ISRAEL DISCOUNT BANK LTD. ( The Bank )

Transcription

1 ISRAEL DISCOUNT BANK LTD. ( The Bank ) Israel Securities Authority Tel Aviv Stock Exchange Ltd. Uwww.isa.gov.ilU Uwww.tase.co.il Date: SJulyS UAugustU S30 SU26U, 2013 Re. USupplementary Immediate Report Regarding Convening of Annual General Meeting UFurther to the Bank's immediate report dated July 30, 2013 (Reference No.: ), the Bank hereby submits this Supplementary Immediate Report notifying about USThe Bank is pleased to announces the convening of an Annual General Meeting ( the Meeting ), which will be held on Monday, September 9, 2013 at 11:00 a.m. at the offices of the Bank, 23 th Yehuda Halevi Street (17 Floor), Tel Aviv, Israel. If a legal quorum is not present, the Meeting will be adjourned to Tuesday, September 10, 2013, at the same time and place. For further details regarding convening of the Meeting, refer to art B of this Immediate Report below. UTopics on the agenda: 1. Discussion of the Financial Statements and the Report of the Board of Directors of the Bank for the Year Ended December 31, UThe proposed resolution: No resolution is required. 2. Approval of Interim Dividend to reference Shareholders as a Final Dividend. UThe proposed resolution: To approve, as a final dividend for 2012, the interim dividend of 6% paid, on December 27, 2012, to shareholders of 40,000, 6% cumulative preference shares, with a nominal value NIS each. The amount of the dividend is GB 24,000. UMajority required to pass the resolution: A simple majority of all the votes of shareholders of ordinary A shares voting at the Meeting personally or by proxy and entitled to vote, not including abstentions in the calculation. 3. Appointment of Auditors and Authorization of the Board of Directors to Fix Their Fees. 3.1 UThe proposed resolution: To reappoint Ziv Haft as auditors and Somekh Chaikin as auditors and to authorize the Board of Directors to fix the fees of the auditors. UMajority required to pass the resolution: A simple majority of all the votes of shareholders of ordinary A shares voting at the Meeting personally or by proxy and entitled to vote, not including abstentions in the calculation. 1

2 3.2 Report concerning the fees of the auditors for 2012 for auditing activities and additional services pursuant to Sections 165 and 167 of the Companies Law, 1999 ( the Companies Law ). 2 UThe proposed resolution: No resolution is required. 4. Appointment of Directors. UThe proposed resolutions: To reappoint the following members of the Board of Directors, who are not directors with the status of outside director pursuant to the law and/or the provisions of the roper Conduct of Banking Business Directives of the Supervisor of Banks, as directors of the Bank: 4.1 Dr. Joseph Bachar, Chairman of the Board of Directors; 4.2 Eli Eliezer Gonen; 4.3 Jorge Zafran; 4.4 Joseph Ciechanover Itzhar; 4.5 Richard Morris Roberts; 4.6 Aliza Rotbard. To appoint for an additional period starting on November 10, 2013, Messrs.: 4.7 Ilan Cohen; 4.8 Yali Sheffi. Messrs. Cohen and Sheffi serve in the status of outside director pursuant to the provisions of the roper Conduct of Banking Business Directives of the Supervisor of Banks. The aforesaid appointments are subject to the approval of the Supervisor of Banks. The vote with regard to each director will be taken separately. UMajority required to pass the resolutions (the vote with regard to each director will be taken separately): A simple majority of all the votes of shareholders of ordinary A shares voting at the Meeting personally or by proxy and entitled to vote, not including abstentions in the calculation. UAdditional details: The above directors have provided the Bank with declarations pursuant to Section 224B(a) of the Companies Law, which are attached to this Immediate Report. An advance notice, pursuant to Section 11C(a)(4) of the Banking Ordinance, 1941, as amended by Section 2(8) of the Banking Law (Legislative Amendments), 2012, was published on July 9, 2013 (Reference No ). The other outside directors (pursuant to the Companies Law or the provisions of the roper Conduct of Banking Business Directives of the Supervisor of Banks) continue to serve until the end of the period of their service pursuant to the law. Regarding the newly appointed directors, pursuant to Regulation 36B(a)(10) of the Securities Regulations (eriodic and Immediate Reports), 1970 ( the eriodic and Immediate Reports Regulations ), the Bank hereby draws attention to the contents of Regulation 26 of the eriodic and Immediate Reports Regulations, with regard to information concerning the directors specified in sections above, as included in the eriodic Report for 2012, which the Bank submitted on March 20, 2013 (Reference No ), in which information was also included regarding commencement of service and membership of committees, except for the updates detailed below. This mention constitutes the inclusion by way of reference of the information with regard to this matter. UName of Director UThe Update (in addition to the contents of

3 Dr. Joseph Bachar, Chairman of the Board of Directors Aliza Rotbard Richard Morris Roberts Regulation 26) Employment during the last five years: Director of Visa Europe (appointed for the period between May 1, 2013 and April 30, 2015) Employment during the last five years: Director of Mobile Max Technologies Ltd. (2007-July 2013) Employment during the last five years: Director of Shibolet & Co. trust companies (since July 2012) Director of Global Dynamic Business Ltd. (since June 2013) Director of Elevator Venture Capital Investments Ltd. (September 2011 May 31, 2013) With regard to Messrs. Ilan Cohen and Yali Sheffi, who serve in the status of outside director pursuant to the provisions of the roper Conduct of Banking Business Directives of the Supervisor of Banks, and whom it is proposed to appoint for an additional service period which starts on November 10, 2013, pursuant to the eriodic and Immediate Reports Regulations, the details of the candidate to serve as a director are set forth below: Ilan Cohen Date on which he commenced serving as an Outside Director of Israel Discount Bank Ltd. pursuant to Directive No. 301 of the roper Conduct of Banking Business Directives: November 10, 2010 ID No.: Date of birth: September 16, 1958 th Address for service of process: The Azrieli Center Circular tower, 38 floor, Tel Aviv, Israel Nationality: Israeli Membership on committee(s) of the Board of Directors: Chairman of the Strategy Committee Computer Committee Coordination Committee Serves as an Outside Director as Defined in the Companies Law: No Serves as an Independent Director as Defined in the Companies Law: No Serves as an Outside Director pursuant to Directive No. 301 of the roper Conduct of Banking Business Directives: Yes ossesses professional and financial expertise and professional qualifications: Yes Employee of the Bank, a subsidiary, an affiliated company or of an interested party: No Education: Academic Master of Business Administration (summa cum laude) from INSEAD, Fontainebleau, France. Bachelor of Economics and Management (summa cum laude) from Tel Aviv University. Employment in the last five years and details of the corporations in which he serves as a Director: Chairman of the Board of Directors of Insuline Medical Ltd. 3

4 Chairman of the Board of Directors of Mikveh Israel Alliance Israelite. Director of Hadaka Hatishim Ltd. Director of Edmond de Rothschild Investment Services Ltd. ("Edris") (since June 2012). Director of.o.c. Investment Company (1999) Ltd. Director of Masa: The roject for the Encouragement of long term rograms in Israel for Jewish Young Adults Ltd. Director of.o.c. Capital Investments Ltd. (since August 1994). resident & CEO of Ilan Cohen Investment and Entrepreneurships Ltd. resident & CEO of Yield-Investment Advisors Ltd. A member of the Executive Board (voluntary) of the Lin and Ted Arison Israel Conservatory of Music in Tel Aviv (since October 2011). Director and Deputy Chairman of the Board of Edmond de Rothschild rivate Equity Management Ltd. (September 2009 to March 2012) Director of the Alliance Israelite Association (2007 November 2009) Relative of another interested party in the Corporation: No ossesses accounting and financial expertise pursuant to Section 92(a)(12) of the Companies Law: Yes Yali Sheffi Date on which he commenced serving as an Outside Director of Israel Discount Bank Ltd. pursuant to Directive No. 301 of the roper Conduct of Banking Business Directives: November 10, 2010 ID No.: Date of birth: March 19, 1951 Address for service of process: 31 Anshey Bereshit, Hod Hasharon 45267, Israel Nationality: Israeli Membership on committee(s) of the Board of Directors: Audit Committee Credit Committee Human Resources Committee Remuneration Committee Strategy Committee Computer Committee Serves as an Outside Director as Defined in the Companies Law: No Serves as an Independent Director as Defined in the Companies Law: Yes Serves as an Outside Director pursuant to Directive No. 301 of the roper Conduct of Banking Business Directives: Yes ossesses professional and financial expertise and professional qualifications: Yes Employee of the Bank, a subsidiary, an affiliated company or of an interested party: No Education: Academic Bachelor of Economics and complementary studies in statistics and mathematics (summa cum laude) from the Hebrew University, Jerusalem Diploma in Accounting for degree holders from Tel Aviv University (outstanding seminary work) Studies in the Direct hd. rogram in Mathematical Economics, the Hebrew University, Jerusalem (not completed) rofessional certificates: CA Employment in the last five years and details of the corporations in which he serves as a Director: 4

5 Director of Keshet Broadcasting Ltd. (since June 2013) Director of MySupermarket Israel (MSI) Ltd. (since 2011) CEO and Director of a private company owned by him, engaged in business consulting (Yali Sheffi, unlimited liability company) (since June 2009) (between 2002 and 2009 the company was inactive) Owner and Director of Yali roperties Ltd. (since 2003) Consultant for Bylinks International Relations Ltd. (since 2010) Served as Chairman of the Board of the Association of Life Assurance Companies of Israel Ltd. ( ) resident & CEO of hoenix Insurance Company Ltd. ( ) resident & CEO of hoenix Holdings Ltd. ( ) Relative of another interested party in the Corporation: No ossesses accounting and financial expertise pursuant to Section 92(a)(12) of the Companies Law: Yes The directors proposed for reappointment as provided in section 4 above (with the exception of the Chairman of the Board of Directors) are entitled to the payment of annual compensation and fees for participating in meetings of the Board of Directors and its committees, in the "maximum amount" as prescribed in the Second and Third Addendums to the Companies Regulations (Rules on Remuneration and Expenses of Outside Directors), 2000, according to the ranking of the Bank, as set forth in the Immediate Report Regarding a Transaction with a Controlling Shareholder or with a Director Which Does Not Require General Meeting Approval, published by the Bank on July 6, 2008 (Reference No , this mention constitutes the inclusion by way of reference of the information included in the said report). For the terms of the appointment and employment of the Chairman of the Board of Directors, refer to the resolution in topic 8 on the agenda below. It is noted, that the General Meeting held on August 27, 2009 (Reference No , this mention constitutes the inclusion by way of reference of the information included in the said report), passed resolutions with regard to the granting of an exemption in advance to the directors and to other officers of the Bank and to the provision of an undertaking to indemnify the directors and other officers of the Bank, and resolved, inter alia, that the aforementioned exemption and undertaking to indemnify would also apply to future directors and officers of the Bank (unless they are controlling shareholders, in which case a special resolution would be required), without it being necessary to obtain specific consent in each individual case. For details regarding the proposed amendment to the advance indemnification undertaking, refer to the resolution in topic 7 on the agenda below. 5. Approval of the Remuneration olicy for Officers of the Bank in accordance with Section 267A of the Companies Law. UThe proposed resolution: To approve the Bank's Officers Remuneration olicy, attached as UAppendix AU agenda, in accordance with Section 267A of the Companies Law. 5 to the UMajority required to pass the resolution: A simple majority of all the votes of shareholders of ordinary A shares voting at the Meeting personally or by proxy or by a voting paper and entitled to vote, provided that one of the following is met:

6 to (a) The majority of the votes in the General Meeting includes the majority of the votes of the shareholders of the Bank participating in the vote, who are non-controlling shareholders or who have no personal interest in the approval of the Remuneration olicy. The number of votes of the said shareholders will not include abstentions; or (b) The total opposing votes among the shareholders in section (a) above does not exceed two percent (2%) of the total voting rights in the Bank. Notwithstanding the aforesaid, the Company's Board of Directors may adopt the Remuneration olicy even if the General Meeting has opposed the approval thereof, provided that the Remuneration Committee, followed by the Board of Directors, have resolved, based on detailed reasoning and after discussing the Remuneration olicy again, that the approval of the Remuneration olicy despite the objection of the General Meeting is in the Bank's favor. UAdditional detailsu: 5.1 The Officers Remuneration olicy, attached as UAppendix AU the agenda ("the Remuneration olicy"), is a remuneration policy which is approved by the Bank for the first time in accordance with Section 267A of the Companies Law. 5.2 The Remuneration olicy, with its different components, was discussed in several meetings of the Remuneration Committee and of the plenum of the Board of Directors in which the recommendations of the Remuneration Committee were discussed. 5.3 The SmeetingSUdiscussionU of the Remuneration Committee in which its recommendation to the Board of Directors regarding the Remuneration olicy was approved Uand the additional discussion regarding clarifications to the Remuneration olicy, as provided in this Supplementary Immediate Report, wereus, wass attended by: Mr. Ilan Biran (Chairman; outside director); Ms. Edith Lusky (outside director) and Mr. Yali Sheffi (independent director). 5.4 The meeting of the Board of Directors in which the Remuneration olicy was approved, was attended by the following members of the Board of Directors: Dr. Joseph Bachar (Chairman), Ilan Biran (outside director), Eli Gonen, Ilan Cohen, David Levinson, Edith Lusky (outside director), Jorge Zafran, Ilan Aish, Joseph Ciechanover Itzhar, Richard Roberts, Aliza Rotbard and Yali Sheffi. UOn August 26, 2013, the Bank's Board of Directors held another discussion, after receiving the recommendations of the Remuneration Committee with regard to clarifications to the Remuneration olicy, as provided in this Supplementary Immediate Report, and decided to adopt these recommendations as part of the Remuneration olicy. The members of the Board of Directors who participated in the additional discussion are Messrs.: Dr. Joseph Bachar (Chairman), Eli Gonen, Ilan Cohen, David Levinson, Edith Lusky (outside director), Jorge Zafran, Ilan Aish, Joseph Ciechanover Itzhar, Richard Roberts, Aliza Rotbard and Yali Sheffi. 6

7 5.5 Names of directors with personal interest and the nature of their personal interest: The Chairman of the Board of Directors could have personal interest since the Remuneration olicy sets forth specific provisions on the terms of the appointment and employment of the Chairman of the Board of Directors of the Bank All members of the Board of Directors could have personal interest since the Remuneration olicy sets forth provisions on the terms of the appointment and employment of the directors of the Bank. 5.6 The aforesaid meetings reviewed and examined, inter alia, data and information as follows: The required considerations with regard to the formulation of a remuneration policy pursuant to Amendment 20 of the Companies Law, including the criteria set forth in Addendum A to the Companies Law, and in arts A (Matters Which Must be Addressed in a Remuneration olicy) and B (rovisions Which Must be Included in a Remuneration olicy); The Guidelines on Sound Remuneration olicy published by the Supervisor of Banks in his letter from April 5, 2009; The existing terms of appointment and employment of the officers of the Bank; The terms of employment of employees of the Bank (including the data requiring reference under Amendment 20); ublic comparative data on the structure of officer remuneration. 5.7 Alongside the explanations provided within the framework of the Remuneration olicy, the reasons of the Board of Directors for approving the Remuneration olicy, having considered the recommendations of the Remuneration Committee, are provided below: The aims of the Remuneration olicy of the Bank are to maintain a proper balance between the overall organizational strategy of the Bank, its goals and its work plans, as set forth from time to time, in line with its risk appetite and risk management. This, alongside the creation of a suitable incentive system for the recruitment and long-term retention of high quality senior management employees, as is required by the Bank for its continued development and business success The fixed remuneration: With the view that the amount of the fixed component should also be limited, the Remuneration olicy prescribes ceilings for the salary of Company officers. 7

8 The fixed remuneration is a significant component of the total remuneration The fixed remuneration, with its different components, facilitates maintaining stability and continuity at the management level of the Bank, thus ensuring the presence of a professional, quality and efficient management In deciding the fixed remuneration for each officer, his education, skills, expertise, professional experience and achievements will be taken into account, as will his position, his responsibilities and previous agreements signed with him To allow the recruitment of management workforce of the highest quality in the financial system, alongside the limitations set forth in the Remuneration olicy, the fixed policy will also be decided taking into account the relevant market terms and employment terms in the financial system at the time The annual bonus component: The variable component is designed to facilitate meeting the goals of the Bank and the Group. The annual bonus will be based on a set of indexes comprising mainly measurable criteria and qualitative indicators. The variable component also includes a mix of group indicators and individual indicators which are relevant to the activity for which the officer is responsible. The Remuneration olicy will allow to adapt the targets in the different indicators to the Bank's changing needs, to its work plan and to its risk management policy Generally, the indicators that are based on measureable criteria will give expression to indicators such as the return on capital and/or to the return on risk assets and to the capital adequacy ratio of the Bank. Thus, expression will be given to the current risk appetite of the Bank. The qualitative indicators will give expression to indicators such as those related to corporate governance, statutory compliance, risk management, etc An arrangement will be decided under which the payment of a part of the annual bonus will be deferred, and payment of deferred bonuses will be made contingent on prerequisites for the payment of an annual bonus being met. This enhances the reliance of the variable component on performance with a long-term view With the view that the total variable component in the Remuneration olicy should be limited, bonus ceilings where included in it for the officers of the Bank as well as a maximum total budget for the bonus to all Vice residents. A ceiling was also prescribed for the percentage of the bonuses to all officers of the

9 9 Bank out of the net income attributed to the shareholders of the Bank The ratio of the fixed component to the variable component in the terms of employment of the officers, as expressed in the ceilings decided for the different remuneration components, is proportionate and balanced With regard to the remuneration for the risk management, control and audit functions of the Bank, the Remuneration olicy prescribes that special provisions may be decided which would take into account the importance and sensitivity of the duties of these functions The Remuneration olicy includes also the option of granting bonuses for special events (such as the exceptional performance or special contribution of an officer) while prescribing ceilings or a budget for these bonuses. These bonuses are also subject to the bonus ceilings decided for the officers The Remuneration olicy includes also the option of granting bonuses if the Bank did not meet the required prerequisites and given special circumstances. The bonus amount is limited in the budget to an immaterial amount, and a maximum ceiling is prescribed for the bonus to an individual officer The capital bonus component: The Remuneration olicy includes a capital component (a bonus that is linked to changes in the share price or "phantom" options), with the aim of bolstering the common interests between the officers and the shareholders, to increase the proportion of the remuneration's long-term component and in view of the importance assigned to the Bank's risk appetite The entitlement to receive the capital bonus will be spread over three years, and will be contingent, in part, on the prerequisites to the annual bonus being met, and in part on the indicators based on measurable criteria being met A ceiling was prescribed for the capital bonus component at the grant date and at the exercise date End-of-employment remuneration: Throughout the employment period of the officer in the Bank, a part of the terms of his appointment and employment is performance-based, as specified above and in the Remuneration olicy, taking into account his achievements and his contribution to attaining the Bank's targets.

10 In view of this, it was not deemed necessary to make the end-ofemployment remuneration contingent on the performance of the Bank, since it is granted for reasons other than to remunerate for the results of the Bank and/or the officer's performance. As aforesaid, proper expression to performance-based remuneration (including in the event of termination of employment) is given in the provisions of the olicy which pertain to the variable component The Remuneration olicy also prescribes the maximum end-ofemployment remuneration The Remuneration olicy preparation process included examination of and reference to the ratio of the remuneration paid to officers of the Bank to the remuneration paid to employees of the Bank (including agency employees), and the Remuneration olicy gives expression to the examination and discussion of this matter The Remuneration olicy includes the option of reducing the variable components at the discretion of the Board of Directors, for special reasons The Remuneration olicy is in line with the Guidelines on Sound Remuneration olicy published by the Supervisor of Banks in his letter from April 5, It is noted that the Remuneration olicy is subject to amendments as shall apply from time to time, in the law and in directives applying to the Bank, including directives that will bind the Bank in accordance with the Circular of the Supervisor of Banks on Bank Remuneration olicy, an updated draft of which was published in July The terms of the Remuneration olicy are reasonable and acceptable under the circumstances and taking into account the responsibility borne by the officers of the Bank and the scope of its activity In view of the aforesaid and in light of the data presented to the Remuneration Committee and the Board of Directors, the Remuneration olicy is fitting and reasonable, under the circumstances. 5.8 Applicability to officers in the subsidiaries: the Remuneration olicy of the Bank will not be applied directly to the terms of appointment and employment of officers in the Bank's subsidiaries (including such officers included in the disclosure in the Bank's eriodic Report for 2012 pursuant to Regulation 21 of the Securities Regulations (eriodic and Immediate Reports), 1970). However, the principles of the Bank's Remuneration olicy will be adopted as part of a Group remuneration policy that will be applied to the officers of the Bank's Israeli subsidiaries, mutatis mutandis, noting the nature and size of each such subsidiary, including as regards the ceilings of the different remuneration components in the Remuneration olicy, and in view of the applying regulation, as relevant. 5.9 Reference to gaps between the Remuneration olicy and the existing appointment and employment terms: at the determination date of the Remuneration olicy by the Board of Directors of the Bank, the terms of the appointment and employment of 10

11 the officers of the Bank to whom the Remuneration olicy presented for approval in this report applies, match the Remuneration olicy, such that there is no material deviation between the remuneration terms of these officers and the Remuneration olicy. 6. Amendment of the Bank's Articles of Association. UThe proposed resolution: To amend sections of the Bank's Articles of Association (amend section 18 and add section 75(a)), with regard to bearer share certificates and advance undertaking to indemnify, pursuant to the text detailed and marked as UAppendix BU of the agenda. UMajority required to pass the resolution: A simple majority of all the votes of shareholders of ordinary A shares voting at the Meeting personally or by proxy and entitled to vote, not including abstentions in the calculation. UAdditional details: It is proposed to set forth in the Bank's Articles of Association that the maximum accumulated indemnification amount that was and will be paid by the Bank to all officers of the Bank and to officers of the subsidiaries, will not exceed fifteen percent (15%) of the equity of the Bank as reflected in its recent financial statements published immediately before the actual indemnification date (for this purpose, "equity" is the supervisory capital as it is defined in Directive No. 202 of the roper Conduct of 1 Banking Business Directives of the Supervisor of Banks)0F. It is further proposed to cancel the provision on bearer share certificates in the Bank's Articles of Association. 7. Update of the Advance Undertaking to Indemnify granted to Directors and Officers. UThe proposed resolution: To amend the advance undertaking to indemnify granted to directors and other officers of the Bank, including directors or other officers as shall be from time to time, pursuant to the text detailed and marked as UAppendix CU of the agenda. UMajority required to pass the resolution: A simple majority of all the votes of shareholders of ordinary A shares voting at the Meeting personally or by proxy or by a voting paper and entitled to vote, provided that one of the following is met: (a) The majority of the votes in the General Meeting includes the majority of the votes of the shareholders of the Bank participating in the vote, who are non-controlling shareholders or who have no personal interest in the approval of the terms of appointment and employment presented for approval in this resolution. The number of votes of the said shareholders will not include abstentions; or (b) The total opposing votes among the shareholders in section (a) above does not exceed two percent (2%) of the total voting rights in the Bank. 1 In this regard it is noted, that according to the Bank's financial statements as of March 31, 2013, the supervisory capital of the Bank amounts to NIS billion. 11

12 Notwithstanding the aforesaid, the Company's Board of Directors may adopt the terms of appointment and employment of officers who are not directors, that are presented for approval as part of this resolution, even if the General Meeting has opposed the approval thereof, provided that the Remuneration Committee, followed by the Board of Directors, have resolved, based on detailed reasoning and after discussing the Remuneration olicy again, that the approval of the Remuneration olicy despite the objection of the General Meeting is in the Bank's favor. UAdditional details: 7.1 The General Meeting held on August 27, 2009 (Reference No , this mention constitutes the inclusion by way of reference of the information included in the said report), resolved, inter alia, to grant an advance undertaking to indemnify to directors and to other officers of the Bank as well as to future directors or officers. 7.2 It is proposed to amend the undertaking to indemnify following the enacting of the Efficiency of the Israel Securities Authority Enforcement rocedures (Legislative Amendments) Law, 2011 and the Antitrust (Amendment No. 13) Law, 2012 ("the Legislative Amendments"). The changes to the text of the undertaking to indemnify previously approved as provided in section 7.1 above, are marked in the undertaking to indemnify, which is attached as UAppendix CU to the agenda. 7.3 The amendment of the undertaking to indemnify is in line with the Remuneration olicy presented for approval in this Report. However, the resolution in this item on the agenda is not subject to the approval of the Remuneration olicy by the Meeting. 7.4 On July 29, 2013, the Company s Board of Directors approved, after the approval of the Remuneration Committee on July 3, 2013, the amendment of the undertaking to indemnify. 7.5 The meeting of the Remuneration Committee was attended by Messrs. Ilan Biran (Chairman; outside director); Ms. Edith Lusky (outside director) and Mr. Yali Sheffi (independent director). The meeting of the Board of Directors was attended by: Dr. Joseph Bachar (Chairman), Ilan Biran (outside director), Eli Gonen, Ilan Cohen, David Levinson, Edith Lusky (outside director), Jorge Zafran, Ilan Aish, Joseph Ciechanover Itzhar, Richard Roberts, Aliza Rotbard and Yali Sheffi. 7.6 Names of Directors with personal interest and the nature of their personal interest: all directors have a personal interest in the approval of the amendment of the undertaking to indemnify, which is part of the terms of their appointment and employment in the Bank. 7.7 Reasons of the Remuneration Committee and the Board of Directors for approving the amendment of the undertaking to indemnify: The amendment of the undertaking to indemnify is in line with the Remuneration olicy presented for approval in this Report. 12

13 7.7.2 The Legislative Amendments expanded the scope of the responsibilities and duties of officers of the Bank, as well as the scope and severity of the exposures and sanctions with respect to breach of said duties ("the New Exposures"). Taking into account the New Exposures entailed in the activity of the officers, including the directors, it is deemed fit that the Bank should amend the advance undertaking to indemnify while noting the New Exposures and according to the framework provided simultaneously with the enactment of the New Exposures The amendment of the undertaking to indemnify does not increase the maximum indemnification amount (previously approved by the General Meeting of the Company's shareholders) which the Company may pay to Officers by virtue of the undertaking to indemnify Many companies have taken steps to amend the undertaking to indemnify pursuant to the New Exposures. 8. Amendment of the Terms of Appointment and Employment of the Chairman of the Board of Directors with regard to Tax Gross Up with respect to the Use of a Vehicle. UThe proposed resolution: Subject to the approval of the Bank's Officers Remuneration olicy, as provided in resolution 5 on the agenda, to approve the Bank bearing the tax gross up with respect to the cost of use of the vehicle placed by the Bank at the disposal of the Chairman of the Board of Directors and the cost of its maintenance. UMajority required to pass the resolutions (the vote with regard to each director will be taken separately): A simple majority of all the votes of shareholders of ordinary A shares voting at the Meeting personally or by proxy and entitled to vote, not including abstentions in the calculation. UAdditional details: 8.1 The Chairman of the Board of Directors, Dr. Joseph Bachar, serves as director of the Bank since January 3, For details of the terms of appointment and employment of the Chairman of the Board of Directors, refer to the Immediate Reports published by the Bank on October 5, 2010 and December 21, 2010 (Reference Nos and , respectively, this mention constitutes the inclusion by way of reference of the information included in the said reports). For additional details, see also Notes 13d(1) and 22(f)-(g) of the eriodic Report for The terms of appointment and employment of the Chairman of the Board of Directors are in effect until January 3, For details of the experience, education and expertise of the Chairman of the Board of Directors, the Bank hereby draws attention to Regulation 26 of the eriodic and Immediate Reports Regulations, as included in the eriodic Report for 2012 and as aforesaid in section 4 above.

14 Dr. 8.4 It is proposed to amend the terms of appointment and employment of the Chairman of the Board of Directors so that starting on September 1, 2013, the Bank will bear the tax gross up with respect to the cost of use of the vehicle placed by the Bank at the disposal of the Chairman of the Board of Directors and the cost of its maintenance. 8.5 The cost to the Bank of the proposed amendment in the terms of appointment and employment of the Chairman of the Board of Directors is NIS 8,880 per month. 8.6 Below is a schedule showing the compensation for 2013 which the Chairman of the Board of Directors is expected to receive, if the aforesaid amendment of the terms of appointment and employment of the Chairman of the Board of Directors were to be approved: Year 2013 Details of the recipient Name Dr. Joseph Bachar (4) osition Chairman of the Board of Directors Extent of position 100% Remuneration* for services Rate of holdings in corporation s capital Salary Bonus (5) 1,941 (6) Employer s payments and provisions (1) Benefits and grossing Total salary, bonus, employer s provisions and (2) up benefits In NIS thousands ,873 Sharebased payment * The amounts of the remuneration are in cost terms and do not include wage tax. (1) Includes adaptation award, severance pay, retirement grant, provident pay, further education fund, vacation pay, National Insurance contributions, loss of work ability insurance and adjustment of provisions following changes in salary. (2) Includes value of use of vehicle and of mobile phone, various benefits and their grossing up. (3) The benefit relating to "phantom" option plans is split over future periods. The benefit is adjusted to fair value at each reporting date, and the fair value at the publication date of the eriodic Report for 2013 cannot be forecast at present. (4) The remuneration, employment terms and "hantom" options were approved by special general meetings of the shareholders held on November 10, 2010 and January 25, (5) Bachar owns shares in the Bank in a negligible nominal value amount of NIS 29,640. (6) The annual bonus for the Chairman of the Board of Directors is decided based on the results of the Bank in As of the date of this Report, the bonus amount to be paid for 2013, if at all, cannot be assessed. The annual bonus to the Chairman of the Board of Directors is limited to an amount that will not exceed NIS 2.4 million (gross), linked to the consumer price index (according to the rate of increase of the index known at the annual bonus payment date compared to the index made public in January 2010). (3) Total Loans granted under regular terms 2, Subject to the approval of the proposed amendment of the terms of appointment and employment of the Chairman of the Board of Directors: According to the data forecast for 2013, the ratio of the variable components (assuming theoretical entitlement to a maximum annual bonus) to the fixed components in the terms of appointment and employment of the Chairman 2 of the Board of Directors is1f : 87% 2 Excludes splitting over future periods the benefit relating to "phantom" option plans, which is adjusted to fair value at each reporting date as provided in footnote (3) in the table in section 8.6 above. 14

15 8.7.2 The proposed amendment of the terms of appointment and employment of the Chairman of the Board of Directors is in the fixed remuneration component. The cost of the fixed remuneration component in the terms of appointment and employment of the Chairman of the Board of Directors (provided that the amendment is approved by the Meeting) is 10.6 times the average monthly cost and 12.3 times the median monthly cost of the fixed component paid to all employees of the Bank and agency workers. A change in the aforesaid gaps following approval of the proposed amendment will not affect workplace relations at the Bank. 8.8 On July 29, 2013, the Board of Directors of the Company approved, after the approval of the Remuneration Committee on July 21, 2013, the proposed amendment of the terms of appointment and employment of the Chairman of the Board of Directors. The Remuneration Committee and the Board of Directors were presented the principles of the terms of appointment and employment of the Chairman of the Board of Directors, the proposed amendment and the data as provided in section 8.7 above. 8.9 The meeting of the Remuneration Committee was attended by Messrs. Ilan Biran (Chairman); Ms. Edith Lusky (outside director) and Mr. Yali Sheffi (independent director). The meeting of the Board of Directors was attended by: Dr. Joseph Bachar (Chairman), Ilan Biran (outside director), Eli Gonen, Ilan Cohen, David Levinson, Edith Lusky (outside director), Jorge Zafran, Ilan Aish, Joseph Ciechanover Itzhar, Richard Roberts, Aliza Rotbard and Yali Sheffi Names of Directors with personal interest and the nature of their personal interest: the Chairman of the Board of Directors has personal interest in approving the amendment of the terms of his appointment and employment Reasons of the Remuneration Committee and the Board of Directors for approving the amendment of the terms of appointment and employment of the Chairman of the Board of Directors Bearing the tax gross up with respect to the cost of use of the vehicle placed by the Bank at the disposal of the Chairman of the Board of Directors and the cost of its maintenance, is in line with the customary terms for Officers of the Bank The amendment of the terms of appointment and employment is in line with the Remuneration olicy and does not materially change the current terms of appointment and employment of the Chairman of the Board of Directors previously approved by the General Meeting of the Bank. 15

16 ART B: ARTICULARS REGARDING THE CONVENING OF THE MEETING 9. UNames of the controlling shareholders of the Bank and the rights conferring on them control of the Bank: Treetops Acquisition Group LTD - holds 15.10% of the capital and voting rights. Treetops Acquisition Group II LTD - holds 10.06% of the capital and voting rights. For additional details regarding the said controlling shareholders, refer to the Immediate Report Regarding Status of Holdings of Interested arties and Senior Officers, Reference No , from July 7, This mention constitutes the inclusion by way of reference of the information included in the said report. 10. ULocation and time at which the meeting will be convenedu: An Annual Meeting of the holders of ordinary A shares of the Bank ( the Meeting ) is to be held on Monday, September 9, 2013 at 11:00 a.m., at the offices of the Bank at 23 th Yehuda Halevi Street (17 floor), Tel-Aviv, Israel. 11. UThe record date: The record date fixed for determining the right of a shareholder to vote at the General Meeting pursuant to Section 182 of the Companies Law and Regulation 3 of the Companies Regulations (Voting aper and osition apers), 2005 ("the Voting aper Regulations"), is Wednesday, August 7, 2013 ( the Record Date ). If the Record Date is a not trading day, the Record Date will be the last trading date preceding this date. 12. UVoting at the MeetingU: 12.1 The shareholders are authorized to vote on resolutions on the agenda (which require voting) either personally or by proxy or by a voting paper as provided in section 12.4 below. An instrument of appointment of a proxy, a power of attorney or a copy certified by an attorney is to be deposited at the office of the Bank not less than 48 hours before the date decided for the Meeting ursuant to the Companies Regulations (roof of Share Ownership for the urpose of Voting at a General Meeting), 2000 ("the Regulations"), a shareholder whose shares are registered with a Stock Exchange member, and the said shares are included among the shares registered in the shareholders register in the name of the nominee company, may vote at the General Meeting upon delivering to the Bank a confirmation from the Stock Exchange member as to his ownership of the shares on the Record Date, as required in accordance with the said Regulations A shareholder whose shares are registered with a Stock Exchange member may receive the confirmation of ownership from the Stock Exchange member through whom he holds shares, at a branch of the Stock Exchange member or by mail to his address upon payment of just a delivery charge, if so requested. The said request is to be given in advance for a specific securities account ursuant to the Voting aper Regulations, the shareholders of the Bank may vote on topics 4, 5, 7 and 8 on the agenda by voting papers. The text of voting papers and position papers on the said resolutions is found on the distribution website of 16

17 17 the Israel Securities Authority: Uhttp:// ( the Distribution Website ) and on the website of the Tel Aviv Stock Exchange Ltd.: Uhttp://maya.tase.co.il U( the Stock Exchange Website ). The shareholders may request directly from the Bank and receive from it the text of the voting paper and position papers. The Stock Exchange member will send by electronic mail, without charge, a link to the text of the voting paper and the position papers on the Distribution Website, to any shareholder who is not registered in the shareholders register and whose shares are registered with the Stock Exchange member, unless the shareholder notified the Stock Exchange member that he is not interested in receiving a link as aforesaid, and provided that the notice was given with regard to a specific securities account and on a date prior to the Record Date. The vote may be given using the second part of the voting paper, as published on the Distribution Website With respect to the resolutions in topics 5 and 7 on the agenda, a shareholder participating in the vote will notify the Company before voting, and if voting by a voting paper will mark in the designated place in art B of the voting paper, if he is deemed a controlling shareholder of the Company or is a representative of such controlling shareholder or has personal interest in the approval of the Remuneration olicy or not, and will note the relevant affinity. If a shareholder has not notified or marked as aforesaid, he will not vote and his vote will not be counted ursuant to the Israel Securities Authority guideline from November 30, 2011, Disclosure Regarding the Manner of Voting by Interested arties, Senior Officers and Institutional Bodies in Meetings ("the Guideline"), an interested party, a senior officer and an institutional body ("the Voters"), as defined in the Guideline, voting in the Meeting on the resolutions in topics 5 and 7 on the agenda, will provide to the Company with their vote the required details pursuant to section 2(b) of the Guideline, and if they voted through a proxy, the Voter or the proxy will also provide the details of the proxy. In addition, details will be provided on any relations between the Voter or the proxy (who has no personal interest) and the Company or a controlling shareholder, including employer-employee relations, business relations, etc., and of the nature of such relations The voting aper is to be delivered to the offices of the Bank, at the address noted in the second part of the voting paper, such that the voting paper will be delivered to the offices of the Bank up to 72 hours prior to the time scheduled for holding the Meeting. The last date for presenting position papers to the Bank is up to 10 days following the Record Date, and the last date for the Board of Directors providing its response to position papers is up to five days after the last date for presenting position papers by shareholders to the Bank. 13. ULegal quorum for holding the MeetingU: The quorum for holding a General Meeting is the participation of at least one shareholder, attending in person or by proxy, holding (individually or cumulatively) at least one-fifth of the voting rights in the Company, within half an hour from the time stipulated for the start of the Meeting. If within half an hour of the time scheduled for opening the Meeting, a quorum is not present, the Meeting shall be adjourned until Tuesday, September 10, 2013, at 11:00 a.m. Where no quorum is present at the adjourned Meeting, as referred to above, one shareholder present in person or by proxy shall constitute a quorum and he may consider the matters for which such Meeting was called.

18 14. UViewing of documents: The text of the proposed resolutions to be brought for approval at the Meeting, and the full text of the Financial Statements and the Report of the Board of Directors for 2012 can be viewed at the Office of the Secretary of the Bank, 23 Yehuda Halevi Street, Tel- Aviv, Israel, by prior arrangement (telephone no ), during regular business hours, from the date of publication of this notice. The Bank representative for all matters regarding the Report is: Adv. Ofer Hanoh and Adv. Roy Reiss of the law firm Gross, Kleinhendler, Hodak, Halevy, Greenberg and Co. (telephone no ). ISRAEL DISCOUNT BANK LTD. 18