daughter-in-law of Shaul Elovitch; and Felix Cohen and Amikam Shorer, both employees and/or officers of Eurocom Group Companies (i.e. companies controlled by Eurocom and/or under the same control).

6. TheU General Meeting and the majority required to pass the resolutions: An extraordinary general meeting of the shareholders of the Company has been called for October 11, 2012 at 11:00 a.m., at the Company's offices at 2 Azrieli Center, Tel Aviv (Triangle Tower, 27th floor), with the issues specified above on the agenda. The majority required for adopting resolutions under sections 3.1 and 3.2 above is an ordinary majority of all the votes of the shareholders participating in the general meeting. With regard to section 3.3, the required majority is an ordinary majority of all the votes of the shareholders participating in the general meeting, and who are eligible to vote and who voted in it, without taking into consideration the absentee votes, unless in the occurrence of one of the following: 1) The count of the majority votes in the general meeting includes a minimum majority of all the votes of the shareholders who do not have a personal interest in the approval of the transaction, who participate in the vote; the count of all the votes of the shareholders will not take abstentions into account. 2) The total negative votes from among the shareholders referred to in sub-section [A] above do not exceed two percent (2%) of all the voting rights in the Company. The effective date for eligibility to participate and to vote in the general meeting in accordance with section 182(B) of the Companies Law 1999 will be September 13, 2012 ("the Effective Date"). The number of shares representing 5% of the total voting rights in the Company is 136,044,843 ordinary shares of the Company. The number of shares constituting 5% of the total voting rights in the Company which are not held by a controlling party in the Company as defined in Section 268 of the Companies Law is 93,696,962 ordinary shares of the Company.

7. ReviewU of documents The shareholders of the Company may review, upon their request, the documents pertaining to the foregoing transaction as specified in Regulation 5 of the Controlling Shareholders' Regulations and any other relevant material pertaining to the issues on the agenda for the general meeting at the Company's secretariat at 2 Azrieli Center, Tel Aviv, Triangle Tower (27th floor) on Monday through Thursday between 10:00 a.m. and 3:00 p.m., and by prearranged appointment (Tel: 03-626-2200)

August 29, 2012

Linor Yochelman, Adv. Company secretary

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Bezeq The Israel Telecommunication Corporation Ltd. Transaction Report and Notice of Convening of an Extraordinary General Meeting Pursuant to the Securities Regulations (Transaction between a Company and a Controlling Shareholder therein) 2001 and pursuant to the Securities Regulations (Periodic and Immediate Reports), 1970

Pursuant to the Securities Regulations (Periodic and Immediate Reports) 1970 and Securities Regulations (Transaction between a Company and a Controlling Shareholder therein) 2001 ("the Controlling Shareholders Regulations"), notice is hereby given of the convening of an extraordinary general meeting of the shareholders of the Company at which the topics laid out hereunder in this report will be discussed. The extraordinary general meeting will be held on October 11, 2012 at 11:00 a.m. at the Company's offices at 2 Azrieli Center (Triangle Tower, 27th floor), in Tel Aviv. Part A - Issues on the agenda and summary of the main points of the proposed resolutions 1.1 Appointment of a directors To appoint Mr. Yair David as a director of the Company (from among employees - 4 attached herewith is a declaration of Mr. David's eligibility)P3F .P 1.2 Letter of Indemnification To approve, subject to the approval of his appointment as a director of the Company, providing Mr. Yair David with a letter of indemnification identical to the letters of indemnification approved for the other directors of the Company. 1.3 Supply and maintenance services for products manufactured by Nokia and ZTE As set out in Part B of this report, below.

4 For further information concerning the candidate for serving as a director in accordance with Regulation 26 of the Securities Regulations (Periodic and Immediate Reports), 1970, see section 3 of the voting ballot attached to this report.

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Part B - Details in accordance with the Controlling Shareholders Regulations with respect to the proposed resolution noted in section 1.3 of Part A

1. Company name: Bezeq The Israel Telecommunication Corporation Ltd. 2. The parties to the transaction: Bezeq – The Israel Telecommunications Corp. Ltd. ("the Company" or "Bezeq"). The subsidiary - Pelephone Communications Ltd. ("Pelephone") 3. Description of the main points and nature of the engagement: Background: A. Eurocom Cellular Communications Ltd. ("Eurocom Communications") is the distributor in Israel of cellular telephones and a range of terminal equipment manufactured by Nokia. Eurocom Communications also deals with the supply of spare parts and accessories and provides maintenance services for Nokia products. At the beginning of 2009 Pelephone began marketing Nokia products to its customers and for this purpose agreements were reached between Pelephone and Eurocom Communications concerning the working procedures, prices, payment terms, levels of technical repairs, etc. as is reflected in the purchase orders and working procedures agreed upon between the parties. In June 2010, following changes in the control of the Company and after Eurocom Communications became a related party to the controlling shareholders in the Company, the general meeting of the Company's shareholders approved an engagement between Pelephone and Eurocom Communications with regard to Pelephone purchasing Nokia products from time to time, which is valid through to December 31, 2012. With regard to the foregoing, a maximum annual limit was set for the engagement that would not exceed NIS 450 million (including an addition of 10% to the foregoing amount). B. Recently Eurocom Communications became the representative of ZTE in Israel (ZTE is a Chinese corporation manufacturing a range of communications products, including cellular terminal equipment, and markets its products throughout the world), and is expected to begin marketing a range of ZTE products in Israel to the general market and as part of this Pelephone, as well as the other cellular operators and other retailers, may also be interested in this equipment. It is further noted that in recent years Pelephone has continuously, and as part of its integral business operations, purchased ZTE MF 190 modem cards ("the Modem Card") from ZTE's previous representative (which is not connected to Eurocom) and under this report Pelephone also requests approval for continuing to purchase the modem card, as will be specified below. C. Due to the fact that the approved engagement period for the purchase of Nokia products ends on December 31, 2012 and in order to enable Pelephone to purchase a range of ZTE products that will be marketed in Israel (including the modem card) from Eurocom Communications, as Pelephone may determine from time to time, it is proposed that the agreement between Pelephone and Eurocom Communications, which was approved by the general meeting of the shareholders on June 10, 2010, be extended and amended in accordance with the main terms set forth below: 1. The term of the agreement will be extended by an additional three years from the current date of expiry. i.e. from January 1, 2013 through to December 31, 2015;

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2. The volume of annual purchases under the agreement will not deviate from a cumulative amount of NIS 300 million per year (before VAT) per calendar year (for Nokia and ZTE products together); 3. Pelephone is not committed to purchase from Eurocom Communications and is free to purchase products at its sole discretion and according to its marketing needs; 4. The parties will negotiate freely with regard to the purchase of Nokia and ZTE products, accessories and spare parts or for maintenance services on all technical levels. 5. Eurocom Communications will offer Pelephone, under these negotiations, to purchase Nokia and ZTE products at competitive terms. 6. Payment terms are EOM + 45 days for the purchase of products and EOM + 62 days for acquisition of repair services. 7. Under the existing agreement, at the time Eurocom Communications' cumulative gross annual profit margin (rate) from marketing of each type of Nokia product and service to Pelephone would not exceed the 2009 margin (before Eurocom Communications became an interested party in Bezeq) and that, if in any calendar year Eurocom Communications' average gross profit margin from marketing Nokia products or services to and to Partner (together) would change with regard to the 2009 margin, the annual gross profit margin limit would change for the same type of product or service at the same rate. 8. Eurocom Communications' average annual gross profit margin limit for any type of product or service of the range of ZTE products and/or services, will be calculated at the end of each calendar year with regard to each product line and/or service of ZTE which was acquired by Pelephone during that year and would be presented for auditing by an external auditor as described below. The initial benchmark period with regard to which the gross profit margin limit would be calculated will be from the date of approval of the amendments in the agreement through to its termination on December 31, 2013 ("the Benchmark Period"). 9. Eurocom Communications' cumulative annual gross profit margin (rate) from the sale of a ZTE line of products and/or services to Pelephone during the benchmark period will not exceed the weighted average of Eurocom Communications' gross profit (weighted by quantitative share purchased by any party) with respect to a line of ZTE products and/or services sold by Eurocom Communications to other cellular operators and/or to retailers, while this calculation will include only retailers that purchased a quantity during the benchmark period not less than 40% of the quantity purchased by Pelephone (with respect to a line of products or services during the relevant period). The weighted average of the gross profit margins will be considered as "the annual gross profit margin for a type of product or service" as set out in the agreement. 10. For the purpose of neutral supervision concerning purchases under the agreement terms, the agreement includes the following supervision mechanism: a. An external auditor from the Somekh Chaikin CPA firm will be preapproved by Eurocom to examine the compliance of the transactions with the terms of the agreement ("the External Auditor"). b. The external auditor will be certified to review all of Eurocom's accounting and supply ledgers and to obtain all the information required for giving an opinion as set forth in this mechanism;

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c. The audit which will be conducted once every calendar year, will include examining compliance with the terms stipulated in sections 7 - 9 above. The external auditor will not transfer to Pelephone any information concerning the audit findings other than an opinion as set forth below. d. The external auditor will issue a written verification to the parties in which he will specify the excess amounts, if any, paid by Pelephone in accordance with the terms stipulated in sections 7 - 9 above. e. If the external auditor's verification notes that Pelephone paid excess amounts exceeding 3% of the annual gross profit margin limit for a type of product or service, these amounts will be refunded to Pelephone within 7 days from the date of the external auditor's verification. For demonstration purposes only: If the annual gross profit margin limit for a type of product or service in any given calendar year is 20%, the rate above which the excess refund will apply will be 20.6%. f. The external auditor's decision will be final and will be binding on the parties without requiring any additional judicial approvals. 11. In an appendix to the agreement and in its amendment, working procedures were defined with respect to the terms of supply, terms of technical maintenance services, marketing budgets, etc, based on the procedures agreed upon between the parties in the past. It also determined that if the need arises, during the term of this agreement, to acquire additional services from Eurocom, the conditions of which are not fixed in the foregoing appendix, then conditions for the additional services will be determined following negotiations between the parties, based on the generally accepted conditions between the parties to the agreement and the market terms. D. ZTE modem cards It is proposed to also approve, under this engagement, the acquisition of a one-time inventory of 2000 ZTE modem cards at the same price as the modem cards recently supplied by the vendor that represented ZTE until recently.

The Company's audit committee and board of directors decided on the following supervision mechanism: A. Prior to Pelephone engaging in a purchase order to acquire a new line of ZTE products offered by Eurocom Communications and as part of Pelephone's internal administration, Pelephone will examine alternative product brands with similar features to ZTE products and consider purchasing them. This examination will be documented and will be examined by Pelephone's internal auditor as part of the audit program. B. In addition, from the end of the second quarter of 2013, once every quarter, Pelephone will send a report of the order backlog generated with Eurocom Communications, separately for ZTE products and for Nokia products for the reported quarter. This report will include the aggregate monetary value of these orders by brand, Nokia and ZTE (each separately) as well as an analysis which will also include the rate of each of these from the total volume of orders issued by Pelephone during the reported quarter to the sources from which the cellular terminal equipment purchase orders were made. The report will be given as part of the quarterly reports for Bezeq's audit committee with respect to the transactions carried out with related parties during the quarter. In addition, once a year, an

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assessment by Pelephone's management concerning the share of ZTE products in the entire market for the reporting year will be sent to the audit committee. 4. Name of the controlling shareholder who has a personal interest in transactions and the nature 5 of such personal interestP4F B Communications Ltd. ("B Com"), the controlling shareholder of the Company, has a personal interest in the transaction because Eurocom Cellular Communications Ltd. (a party 6 to the transaction) is an affiliate of B ComP5F .P 5. Method for determining the consideration The prices under the foregoing agreement will be fixed as part of negotiations while the volume of the purchase will be at the sole discretion of Pelephone. Furthermore, the agreement prescribes control mechanisms for ensuring competitive prices and terms for Pelephone. 6. Approvals for executing the transaction The Company board of directors' audit committee approval was given on August 26, 2012. The Company board of directors’ approval was given on August 29, 2012. Approval of the transaction is also required by the general meeting of the shareholders in the Company which is set for October 11, 2012, in accordance with this report. 7. Similar transactions See details in section 3 above with regard to the existing agreement between Pelephone and Eurocom Communications for the purchase of Nokia products, which is to be amended and extended as specified in this report. 8. Audit Committee and board of directors explanations and the names of the directors who participated in the discussions: Section 1.2 (granting of a letter of indemnification): A. Granting appropriate protection for the officer in the Company will allow him to act efficiently and without concern for the benefit of the Company. B. Awarding the pre-indemnity undertaking supplements the protection given to officer as part of the officers liability insurance. C. The scope of indemnity is limited (as required by the law) to types of events that are expected given the Company's actual operations when granting the undertaking for indemnity and the amount that is reasonable under the circumstances. D. Granting an undertaking for indemnity in advance to officer is conventional in the Company and other companies, in addition to officers' liability insurance Section 1.3 (Supply and maintenance services for Nokia and ZTE products): a. The agreement is required for supplying Nokia and ZTE products (including modem cards), spare parts, accessories and supporting services. These products and services

5 See details of the nature of the personal interest of directors considered to be controlling shareholders in section 8 above. 6 Eurocom Cellular Communications Ltd. is a company controlled by Eurocom Communications Ltd. ("Eurocom Communications") which is a controlling shareholder (through holdings) B Communications (the controlling shareholder of the Company).

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could be essential for Pelephone in order to cope with the competition in the cellular communications market. b. With regard to the price of the modem cards specified in the batch order as set forth in section 3. D above is the same as the price at which the modem cards are purchased from the current vendor. c. The prices for Nokia and ZTE products and services will be fixed in negotiations, while the purchase volume and terms, including the prices, are at Pelephone's sole discretion. The agreement includes a mechanism for ensuring that the prices to Pelephone will be in accordance with competitive terms.

The following members of the audit committee participated in the audit committee's discussions concerning the approval of issues 1.2-1.3 on the agenda: Mordechai Keret (external director), Yitzhak Edelman (external director), Eldad Ben-Moshe and Yehoshua Rosenzweig. The following board members participated in the board of directors discussions concerning the approval of issue 1.2 on the agenda: Shaul Elovitch, Or Elovitch, Orna Elovitch-Peled, Amikam Shorer, Felix Cohen, Mordechai Keret (external director), Yitzhak Edelman (external director), Eldad Ben-Moshe, Yehoshua Rosenzweig, Arieh Saban and Rami Nomkin. The following board members participated in the board of directors discussions concerning the approval of issue 1.3 on the agenda: Mordechai Keret (external director), Yitzhak Edelman (external director), Eldad Ben-Moshe and Yehoshua Rosenzweig, Arieh Saban and Rami Nomkin. 8. Personal interest for directors: Shaul Elovitch - as the controlling shareholder (through holdings) of Eurocom Communications; Or Elovitch, the son of Shaul Elovitch; Orna Elovitch, the wife of Or Elovitch and daughter-in-law of Shaul Elovitch; and Felix Cohen and Amikam Shorer, both employees and/or officers of Eurocom Group Companies (i.e. companies controlled by Eurocom Communications and/or under the same control).

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Part C - Notice of convening of the General Meeting 1. The General Meeting and the majority required to pass the resolutions: An extraordinary general meeting of the shareholders of the Company has been called for October 11,2012 at 11:00 a.m., at the Company's offices at 2 Azrieli Center, Tel Aviv (Triangle Tower, 27th floor), with the issues specified above on the agenda. The majority required for adopting resolutions under sections 1.1 and 1.2 above is an ordinary majority of all the votes of the shareholders participating in the general meeting. With regard to section 1.3, the required majority is an ordinary majority of all the votes of the shareholders participating in the general meeting, and who are eligible to vote and who voted in it, without taking into consideration the absentee votes, unless in the occurrence of one of the following: 1) The count of the majority votes in the general meeting includes a minimum majority of all the votes of the shareholders who do not have a personal interest in the approval of the transaction, who participate in the vote; the count of all the votes of the shareholders will not take abstentions into account. 2) The total negative votes from among the shareholders referred to in sub-section [A] above do not exceed two percent (2%) of all the voting rights in the Company. Should, following thirty minutes from the time set for the commencement of the general meeting, no legal quorum be present (two shareholders who jointly hold a minimum of 51% of the issued share capital of the Company), the general meeting will be adjourned until October 18, 2012, at the same time and the same place. Should no legal quorum as stated above, be present at the adjourned meeting, at the end of half an hour from the time set for the meeting, the General Meeting shall commence with any number of participants present. All shareholders may participate in the general meeting in person or by a proxy whose written appointment will be delivered to the Company's official offices. The effective date for eligibility to participate and to vote in the general meeting in accordance with section 182(B) of the Companies Law 1999 will be September 13, 2012 ("the Effective Date"), i.e. any holder of shares at the end of trading on September 13, 2012 will be eligible to participate and vote in the general meeting against presentation of certification pertaining to ownership of shares on the effective date, drafted in accordance with the Companies (Proof of Ownership of a Share for the Purpose of Voting at a General Meeting) Regulations, 2000. The number of shares representing 5% of the total voting rights in the Company is 136,044,843 ordinary shares of the Company. The number of shares constituting 5% of the total voting rights in the Company which are not held by a controlling party in the Company as defined in Section 268 of the Companies Law is 93,696,962 ordinary shares of the Company. 2. Voting slips and position notices 1. Votes with respect to all the issues specified above will also be permitted by way of voting ballots. A written vote will be cast on the second part of the Voting Ballot as published on the Israel Securities Authority website. 2. The website addresses Securities Authority and of the Ltd. containing the wording for voting ballots and position papers are: The Securities Authority website: www.magna.isa.gov.il Tel Aviv Stock Exchange website:: www.maya.tase.co.il and the Company's website: www.bezeq.co.il 3. Members of the Tel Aviv Stock Exchange shall send, without charge, by email, a link to the Proxy Statement and the Statements of Positions on the Israel Securities Authority website to shareholders who are not registered in the Shareholders Register and whose shares are registered with the member of the Tel Aviv Stock Exchange, as

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long as notice was given regarding a specific securities account and prior to the effective date. 4. Shareholders are entitled to apply directly to the Company in order to receive the wording of the Proxy Statement and the Statements of Position. 5. Shareholders whose shares are registered with a member of the Tel Aviv Stock Exchange are entitled to receive confirmation of shareholder’s proprietary rights from the member of the Stock Exchange through which their share are held, at the branch of the member of the Stock Exchange or by post to their registered address bearing postage costs only, if requested by said shareholders. A request for the purpose of this matter shall be submitted in advance to a specific securities account. 6. The deadline for delivering position papers by the Company's shareholders is September 23, 2012. 7. The deadline for issuing the board of directors' response to the position papers is September 28, 2012. 8. The position notice and documents required to be enclosed therewith (as stipulated in the position notice) must be presented at the Company's offices up to 72 hours prior to the date of convening of the general meeting. In this matter the "time of the vote” is the time at which the voting slip and attached documents arrive at the Company's office. 9. The voting slip and position notices shall be delivered by hand or by registered post. 3. Powers of the Israel Securities Authority Pursuant to the controlling shareholder regulations, the Securities Authority, or an employee of the Authority so authorized ("the Authority"), may instruct the Company, within 21 business days of the date of filing of this report, to provide, within the time frame it may prescribe, any explanation, information or documents pertaining to the transaction and to instruct the Company to amend this immediate report in the manner and within the time it so prescribes. Should an order to amend this report be given, as aforesaid, the Authority may order an adjournment of the general meeting to a date which will fall no less than three business days and no later than twenty one business days from the publication date of the amendment to the immediate report. 4. Company representative The Company's representative in respect of the handling of this transaction report is: Adv. Linor Yochelman – Company Secretary, Address: 2 Azrieli Center, Tel-Aviv, Israel Tel: 03-626-2200, Fax: 03-626-2209 5. Review of documents The shareholders of the Company may review, upon their request, the documents pertaining to the foregoing transaction as specified in Regulation 5 of the Controlling Shareholders' Regulations and any other relevant material pertaining to the issues on the agenda for the general meeting at the Company's secretariat at 2 Azrieli Center, Tel Aviv, Triangle Tower (27th floor) on Monday through Thursday between 10:00 a.m. and 3:00 p.m., and by prearranged appointment (Tel: 03-6262200)

August 29, 2012 Linor Yochelman, Adv. Company secretary

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The3T above information constitutes a translation of the 3T Immed3T iate Report published by the Company. The Hebrew version was 3T submitted3T by the Company to the relevant authorities pursuant to Israeli law, and represents the binding version and the only one 3T having3T legal effect. This translation was prepared for convenience purposes only.

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