Discount Investment Corporation Ltd by ajh17208

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									              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies

General
Discount Investment Corporation (hereinafter – the Company), a member of the IDB Group, usually
invests in investee companies at a level that enables it to be able to influence their direction and
management.
In the current year the Company focused it operations mainly on management of its existing assets
portfolio, on merging the communications companies Netvision Ltd., Globecall Ltd. and Barak I.T.C.
(1995) - The International Telecommunication Corporation Ltd. into one group, on listing the shares of
Cellcom Israel Ltd. for trade on the New York Stock Exchange and on selling part of its holding in
Cellcom as described in Note 2B2b, on selling part of its holding in Super-Sol Ltd. as described in
Note 2B2d and on disposing of holdings that are not part of its core activities. The Company and its
investee companies, as part of the IDB Group with its variety of operations and its relative
significance in the Israeli market, are subject to legal restrictions on their business operations, such as
instructions regulating the supervision over restrictive trade practices and the various layers of the
communications industry. In addition, the directives of the Supervisor of Banks in Israel limit the
Israeli banks' ability to provide credit beyond certain limits, and include restrictions pertaining to the
total debt of a single group of borrowers as well as the total debt of the six largest borrowers of a
banking entity. The Company, the companies it controls, its controlling shareholders and other
companies controlled by them are considered a single group of borrowers for this purpose. The
definition of a “group of borrowers” is broad and it includes, inter alia, dependence of a borrower on
the financial strength of other borrowers. As a result the aforementioned directives have an effect from
time to time on the ability of part of the banks in Israel to grant credit to the Company and the Group
companies, and they may affect the ability of the Company and its investee companies to borrow
additional amounts from the banks in Israel and their ability to make investments for which they
require bank credit or to invest in companies that have taken large amounts of credit from certain
banks in Israel.
The financial statements have been prepared in a format corresponding with the nature of the
Company’s business in accordance with generally accepted accounting principles and in accordance
with the Securities Regulations (Preparation of Annual Financial Statements) – 1993.

A.    Definitions
      In these financial statements -
      Subsidiary - A company in which the Company holds, directly or indirectly, 50% or more of the
      voting rights or the right to appoint the majority of the members of the Board of Directors, and the
      financial statements of which are consolidated with those of the Company.
      Proportionately consolidated company - A jointly controlled company whose financial
      statements are consolidated with those of the Company by the proportionate consolidation
      method.
      Affiliated company - A company, including a partnership, in which the Company has significant
      influence, (which is not a subsidiary or a proportionately consolidated company), and the
      investment in which is accounted for by the equity method.
      Investee company - A subsidiary, proportionately consolidated company or an affiliate.
      Other company – A company over which the Company does not have significant influence as a
      result of its investment.


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              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007




Note 1 - Financial Reporting and Accounting Policies (cont'd)

A.   Definitions (cont'd)
     Significant influence - More than 20% of the voting rights or of the right to appoint directors,
     except in cases where it can be demonstrated that significant influence does not exist. The
     holding of less than 20% of such rights may also confer significant influence in cases where
     such influence is clearly demonstrated.
     Excess of cost - Difference between the cost of the investment in shares and the net asset value
     at dates of acquisition.
     Related party - As defined in Opinion No. 29 of the Institute of Certified Public Accountants in
     Israel.
     Interested party - As defined in Paragraph (1) of the definition of an “interested party” in
     Section 1 of the Securities Law - 1968.
     Controlling shareholder - As defined in the Securities Regulations (Financial Statement
     Presentation of Transactions between a Company and its Controlling Shareholder) – 1996 and
     Accounting Standard No. 23, “The Accounting Treatment of Transactions between an Entity
     and its Controlling Shareholder”, of the Israel Accounting Standards Board.
     Dollar - The US dollar.
     CPI - The Consumer Price Index as published by the Central Bureau of Statistics.
     Adjusted amount – The nominal historical amount adjusted in accordance with the provisions of
     Opinions 23 and 36 of the Institute of Certified Public Accountants in Israel.
     Reported amount – The adjusted amount as at December 31, 2003 (the transition date), with the
     addition of amounts in nominal values that were added after the transition date and less amounts
     eliminated after the transition date.


B.   Discontinuance of adjustment of financial statements
     1.      In October 2001 the Israel Accounting Standards Board published Accounting Standard
             No. 12, “Discontinuance of Adjustment of Financial Statements”. Pursuant to this
             standard and in accordance with Accounting Standard No. 17 that was published in
             December 2002, the adjustment of financial statements to the effect of inflation was
             discontinued as of January 1, 2004. Up to December 31, 2003, the Company continued to
             prepare adjusted financial statements in accordance with Opinion No. 36 of the Institute
             of Certified Public Accountants in Israel.

     2.      Financial statements in reported amounts
             a.    In the past the Company prepared its financial statements on the basis of historical
                   cost adjusted for the changes in the CPI. The adjusted amounts included in the
                   financial statements as at December 31, 2003 constitute the starting point for the
                   nominal financial report as of January 1, 2004. Any additions made during the
                   period are included in their nominal values.




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              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

B.   Discontinuance of adjustment of financial statements (cont'd)
     2.      Financial statements in reported amounts (cont'd)
             b.    Amounts of non-monetary assets do not necessarily reflect their realizable value or
                   current economic value, but only the reported amounts of such assets.
             c.    The term “cost” in these financial statements means the reported amount of cost.
             d.    The financial statements of certain subsidiaries are stated on the basis of the
                   changes in the exchange rates of their relevant functional currencies – see Section
                   E(1)(b) below.
             e.    Balance sheet
                   1.    The net asset value of investments in investee companies is determined on
                         the basis of the reported financial statements of those companies or their
                         financial statements translated into NIS.
                   2.    Non-monetary items (mainly – investments in companies, in fixed assets and
                         in real estate, deferred charges and other assets) are stated at reported
                         amounts.
                   3.    Monetary items are stated in the balance sheet at their nominal values.
             f.    Statement of income
                   1.    The Company’s equity in the operating results of investee companies and the
                         share of external shareholders in the results of subsidiaries are determined on
                         the basis of the reported financial statements of those companies or their
                         financial statements translated into NIS.
                   2.    Income and expenses deriving from non-monetary items (such as
                         depreciation and amortization) or from provisions included in the balance
                         sheet are derived from the difference between the reported amount of the
                         opening balance and the reported amount of the closing balance.
                   3.    All other operating items are stated at their nominal values.
             g.    Statement of changes in shareholders’ equity
                   A dividend declared in the period of the report, as well as a dividend declared
                   subsequent to balance sheet date, is stated in nominal values.
             h.    Details regarding the CPI, the exchange rates of the dollar and the Japanese yen
                   and the rates of change in them are as follows:
                                                                            Change during the year
                                                 As at December 31            ended December 31
                                               2007     2006    2005        2007    2006      2005
                                                                             %        %        %

                    CPI in points - latest
                     known index               113.0     109.9     110.2      2.8      (0.3)      2.7
                    Representative
                     exchange rate of the
                     U.S. dollar – in NIS      3.846     4.225    4.603      (9.0)     (8.2)      6.8



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              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

C.   Use of estimates
     The preparation of financial statements in conformity with generally accepted accounting
     principles requires management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities and disclosure of contingent assets and liabilities and the
     reported amounts of revenues and expenses during the reporting period. Actual results may
     differ from such estimates.


D.   Consolidated financial statements
     These financial statements include the consolidated financial data of the Company and of the
     subsidiaries, as well as financial data consolidated by the proportionate consolidation method of
     jointly controlled companies, as detailed in Paragraphs D and H of the annex to these financial
     statements.
     Intercompany balances and transactions between the companies included in the consolidation,
     and income from intercompany sales not yet realized outside the Group have been eliminated.


E.   Significant accounting policies
     1.      Investments in investee companies
             a.   Valuation bases -
                  Investments in shares of affiliates are presented on the equity basis. Investments in
                  shares of companies where the Company’s holding is less than 20% are also
                  presented on the equity basis in the event that the Company has a voting agreement
                  with other shareholders granting it the right to appoint at least 20% of the directors
                  of these companies.
                  Until December 31, 2005 the calculation of the Company’s equity took into
                  account losses from anticipated realization of convertible securities issued by
                  investee companies, if it was likely that these securities would be converted or
                  realized (hereinafter – “provision for an anticipated loss”). As from January 1,
                  2006 the Company implements Accounting Standard No. 22, “Financial
                  Instruments: Disclosure and Presentation” of the Israel Accounting Standards
                  Board (hereinafter – Standard 22). In accordance with the transitional provisions of
                  Standard 22, the provision for an anticipated loss in the amount of NIS 18 million
                  that is included on the books of the Company as at December 31, 2005 was
                  cancelled when Standard 22 came into effect. The cancellation of the provision was
                  included in the statement of income on January 1, 2006 under the item “cumulative
                  effect as at the beginning of the year of change in accounting policy, net”.
                  In determining the net asset value of such investments the amounts taken into
                  consideration are the amounts appearing in the financial statements of those
                  companies, after adjustments required by the application of Israeli generally
                  accepted accounting principles.




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              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     1.      Investments in investee companies (cont'd)
             a.   Valuation bases (cont'd)
                  The Company examines from time to time whether there has been a decline in the
                  value of its investments. This examination is conducted when there are signs
                  indicating that there may have been an impairment in the value of permanent
                  investments, including a decline in stock exchange prices, consecutive losses on its
                  investments, the industry in which the investee company operates, the excess cost
                  of the investment and additional parameters. The reductions recorded in order to
                  adjust the value of these investments, which in the opinion of management are
                  based on an examination of the overall relevant aspects while attributing to each
                  one its proper significance and which are not of a temporary nature, are recorded in
                  the statement of income under the item of the Company’s equity in the net gains
                  and reductions of affiliated companies. The Company’s share in earnings or losses
                  and in the net asset value of affiliated companies is based on their audited annual
                  financial statements.
                  In respect of affiliates which have a shareholders’ deficiency, the Company records
                  its equity in their losses in excess of its investment in the capital and loans of the
                  affiliates, up to the amount of the guarantees it gave to the affiliates and/or amounts
                  the Company intends to provide in the future, either in cash or in guarantees, even
                  if the conditions or timing of doing so have not yet been determined.
             b.   Adjustments arising from translation of financial statements of investee
                  companies -
                  As of January 1, 2004 the Company implements Accounting Standard No. 13,
                  “Effect of Changes in Exchange Rate of Foreign Currency” of the Israel
                  Accounting Standards Board (hereinafter – Standard 13). Standard 13 discusses the
                  translation of transactions in foreign currency and the translation of financial
                  statements of foreign operations for the purpose of including them in the financial
                  statements of the reporting entity. Standard 13 provides rules for classifying
                  foreign operations as an autonomous foreign investee or as an integrated investee,
                  on the basis of the indications described in the standard and the use of discretion,
                  and it provides the method for translating the financial statements of autonomous
                  foreign investees.
                  As of January 1, 2004 the Company’s share in the shareholders’ equity of
                  autonomous foreign investees is translated according to the closing exchange rate
                  of the relevant currency on balance sheet date. The goodwill arising upon the
                  acquisition of an autonomous foreign investee is treated as an asset of that same
                  autonomous foreign investee, and it is translated according to the exchange rate of
                  the relevant currency on balance sheet date, as opposed to the past practice of
                  translating the goodwill according to the exchange rate of the relevant currency on
                  the date of the transaction.




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              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     1.      Investments in investee companies (cont'd)
             b.   Adjustments arising from translation of financial statements of investee
                  companies (cont'd)
                  Beginning from January 1, 2004 the income and expenses of an autonomous
                  foreign investee are translated according to the exchange rate of the relevant
                  currency on the date of the transactions, or for practical reasons, according to the
                  average exchange rate of the relevant currency in the period, as opposed to the past
                  practice of translating the financial statements according to the exchange rate in
                  effect on balance sheet date.
                  As from January 1, 2004, in such cases in which the autonomous foreign investee
                  is required to prepare inflation-adjusted financial statements according to generally
                  accepted accounting principles of a hyperinflationary economy, the income and
                  expense items were translated according to the closing exchange rate of the
                  relevant currency on balance sheet date, as opposed to the past practice by which
                  the adjustments to the foreign rate of inflation were made before the translation in
                  countries with inflation of more than 20% over a period of three years.
                  The exchange rate differences created in respect of the autonomous foreign
                  investee are classified as a separate item of shareholders’ equity until the disposal
                  of the investment.
                  Exchange rate differences in respect of foreign currency loans to autonomous
                  foreign investees and in respect of loans used to finance investments in
                  autonomous foreign investees, are also included, net of the related tax, in the
                  shareholders’ equity under the item of adjustments from the translation of financial
                  statements of autonomous foreign investees.
                  Impairment in the value of an investment in an autonomous foreign investee does
                  not constitute a partial disposal and therefore no part of the translation differences
                  is charged to earnings at the time of the impairment.
                  The financial statements of integrated foreign investees were translated as follows:
                  Assets and liabilities (other than non-monetary items) were translated at the closing
                  exchange rate of the relevant currency on balance sheet date. Non-monetary items
                  were translated according to the exchange rate of the relevant currency on the date
                  of the transaction. Income and expense items were translated according to average
                  exchange rates of the relevant currency, except for income and expenses related to
                  non-monetary items which were translated according to the historical exchange
                  rates by which the related non-monetary items were translated.

             c.   Excess of cost -
                  As from January 1, 2006 the Company implements the provisions of Accounting
                  Standard No. 20 (Revised), “The Accounting Treatment of Goodwill and
                  Intangible Assets when Purchasing an Investee Company” of the Israel Accounting
                  Standards Board (hereinafter – Standard 20). Standard 20 provides as follows:




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              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     1.      Investments in investee companies (cont'd)
             c.   Excess of cost (cont'd)
                  • The excess cost of an investment in an investee company over the share of the
                     Company in the fair value of its identified assets (including intangible assets)
                     net of the fair value of its identified liabilities (after the allocation of taxes) as at
                     the date of acquisition is goodwill.
                  • The excess of cost that was attributed to identified assets and identified
                     liabilities having a finite useful life are amortized over their useful life.
                  • Goodwill and intangible assets with an indefinite useful life are not
                     systematically amortized. Instead, the Company examines whether there has
                     been an impairment in the value of the goodwill and intangible assets deriving
                     from the acquisition of a subsidiary, once a year (and no later than December 31
                     of each year) or more frequently if events or changes in circumstances indicate
                     that there may have been an impairment in the value of the assets.
                  • Until December 31, 2005 goodwill was amortized at equal annual rates over 10-
                     20 years as from the date of acquisition. In 2005 the Company recorded
                     goodwill amortization in the total amount of NIS 89 million. Following the
                     implementation of Standard 20, the balance of negative goodwill as at January
                     1, 2006 in the amount of NIS 19 million was included in retained earnings.
                     Comparative data for 2005, before the implementation of Standard 20, was not
                     restated.
                  • The excess of cost in subsidiaries that was attributed to assets and liabilities is
                     allocated to the relevant balance sheet items. The goodwill in subsidiaries is
                     presented in the consolidated balance sheet under the item of “deferred
                     expenses and other assets”. The excess of cost in affiliated companies is
                     presented as part of the investment.
                  • The excess of the Company’s share in the fair value of the investee company’s
                     identified assets (including intangible assets) net of the fair value of its
                     identified liabilities (after the allocation of taxes) over the cost of the investment
                     in the investee company is initially deducted from the share of the Company in
                     the intangible assets of the investee company, and the balance is deducted from
                     the share of the Company in the other non-monetary assets of the investee
                     company, proportionately to the fair value of these assets. The excess of cost
                     remaining after this allocation is negative goodwill, which is recognized in the
                     financial statements upon acquisition.
                  • See also Note 1E(18) regarding the initial implementation of Accounting
                     Standard No. 30 regarding intangible assets.




                                                   52
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     1.      Investments in investee companies (cont'd)
             d.    Tax provision -
                   The Company provides for tax in respect of the excess net asset value of the
                   Company’s investments in investee companies over their base value for tax
                   purposes (as a result of accumulated profits, translation differences, etc.), unless it
                   does not anticipate selling the investment in the foreseeable future. It also provides
                   for tax in respect of taxable dividends from affiliated companies, other than the
                   dividends the Company customarily passes on to its shareholders in a manner that
                   does not subject the Company to taxation.

     2.      Investments in shares of other companies -
             Those investments, which are of a permanent nature, are stated at their cost which is not
             in excess of their value as assessed by management. See Note 1E(1)(a) above regarding a
             decline in value which is not of a temporary nature.

     3.      Provision for doubtful debts -
             The consolidated financial statements include specific provisions for doubtful debts
             which, in the opinion of the subsidiaries’ managements (hereinafter – the managements),
             adequately reflect the loss included in those debts the collection of which is doubtful. The
             managements’ determination of the adequacy of the provision is based, inter alia, on their
             experience with respect to the collection of past debts and on an evaluation of the risk, by
             considering the available information on the financial position of the debtors, the time
             that has passed since the original date of repayment, the volume of their business and an
             evaluation of the security received from them. Doubtful debts which, according to the
             managements’ opinion, are unlikely to be collected are written off the books of the
             companies, based on a resolution made by the managements.

     4.      Marketable securities –
             Marketable securities held for the short-term are stated at their market value as at balance
             sheet date. The changes in their value are charged to the statement of income.

     5.      Cash and cash equivalents –
             Cash and deposits with banks of an original maturity that does not exceed three months.

     6.      Deferred taxes –
             a.    The Company and its subsidiaries create deferred taxes in respect of deductible
                   temporary differences. The temporary differences are differences in the value of
                   assets and liabilities for tax purposes and for financial reporting purposes.




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              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     6.      Deferred taxes (cont'd)
             a.    (cont'd)
                   Deferred tax balances (asset or liability) are calculated according to the liability
                   approach at the tax rates expected to be in force when the deferred tax liability is
                   utilized, or when the deferred tax asset is realized, on the basis of tax rates and tax
                   laws, the legislation of which has been essentially completed as at balance sheet
                   date.
             b.    The main factors, in respect of which deferred taxes were not created, are as
                   follows:
                   • See Note 1E(1)(d) above regarding investments in investee companies.
                   • Deferred taxes in respect of temporary differences relating to land that were
                       created in business combinations that occurred before January 1, 2005.
                   • Deferred tax assets are not created in respect of temporary differences where the
                       probability of realization of the benefit is doubtful.
                   • A temporary difference created upon the initial recognition of goodwill.
                   • Amounts of adjustment to changes in the purchasing power of the shekel,
                       referring mainly to buildings and land, according to the principles set by the
                       Israel Accounting Standards Board.
             c.    As from January 1, 2005 the Company implements Accounting Standard No. 19,
                   “Taxes on Income” of the Israel Accounting Standard Board (hereinafter –
                   Standard 19). Standard 19 was implemented by means of a cumulative effect of a
                   change in accounting method. The transition to Standard 19 amounted to a non-
                   recurring effect on income in the amount of NIS 2 million (income).

     7.      Deferred charges and other assets –
             a.    Deferred charges and other assets are included at cost net of accumulated
                   amortization, which is calculated on a straight-line basis over the estimated useful
                   lives of the assets.
                   The principal annual rates of amortization are as follows:
                    Licenses and frequencies                5-10%             (mainly 5-6)
                    Goodwill in subsidiaries                -                 (5-8 up to and including 2005)
                    Acquisition and development of computer
                     software                               10-33%            (mainly 27)
                    Know-how use rights                     10%
             b.    Licenses to use frequencies are amortized over the period of the license as from the
                   date the communications network specified in the license is ready for use after the
                   execution of operating tests.
             c.    Goodwill – see Note 1E(1)(c) above.
             d.    Customer relations – Excess of cost attributed in a subsidiary to customer relations
                   is amortized over 7 years and in accordance with the economic benefit anticipated
                   from the customers each period.


                                                   54
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     7.      Deferred charges and other assets (cont'd)
             e.    Brand – Excess of cost attributed in a subsidiary to a brand having an indefinite
                   useful life is not amortized.
             f.    Development costs of software for self-use are capitalized after the preliminary
                   planning stage has been completed, and it is anticipated that the project will be
                   completed and the software will be used for its designated purposes. The
                   capitalization is stopped when the software is essentially completed and ready for
                   its designated use. Costs incurred in the early stage of the project are recognized in
                   the statement of income.
             g.    Purchase tax in respect of long-term lease contracts is amortized over the lease
                   period.
             h.    Taxes in respect of unrealized gains in real estate transactions (mainly appreciation
                   tax on real estate transactions) are amortized over the period of the transaction.
             i.    Until December 31, 2005 deferred expenses in respect of the issuance of
                   debentures were presented under the item of other assets on the basis of cost net of
                   accumulated amortization. Such expenses attributed to the raising of debentures
                   were amortized by the straight-line method over the life of the debentures, pro rata
                   to the outstanding amount thereof, separately for each series of debentures.
                   As from January 1, 2006, upon the coming into effect of Accounting Standard No.
                   22, “Financial Instruments: Disclosure and Presentation”, the costs of raising
                   debentures and other financial liabilities are offset from the balance of such
                   liabilities and are amortized according to the effective interest method. The costs of
                   raising convertible debentures that are attributed to the equity component are offset
                   from the balance of the equity component – see Note 1E(11) below.
                   Upon the initial implementation of Standard 22, costs having a net book value of
                   NIS 12 million as at December 31, 2005, in respect of the raising of credit and
                   debentures, were offset from the balance of liabilities as at that date.
             j.    Long-term prepaid lease expenses are amortized over the period of the lease.
             k.    Know-how use rights are presented at cost and amortized over the benefit period
                   anticipated from the asset.
             l.    See also Note 1E(18) below regarding the initial implementation of Accounting
                   Standard No. 30 regarding intangible assets.

     8.      Fixed assets –
             a.    Fixed assets are stated at cost net of accumulated depreciation which is calculated
                   on a straight line basis over the estimated useful lives of the assets, and net of any
                   existing impairment losses.




                                                   55
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     8.      Fixed assets (cont'd)
             a.    (cont'd)
                   Cost includes expenditures that can be directly attributed to the acquisition of the
                   asset. The cost of self constructed assets includes the cost of materials and direct
                   labor, and any other costs that can be directly attributed to bringing the asset to the
                   location and condition necessary for it to begin operating in the manner intended
                   by management.
                   Annual depreciation rates are as follows:
                    Communications network                              5-25%           (mainly 15)
                    Buildings                                           2-4%
                    Machinery, installations and equipment              6-33%
                    Telephone switchboards                              10-33%          (mainly 10-15)
                    Orchards                                            15-20%
                    Motor vehicles                                      10-20%
                    Computers and office furniture and equipment 6-33%
                    Installations and leasehold improvements            10-14%
             b.    Leasehold improvements are amortized over the lease period (including any
                   existing option for an extension of the lease period that is not in excess of the
                   economic life of the asset).
             c.    Fixed assets under capital leases are presented as being owned by the Company, at
                   ordinary purchase prices (excluding the financing component) and are depreciated
                   at the rates of depreciation that are in use in respect of these fixed assets. The lease
                   payments payable in the forthcoming years, net of the interest component included
                   in them, are included in liabilities. The interest in respect of such amounts is
                   accrued on a current basis and is charged to the statement of income.
             d.    See Note 1E(24) hereunder regarding the treatment of real (net of inflation)
                   financing expenses.
             e.    The cost of assets in respect of which an investment grant has been received is
                   stated net of the amount of the grant.
             f.    Improvements and enhancements are added to the cost of the assets whereas
                   maintenance and repairs are charged to expense as incurred.
             g.    Direct and other expenses required in order to bring the assets into operation are
                   included in the cost of such assets.
             h.    See also Note 1F below regarding reclassification and restatement pursuant to
                   Accounting Standard No. 27, “Fixed Assets”.




                                                   56
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     9.      Debentures –
             a.    Debentures are stated at their liability value as at balance sheet date, in accordance
                   with their terms of issue and net of the unamortized discount as at balance sheet
                   date or with the addition of the unamortized premium as at that date.
             b.    A discount and premium are amortized over the period of the debentures using the
                   effective interest method. See Paragraph (7)i above in this Note 1E.

     10.     Issuance of units comprised of shares and warrants –
             In October 2007 the Company issued units that included shares and warrants. The
             issuance was executed by means of a tender on the price of the unit.
             a.    Attribution of the net issuance proceeds
                   The proceeds from the issuance of the unit, net of issuance expenses, were
                   attributed to the components of the unit according to their relative fair value. The
                   fair value of the components was determined on the basis of the market prices of
                   the securities shortly after their issuance.
             b.    Warrants
                   Proceeds on account of warrants for the purchase of Company shares, which grant
                   to their holder the right to purchase a fixed amount of ordinary shares for a fixed
                   price in cash, were presented under shareholders’ equity. As a result of the exercise
                   of the warrants, as described in Note 13E hereunder, receipts on account of the
                   aforementioned warrants were classified as share capital and share premium.
                   Receipts on account of expired warrants, as described in Note 13E hereunder, were
                   classified as share premium.

     11.     Issuance by means of rights of shares and debentures convertible into shares
             In June 2005 the Company issued shares and convertible debentures by means of rights.
             a.    Attribution of net issuance proceeds
                   Proceeds were attributed to the convertible debentures according to their average
                   value on their first 3 days of trading on the Tel Aviv Stock Exchange (hereinafter –
                   TASE), and the balance was attributed to share capital and premium. The issuance
                   expenses were attributed to each of the issued securities according to the attribution
                   of the issuance proceeds.
             b.    Debentures convertible into shares
                   Following the Company’s announcement from October 9, 2005 regarding a forced
                   conversion of the convertible debentures, and in accordance with International
                   Accounting Standard No. 32, as from October 9, 2005 these debentures were split
                   into two components – a liability component in the amount of NIS 91 million, which




                                                   57
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     11.   Issuance by means of rights of shares and debentures convertible into shares
           (cont'd)
           b.    Debentures convertible into shares (cont'd)
                 constituted the present value of the future interest payments and was presented
                 under current liabilities, and an equity component (the balance net of deferred
                 issuance expenses attributed to the equity component) in the amount of NIS 1,651
                 million, which was presented under the shareholders’ equity. The present value of
                 the aforementioned future interest payments was calculated according to a
                 capitalization rate of 5.4%.
                 Following the conversion of the convertible debentures in October 2006, the equity
                 component was classified to share capital and to share premium.

     12.   Current taxes –
           a.    Current taxes are comprised of payments on account during the year plus amounts
                 due as at balance sheet date (or less amounts refundable as at balance sheet date).

           b.    The current taxes are calculated according to the new tax rates as described in Note
                 25D hereunder.

     13.   Linkage and exchange rate adjustments –
           Balances that are linked to the Consumer Price Index or the Cost of Building Index have
           been adjusted according to the latest index published prior to balance sheet date, except
           for balances that are linked to the index in respect of the last month of the reported year.
           Assets and liabilities in foreign currency or linked thereto are stated based on the
           representative rates of exchange as at balance sheet date.

     14.   Earnings per share –
           The Company implements Accounting Standard No. 21, “Earnings per Share (hereinafter
           – Standard 21) of the Israel Accounting Standards Board. In accordance with the
           provisions of Standard 21, the Company calculates basic earnings per share with respect
           to earnings or loss, and basic earnings per share with respect to earnings or loss from
           continuing operations, which is attributable to the ordinary shareholders. The basic
           earnings per share is calculated by dividing the earnings or loss attributable to the
           ordinary shareholders with the weighted average number of ordinary shares outstanding
           during the period. In order to calculate the diluted earnings per share the Company
           adjusted the earnings or loss attributable to the ordinary shareholders, and the weighted
           average number of outstanding ordinary shares, in respect of the effects of all the dilutive
           potential ordinary shares (such as convertible debentures and warrants). The Company’s
           share in the earnings of investee companies was calculated according to its portion in the
           earnings per share of such investee companies multiplied by the number of shares held by
           the Company.




                                                 58
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     14.   Earnings per share (cont'd)
           Following the issuance of rights, as described in Note 1E(11) above, the comparative data
           regarding the basic earnings per share have been retroactively adjusted according to the
           benefit rate of 15% that is included in the issuance of the rights.
           Basic earnings per share
           The basic earnings per share as at December 31, 2007 is calculated by dividing the
           earnings attributed to the ordinary shareholders in the amount of NIS 1,536 million
           (2006 – NIS 698 million, 2005 – NIS 473 million) by the weighted average number of
           ordinary shares outstanding in the amount of 78,833 thousand shares (2006 – 76,454
           thousand shares, 2005 – 54,728 thousand shares), as follows:




                                                59
                                          Discount Investment Corporation Ltd.

                                    Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.    Significant accounting policies (cont'd)
      14.   Earnings per share (cont'd)
                                  For the year ended December 31, 2007   For the year ended December 31, 2006   For the year ended December 31, 2005
                                  Continuing Cumulative                  Continuing Cumulative                  Continuing Cumulative
                                  operations       effect      Total     operations       effect      Total     operations       effect      Total
                                                                                      NIS thousands

Net earnings for the period         1,539            -        1,539            684        17          701          468            2          470
Difference in respect of the
   Company’s share in the
   earnings of investee
   companies                           (3)           -           (3)            (3)         -           (3)          3            -            3
Earnings attributed to ordinary
shareholders                       1,536             -        1,536            681        17          698          471            2          473




                                                                          60
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     14.   Earnings per share (cont'd)
           Weighted average number of ordinary shares:
                                                                 For the year ended December 31
                                                                  2007         2006        2005
                                                                       Thousands of shares

            Balance as at January 1                            77,831        75,067       45,912
            Add shares deriving from exercise of options            7             8            6
            Shares deriving from conversion of convertible
              debentures                                             -             -       4,890
            Change in shares deriving from conversion of
              debentures as a result of change in conversion
              price                                                 -         1,379            -
            Issuance of shares in the framework of rights           -             -        3,920
            Issuance of shares*                                   995             -            -
            Weighted average number of ordinary shares
              used in the calculation of basic earnings per
              share                                            78,833        76,454       54,728
           * Including shares deriving from the exercise of options issued in the current year.
           Diluted earnings per share
           The diluted earnings per share as at December 31, 2007 is calculated by dividing the
           earnings attributed to the ordinary shareholders in the amount of NIS 1,528 million
           (2006 – NIS 690 million, 2005 – NIS 486 million) by the weighted average number of
           ordinary shares outstanding, after adjustment in respect of all the dilutive potential
           ordinary shares, in the amount of 79,227 thousand shares (2006 – 76,517 thousand shares,
           2005 – 60,863 thousand shares), as follows:




                                                61
                                         Discount Investment Corporation Ltd.

                                   Notes to the Financial Statements for the Year Ended December 31, 2007



E.   Significant accounting policies (cont'd)
     14.   Earnings per share (cont'd)
           Diluted earnings per share (cont'd)
                                  For the year ended December 31, 2007   For the year ended December 31, 2006   For the year ended December 31, 2005
                                  Continuing Cumulative                  Continuing Cumulative                  Continuing Cumulative
                                  operations       effect      Total     operations       effect      Total     operations       effect      Total
                                                                                      NIS thousands

            Earnings used in
              the calculation
              of the basic
              earnings per
              share                 1,539             -        1,539           684          17         701          468            2           470
            Difference in
              respect of the
              Company’s
              share in the
              earnings of
              investee
              companies               (11)            -          (11)          (11)          -          (11)         (8)            -           (8)
            Neutralizing of
              interest on
              convertible
              debentures                -             -            -             -           -            -          24             -           24
            Earnings attributed
              to ordinary
              shareholders
              (diluted)             1,528             -        1,528           673          17         690          484            2           486



                                                                          62
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     14.   Earnings per share (cont'd)
           Weighted average number of ordinary shares:
                                                                  For the year ended December 31
                                                                   2007         2006        2005
                                                                        Thousands of shares

            Weighted average number of ordinary shares
              used in the calculation of basic earnings per
              share                                              77,831        76,454        54,728
            Effect of the conversion of convertible
              debentures                                              -              -        6,065
            Shares deriving from exercise of options                  7             63           70
            Issuance of shares*                                   1,269              -            -
            Expired options                                         120              -            -
            Weighted average number of ordinary shares
              used in the calculation of diluted earnings per
              share                                              79,227        76,517        60,863
           * Including shares deriving from the exercise of options issued in the current year.

     15.   Financial instruments –
           a.    The Company and its subsidiaries hold financial assets which include, inter alia,
                 cash and cash equivalents, marketable securities, trade and sundry receivables and
                 financial liabilities which include, inter alia, long term credit, short term credit,
                 trade and sundry payables.
           b.    As from January 1, 2006 the Company implements Accounting Standard No. 22,
                 “Financial Instruments: Disclosure and Presentation”.
           c.    The fair value of financial instruments traded on active markets is based on
                 quotations as at balance sheet date. The fair value of financial instruments that are
                 not traded on an active market is based on market prices of similar financial
                 instruments, and in their absence on various other valuation methods.
                 The valuation methods that were applied include the present value of cash flows,
                 economic models for the valuation of options and other accepted valuation
                 methods.
           d.    Financial assets and financial liabilities are presented at a net amount in the balance
                 sheet only when the Company has the legal right to enforce the offset and it intends
                 to dispose of the asset and liability on a net basis or to realize the asset and settle
                 the liability at the same time.
           e.    Derivative financial instruments intended for hedging purposes are presented in the
                 balance sheet as assets or liabilities according to their fair value. Gains and losses
                 deriving from transactions that hedge financial instruments and future purchases of
                 inventory, and meet the accounting criteria of cash flow hedge transactions
                 (including documentation requirements) are recorded under a capital reserve and


                                                 63
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     15.   Financial instruments (cont'd)
           e.    (cont'd)
                 posted to the statement of income when the specific financial instruments or
                 specific inventory are posted to the statement of income.
           f.    Derivative financial instruments not intended for hedging purposes, as well as the
                 ineffective portion of derivative financial instruments intended for hedging
                 purposes, are presented as assts or liabilities in the balance sheet at their fair value.
                 Changes in fair value are charged to the financing item in the statement of income
                 during the period in which they occur.
           g.    The fair value of derivative financial instruments is determined on the basis of their
                 market values or the quotations of financial institutions. In the absence of a market
                 value or financial institution quotation the fair value is determined on the basis of a
                 valuation model.

     16.   Presentation of transactions between the Company and the controlling shareholder –
           Until December 31, 2006 transactions between the Company and its controlling
           shareholder were presented in accordance with the Securities Regulations (Financial
           Statement Presentation of Transactions between a Company and its Controlling
           Shareholder) - 1996. Accordingly, differences between the consideration received from
           the sale of assets to the controlling shareholder and the book value of the assets on the
           books of the Company were included in the Company’s shareholders’ equity.
           As from January 1, 2007 the Company implements Accounting Standard No. 23, “The
           Accounting Treatment of Transactions between an Entity and its Controlling
           Shareholder”, of the Israel Accounting Standards Board (hereinafter – Standard 23).
           Standard 23 replaces the Securities Regulations (Financial Statement Presentation of
           Transactions between a Company and its Controlling Shareholder) – 1996, and provides
           that assets and liabilities included in a transaction between the entity and its controlling
           shareholder shall be measured on the date of the transaction at fair value and that the
           difference between the fair value and the consideration from the transaction shall be
           included in shareholders’ equity. A debit difference is actually a dividend and accordingly
           reduces the retained earnings. A credit difference is actually an investment of the
           shareholder and shall therefore be presented under a separate item of shareholders’ equity
           called “capital reserve from transaction between an entity and its controlling
           shareholder”.
           Standard 23 discusses three issues relating to transactions between an entity and its
           controlling shareholder, as follows: the transfer of an asset to the entity by the controlling
           shareholder, or conversely, transfer of an asset from the entity to the controlling
           shareholder; the controlling shareholder assuming upon itself a liability of the entity to a
           third party, all or part, indemnification of the entity by the controlling shareholder in
           respect of an expense, and the controlling shareholder waiving the entity’s debt to it, all
           or part; and loans that were granted to the controlling shareholder or loans that were
           received from the controlling shareholder. Standard 23 also provides the disclosure that is
           to be made in the financial statements regarding transactions between the entity and its
           controlling shareholder during the period.


                                                  64
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007




Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     16.   Presentation of transactions between the Company and the controlling shareholder
           (cont'd)
           Standard 23 does not apply to business combinations involving entities under common
           control. The Securities Authority decided that as from January 1, 2007 business
           combinations of entities under common control shall be accounted for using the “As
           Pooling” method and not according to the fair value method.
           In accordance with the transitional provisions of Standard 23, the Company applied
           Standard 23 to transactions with a controlling shareholder that were executed after
           January 1, 2007 and to loans to the controlling shareholder or received from it before this
           Standard came into effect, as from the date of its coming into effect.
           The initial implementation of Standard 23 did not have an effect on the Company’s
           results of operations and financial position.

     17.   Real estate –
           a.    Real estate is stated at cost that is not in excess of market value.
           b.    The portion of land which is undergoing construction is included in inventory of
                 buildings for sale and is stated under current assets or as a deduction from
                 customers’ advances in current liabilities.
           c.    The inventory of stores for sale is stated at cost, but not in excess of its market
                 value.
           See Note 1F(2) below regarding the adoption of Accounting Standard No. 16,
           “Investment Property”.

     18.   Intangible assets –
           As from January 1, 2007 the Company implements Accounting Standard No. 30,
           “Intangible Assets” (hereinafter – Standard 30) of the Israel Accounting Standards Board.
           Standard 30 provides the accounting treatment of intangible assets and defines how to
           measure the book value of these assets, as well as the disclosures that are required.
           Standard 30 is to be initially implemented retroactively, except as described below. As
           regards business combinations, Standard 30 shall be implemented with respect to
           business combinations that took place on January 1, 2007 or thereafter, whereas in respect
           of a research and development project in process that was acquired in a business
           combination that took place before January 1, 2007 and which meets the definition of an
           intangible asset on the date of acquisition and was recorded as an expense on the date of
           acquisition, the Company shall recognize the research and development project in process
           as an asset and make an allocation of taxes on January 1, 2007.
           A research and development asset shall be recognized in the amount of its value on the
           date of acquisition less the amortization that would have accumulated from the date of
           acquisition until December 31, 2006 on the basis of the useful life of the asset, and less
           any accrued impairment losses. The amount of the adjustment shall be included in the
           balance of retained earnings as at January 1, 2007.




                                                  65
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     18.   Intangible assets (cont'd)
           The Company recorded as an expense the amount of NIS 20 million in respect of research
           and development projects in process that were acquired in the framework of business
           combinations that took place before January 1, 2007. The projects meet the definition of
           an intangible asset and therefore as at January 1, 2007 the Company recognized research
           and development projects in process as assets in the amount of NIS 18 million (after the
           allocation of deferred taxes), against an adjustment in the balance of retained earnings as
           at that date. The assets are amortized over the balance of their useful life of between 5
           and 13 years.
           Furthermore, the Company reclassified software and capitalized software development
           expenses that do not constitute an integral part of the related hardware, having a net book
           value of NIS 237 million as at December 31, 2006, from the item of fixed assets to the
           item of other assets.

     19.   Trade payables –
           In accordance with agreements with suppliers a subsidiary is entitled to offset discounts it
           receives from its suppliers in respect of purchases from its liabilities to the suppliers in
           respect of purchases. Accordingly, discounts receivable are recorded as a deduction from
           its trade payables.

     20.   Inventory –
           Inventory is stated at the lower of cost or net realizable value. Cost is calculated as
           follows:
           Purchased merchandise in warehouses – at cost calculated on a moving average basis.
           Purchased merchandise in stores – at cost calculated on a “first in-first out” basis.
           Raw and packing materials – at cost calculated on a “first in-first out” basis or on a
           moving average basis, according to the nature of the material.
           Work in process and finished goods - at average cost which includes raw materials, labor
           and other direct and indirect costs.
           Cellular telephones and communications equipment – presented at cost calculated on a
           moving average basis.
           Spare parts and office supplies – at cost calculated on a moving average basis.
           Buildings for sale – at cost, including direct identifiable costs that are attributed to the
           projects, and joint indirect costs that are attributed to the projects on the basis of the
           proportion of the direct costs. General and administrative costs and selling costs are
           capitalized to the cost of construction only when they can clearly and unmistakably be
           attributed to specific projects. In respect of buildings regarding which a loss is
           anticipated, a provision is recorded in the statement of income in the full amount of the
           anticipated loss.
           The cost of inventory includes all the purchase costs, conversion costs and other costs that
           were incurred in order to bring the inventory to its present location and condition.
           As from January 1, 2007 the Company implements Accounting Standard No. 26,
           “Inventory”, of the Israel Accounting Standards Board (hereinafter – Standard 26).




                                                 66
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     20.   Inventory (cont'd)
           Standard 26 applies to all types of inventory, other than inventory of work in process
           subject to Accounting Standard No. 4 of the Israel Accounting Standards Board, “Work
           Executed by Contract”, inventory of buildings held for sale subject to Accounting
           Standard No. 2 of the Israel Accounting Standards Board, “Construction of Buildings for
           Sale” and financial instruments.
           Standard 26 provides that inventory is to be measured at the lower of cost or net
           realizable value. The cost of the inventory is determined on the basis of the “First-In –
           First-Out” (FIFO) method or a weighted average of cost, while being consistent with
           respect to all inventory having a similar nature and use. It is not permitted to value
           inventory on the basis of the “Last-In – First-Out” (LIFO) method. Standard 26 also
           provides guidelines regarding the allocation of conversion costs to inventory and for
           determining impairment in value of inventory written down to net realizable value of the
           inventory.
           In accordance with the transitional provisions of Standard 26, it was adopted retroactively
           by restating the comparative data relating to prior periods.
           The implementation of Standard 26 does not have a material effect on the Company’s
           results of operations and financial position.

     21.   Cost of sales –
           a.    The cost of sales includes expenses regarding loss, storage and handling of
                 inventory until the end selling points.
           b.    Discounts that are received from suppliers are deducted from the purchase cost
                 when the conditions entitling the Company to such discounts have been fulfilled.
           The part of the discounts that relates to the purchases added to the closing inventory is
           attributed to inventory, and the rest of the discounts reduce the cost of sales.
           Fixed discounts which do not depend on the volume of purchases are calculated as a fixed
           percentage of the purchases made from the supplier or as an annual fixed amount that
           does not depend on the volume of purchases.
           Discounts from suppliers that the Company is entitled to receive only after meeting
           certain targets such as a minimum annual amount of purchases (quantitative or monetary),
           an increase in the volume of purchases compared to prior periods, etc., are included in the
           financial statements proportionately on the basis of the volume of the Company’s
           purchases from the suppliers in the reported period that advance the Company towards
           meeting the targets, but only if it is anticipated that the targets will be obtained and the
           amounts of the discounts can be reliably estimated. The estimate of compliance with the
           targets is based, inter alia, on past experience and on the anticipated volume of purchases
           from the suppliers during the rest of the period.




                                                 67
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     22.   Advance membership discount –
           When a subsidiary issues a credit card to a customer, it grants the customer the right to a
           membership discount that can be used in the stores of the subsidiary. The right is
           contingent upon charging the credit card with a minimum annual amount during the 12
           months following the issuance. In the opinion of management of the subsidiary, this right
           will be fully utilized.
           The expense in respect of the membership discount is recognized over a period of 12
           months from the date of utilizing the right or on the date the minimum amount is charged,
           whichever earlier.

     23.   Revenue recognition –
           a.    Revenues from the sale of communication products and equipment are recognized
                 upon their delivery to the customer, and the transfer of the principal risks and
                 rewards arising from ownership over the sold products.
                 Discounts granted to customers that purchase goods with money certificates are
                 recorded as a reduction from sales at the time the money certificates are used.
           b.    Proceeds from the sales of cellular call cards are recorded as deferred income and
                 recognized as revenue according to use.
           c.    Revenues from rent, commissions and services are included in accordance with the
                 period to which they are related if it is certain that the economic benefits attributed
                 to them will be received.
           d.    Revenues from commissions and credit margins on transactions executed with
                 credit cards issued by a subsidiary are recognized on the basis of the transactions
                 executed with these cards at the rate and on the date the businesses were credited.
           e.    Revenues from installing communications equipment are recognized according to
                 the stage of completion of the work as at balance sheet date compared to the
                 anticipated time it will take to complete the work.
           f.    Revenues deriving from long-term credit arrangements are recognized on the basis
                 of the present value of the future cash flows, capitalized according to market
                 interest rates as at the date of the transaction. The difference between the original
                 amount of the credit and its present value, as aforementioned, is spread over the
                 period of the credit and recognized as interest income.
           g.    Revenues from the construction of buildings for sale are recognized in accordance
                 with Accounting Standard No. 2, “Construction of Buildings for Sale”, of the Israel
                 Accounting Standards Board (hereinafter – Standard 2). According to Standard 2,
                 revenues from these sales are recorded by multiplying the proceeds from the sales by
                 the rate of completion of the project, but not before the rate of completion has
                 reached 25% and the actual amount of the proceeds has reached at least 50% of the
                 total anticipated sales of the project.




                                                 68
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     23.   Revenue recognition (cont'd)
           g.    (cont'd)
                 Furthermore, Standard 2 provides principles regarding the presentation of
                 combination transactions, according to which the land in a transaction for the
                 purchase of land in consideration of construction services will be presented at the
                 estimated cost of the construction services, and a liability will be recorded in the
                 same amount.
                 Buildings for sale are defined as projects which include construction work in which a
                 subsidiary has participated as a contractor or as an entrepreneur. Each project
                 consists of one building or a group of buildings. A group of buildings is considered
                 one project when they are on the same site, are being built under one construction
                 plan and license and are being offered for sale at the same time.
                 The joint construction costs of adjacent projects are attributed to the projects
                 according to the anticipated proceeds of each project.
           h.    Revenues and costs arising from projects executed under contract are recognized
                 according to the percentage of completion as at balance sheet date, if the result of
                 the project can be reliably estimated. The percentage of completion is usually
                 measured on the basis of the completion of engineering stages.
           i.    Reporting revenues on a gross or net basis - In order to decide whether to report
                 revenues on a gross basis (as a principal supplier) or on a net basis (as an agent), the
                 Company implements Clarification No. 8, “Reporting Revenues on a Gross or Net
                 Basis” of the Israel Accounting Standards Board (hereinafter – “Clarification 8”).
                 Clarification 8 provides that an entity acting as an agent or intermediary without
                 bearing the risks and enjoying the rewards arising from the transaction will present
                 its revenues on a net basis. On the other hand, an entity acting as a principal supplier
                 that bears the risks and enjoys the rewards arising from the transaction will present
                 its revenues on a gross basis. The Clarification provides a list of indications that the
                 Company examines in order to determine whether the revenues should be reported
                 on a gross or net basis.

     24.   Capitalization of credit costs –
           In accordance with Standard No. 3 of the Israel Accounting Standards Board specific and
           non-specific credit costs are to be capitalized to qualifying assets. Non-specific credit
           costs are capitalized to such investment, or portion thereof, which was not financed with
           specific credit, by means of a rate which is the weighted-average cost of the credit
           sources which were not specifically capitalized.
           The average capitalization rate, as calculated according to the Standard, is about 8.3% in
           real terms in 2007 and 5.5%-7.9% in 2006.




                                                 69
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     25.   Provision for impairment in value of assets –
           In accordance with Accounting Standard No. 15 of the Israel Accounting Standards
           Board, the Company and each one of its subsidiaries examine the recoverable value of
           their assets whenever there are signs indicating that there may have been a decline in the
           value of these assets. If the book value of the assets is higher than their recoverable value,
           which is determined as the higher of the net selling price and the use value (the present
           value of the estimated future cash flows expected to be derived from use and disposal of
           the asset), a loss from the impairment in value of the asset is recorded. A loss from the
           impairment in value of an asset that was recognized in the past will be cancelled only in
           the event of changes occurring in the estimates that were used to determine the
           recoverable value of the asset since the date on which the most recent loss from the
           decline in value was recognized.
           The book value after the cancellation does not exceed the book value that would have
           been determined for the asset if a loss from the decline in value had not been recorded in
           prior years.
           The standard applies to all the assets in the consolidated balance sheet, except inventory,
           inventory of buildings for sale, tax assets and monetary assets (excluding monetary assets
           which are investments in investee companies that are not subsidiaries). The examination
           of the recoverable value of the assets is based on a use value calculated according to a
           capitalization rate before tax of 8%. The selling price was determined on the basis of an
           appraiser’s estimate from which direct selling costs were deducted.
           See Note 1E(1)(a) above regarding the method of examining the fair value of investments
           in affiliated companies.
           In September 2003 the Israel Accounting Standards Board published Clarification No. 1
           regarding the accounting treatment of an impairment in value of an investment in an
           investee company that is not a subsidiary. This clarification provides that in the periods
           following the period in which a provision was created for the first time in respect of the
           impairment in value of an investee company that is not a subsidiary, the investment in the
           investee company should be presented at the lower of the recoverable value and the
           amount of the investment based on the equity method, with the recoverable amount being
           calculated in each reporting period in which there are indicators that there has been a
           change in the recoverable value. Losses from impairment in value of an investee
           company that is not a subsidiary, which were recognized or cancelled in the period are
           included in the item of the Company’s equity in the net earnings (losses) and reductions
           of affiliated companies.
           In February 2005 the Israel Accounting Standards Board published Clarification No. 6
           regarding the accounting treatment of an impairment in value of the assets of an investee
           company that is not a subsidiary. This clarification requires determination of the
           recoverable value of each one of the cash generating units or identified assets of the
           affiliated company, for which there are indications of an impairment in value or
           indications that a loss from impairment that was recognized in prior years no longer exists
           or has decreased. The decline or increase in value will be examined from the point of
           view of the holding company.




                                                  70
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     26.   Provision for future rent payment –
           A subsidiary records a provision for the future payment of rent in respect of assets for
           which it is committed to pay rent in the future in amounts in excess of the future
           economic benefit anticipated from the assets. The aforementioned liability is stated at its
           present value.

     27.   Provision for warranty –
           A subsidiary’s provision for warranty in respect of cellular end equipment is in respect of
           manufacturer malfunctions in the first year after its sale. The provision for those cases in
           which the subsidiary bears this cost is recorded on the basis of the estimates of
           management of the subsidiary, and on the basis of past experience.

     28.   Advertising expenses –
           Advertising expenses are expensed as incurred.

     29.   Research and development expenses –
           Research and development expenses are expensed as incurred.

     30.   Operating cycle –
           The normal operating cycle of a subsidiary is longer than one year, particularly with
           respect to contracting work in respect of which the operating cycle can even be two to
           three years. As a result, current assets include items the realization of which is intended
           and anticipated to take place over the normal operating cycle of the aforementioned
           subsidiary.

     31.   Dividend declared subsequent to balance sheet date –
           In accordance with Accounting Standard No. 7 regarding ”Events Subsequent to Balance
           Sheet Date” of the Israel Accounting Standards Board, a liability in respect of a dividend
           that was proposed or declared subsequent to balance sheet date is reflected in the
           accounts only in the period it was declared. Furthermore, the amount intended for
           distribution as a dividend is separately reflected in the statement of changes in
           shareholders’ equity against a reduction in the retained earnings.

     32.   Share-based payment –
           As from January 1, 2006 the Company implements Accounting Standard No. 24, “Share-
           Based Payments” of the Israel Accounting Standards Board (hereinafter – Standard 24).
           In accordance with the provisions of Standard 24, the Company recognizes share-based
           payment transactions in the financial statements, including transactions with employees
           or other parties that are settled by equity instruments, cash or other assets. Share-based
           payment transactions in which goods or services are received are recognized at their fair
           value.




                                                 71
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

E.   Significant accounting policies (cont'd)
     32.     Share-based payment (cont'd)
             With respect to transactions settled by equity instruments, Standard 24 applies to grants
             executed after March 15, 2005 that had not yet vested by January 1, 2006. Similarly,
             Standard 24 applies to changes in the terms of share-based payment transactions being
             settled by means of equity instruments that were executed after March 15, 2005, even if
             the changes in terms relate to grants that were executed before that date. The Company
             records as a salary expense, with a parallel increase in its shareholders’ equity, the benefit
             that is created when it grants options to employees, in accordance with the fair value of
             the options on the grant date, while using the Black & Scholes model. The said benefit is
             spread over the vesting period of the options on the basis of the Company’s evaluations
             regarding the number of options that will vest, without taking into account options that
             will expire as a result of non-compliance with their provisions.

     33.     The total effect of the implementation of new accounting standards –
             As a result of the implementation of new accounting standards, the retained earnings as at
             January 1, 2007 increased by the amount of NIS 608 million, as follows:
                                                                                              NIS millions

              Standard 27 (see Note 1F(1)(b) hereunder)
               Recognition of costs for dismantling and removing fixed asset items                 (4)
              Standard 16 (see Note 1F(2) hereunder)
               Implementation of fair value model to investment property                          520
              Standard 30 (see Note 1E(18) above)
              Recognition of research and development project in process that was
                recognized in a business combination                                               18
              Total amount included in retained earnings as at January 1, 2007                    534
              Standard 27 (see Note 1F(1)(a) hereunder)
              Implementation of components method - restatement of retained
                earnings as at December 31, 2006                                                   74
                                                                                                  608


F.   Reclassification and restatement
     1.      As from January 1, 2007 the Company implements Accounting Standard No. 27, “Fixed
             Assets” (hereinafter – Standard 27), of the Israel Accounting Standards Board. Standard
             27 prescribes rules for the presentation, measurement and derecognition of fixed assets
             and for the disclosure required in respect thereto.
             Standard 27 provides that a fixed asset item that is qualified for recognition as an asset
             shall be measured at cost upon its initial recognition. Standard 27 states that the cost of a
             fixed asset includes its cost of acquisition (including import taxes and purchase taxes that
             are not refunded, net of trade discounts), costs that can be directly attributed to bringing
             the asset to the location and condition necessary for it to begin operating in the manner
             intended by management, and an initial estimate of the present value of costs required in
             order to dismantle and remove the item and restore the site on which it was located (when



                                                    72
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

F.   Reclassification and restatement (cont'd)
     1.      (cont'd)
             the entity has an obligation to do so). The cost of a fixed asset is equivalent to the cash
             price on the date of recognition. Accordingly, if the payment for the asset is deferred
             beyond ordinary terms of credit, the difference between the amount equivalent to the cash
             price and the total amount paid is recognized as an interest expense over the period of the
             credit.
             After initial recognition, Standard 27 allows an election between the cost method and the
             revaluation method as the accounting policy. Nevertheless, the same policy is to be
             applied in respect of all the fixed asset items of the same group. According to the cost
             method, a fixed asset is to be stated at cost net of accumulated depreciation and any
             incurred impairment losses.
             According to the revaluation method, a fixed asset, the fair value of which can be reliably
             measured, is to be stated at its revalued amount, which is the fair value on the date of the
             revaluation less accumulated depreciation and any impairment losses incurred after then.
             An increase in the value of the asset to above its book value as a result of the revaluation
             is to be directly included in the shareholders’ equity under a revaluation reserve.
             Nonetheless, such an increase in value will be included in earnings up to the amount that
             it reverses a previously recognized impairment loss in respect of that asset. Conversely, a
             decline in the book value of the asset as a result of the revaluation is to be recognized as a
             loss. Nevertheless, such a decline in value is to be included in the shareholders’ equity
             under a revaluation reserve up to the amount of any existing credit balance in a
             revaluation reserve in respect of the same asset.
             Standard 27 provides that in order to depreciate the fixed asset item, the amount that was
             initially recognized in respect of the fixed asset item shall be allocated between its
             significant components and each component shall be depreciated separately, although
             combination of different components of the asset that have the same useful life and
             method of depreciation is permitted. According to Standard 27 the residual value, useful
             life and depreciation method of the asset are to be examined at least once every fiscal
             year. In the event of a change in the forecasted pattern of using the future economic
             benefit embodied in the asset, the method of depreciation should be changed and the
             change shall be treated as a change in accounting estimate.
             The Company has chosen the cost method as its accounting policy for measuring fixed
             assets. The initial implementation of Standard 27 had the following effects:
             a.    Implementation of the components method - In accordance with the transitional
                   provisions of Standard 27, the financial statements were restated as a result of
                   implementing the provisions of the Standard with respect to the separate
                   calculation of depreciation for the various cost components of the fixed assets
                   according to the useful life of each item. The effect of the aforementioned
                   restatement is as follows:




                                                    73
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

F.   Reclassification and restatement (cont'd)
     1.      (cont'd)
             a.    Implementation of the components method (cont'd)
                                                                                            As reported
                                                                                              in these
                                                             As originally    Effect of      financial
                                                              reported *     restatement    statements
                                                                             NIS millions

                        The effect on the consolidated
                         balance sheet as at December
                         31, 2006
                        Fixed assets                            4,362            185         4,547
                        Provision for deferred taxes              374             49           423
                        Minority interest in shareholders’
                         equity of subsidiaries                 1,646             62         1,708
                        Shareholders’ equity                    4,932             74         5,006

                        The effect on the Company’s
                          balance sheet as at December
                          31, 2006
                        Investment                            10,170              74        10,244
                        Shareholders’ equity                   4,932              74         5,006

                        Retained earnings January 1,
                         2006                                      19             65            84
                        Retained earnings January 1,
                         2005                                    227              50           277
                   * After the reclassification of investment property, software and software
                     development costs that were capitalized to other assets.




                                                      74
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

F.   Reclassification and restatement (cont'd)
     1.      (cont'd)
             a.    Implementation of the components method (cont'd)
                                                        Consolidated statement    Company statement of
                                                            of income for              income for
                                                          2006         2005         2006        2005
                                                                          NIS millions

                        The effect on net earnings
                        Net earnings as reported in
                          the past                          692        455         692          455
                        Effect of restatement:
                        Increase in the Company’s
                          share in gains and
                          reductions, net, of
                          investee companies                  -           -          22          15
                        Decrease in cost of sales
                          and services                       32          4            -           -
                        Decrease (increase) in
                          taxes on income                    (4)         2            -           -
                        Increase (decrease) in gain
                          from realization of
                          investments less
                          reductions, net                   (13)        10          (13)          -
                        Increase in the share of the
                          minority in earnings of
                          subsidiaries                       (6)         (1)          -           -
                        Net earnings as reported in
                          these financial statements        701        470         701          470




                                                       75
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

F.   Reclassification and restatement (cont'd)
     1.      (cont'd)
             a.    Implementation of the components method (cont'd)
                                                                                 2006          2005
                                                                                    NIS per share

                        The effect on basic earnings per ordinary
                         share (consolidated and company)
                        Basic earnings per ordinary share before
                         cumulative effect as reported in the past                8.8              8.4
                        Effect of restatement                                     0.1              0.2
                        Basic earnings per ordinary share before
                         cumulative effect as reported in these financial
                         statements                                               8.9              8.6
                        Basic earnings per ordinary share after
                         cumulative effect as reported in the past                9.0              8.4
                        Effect of restatement                                     0.1              0.2
                        Basic earnings per ordinary share after
                         cumulative effect as reported in these financial
                         statements                                               9.1              8.6
                        The effect on diluted earnings per ordinary
                         share (consolidated and company)
                        Diluted earnings per ordinary share before
                         cumulative effect as reported in the past                8.7              7.8
                        Effect of restatement                                     0.1              0.1
                        Diluted earnings per ordinary share before
                         cumulative effect as reported in these financial
                         statements                                               8.8              7.9
                        Diluted earnings per ordinary share after
                         cumulative effect as reported in the past                8.9              7.8
                        Effect of restatement                                     0.1              0.1
                        Diluted earnings per ordinary share after
                         cumulative effect as reported in these financial
                         statements                                               9.0              7.9
             b.    Liability for the removal of assets – In the past, upon the initial recognition of a
                   fixed asset, the Company did not include in its cost the initial estimate of costs for
                   dismantling and removing the item and for restoring the site on which it was
                   located, and therefore:
                   1.       It measured the said liability as at January 1, 2007 in accordance with
                            generally accepted accounting principles at the amount of NIS 12 million,
                            and it recorded a tax asset in the amount of NIS 2 million;
                   2.       It calculated the amount that would have been included in the cost of the
                            asset on the date on which the liability was initially incurred by capitalizing
                            the amount of the liability mentioned in item 1 above to the date on which the


                                                     76
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

F.   Reclassification and restatement (cont'd)
     1.      (cont'd)
             b.    Liability for the removal of assets (cont'd)
                          liability was initially incurred (hereinafter – the capitalized amount) at the
                          amount of NIS 9 million. The liability was capitalized using the best
                          estimate of the historical capitalization rates suitable to the risk that was
                          relevant to that liability during the expired period; and,
                   3.     It calculated the accumulated depreciation on the capitalized amount as at
                          January 1, 2007 on the basis of the useful life of the asset as at that date at
                          the amount of NIS 4 million;
                   4.     The difference of NIS 4 million between the amount that was charged to the
                          asset in accordance with items 2 and 3 above, and the amount of the liability
                          and tax asset, in accordance with item 1 above and net of the minority
                          interest of NIS 1 million, was included in retained earnings as at January 1,
                          2007.

     2.      Investment property – As from January 1, 2007 the Company implements Accounting
             Standard No. 16, “Investment Property” (hereinafter – Standard 16) of the Israel
             Accounting Standards Board. Standard 16 provides rules for the recognition,
             measurement and disposal of investment property and the disclosure required in respect
             thereto. Standard 16 provides, inter alia, that investment property shall be initially
             measured at cost with the addition of transaction costs. Standard 16 also provides that in
             subsequent periods, the entity is required to choose between measuring its investment
             property at cost net of accumulated depreciation and impairment losses, and measuring it
             at fair value, with the adjustment in fair value being recorded to earnings.
             Investment property is property (land or building – or part of a building – or both) held by
             the Company (as the owner or under a financing lease) in order to generate income from
             rent or for the purpose of a capital increase in value or both, and not for the following
             purposes:
             a. To be used in order to produce or supply goods or services or for administrative
                 purposes; or
             b. To be sold in the ordinary course of business
             Furthermore, leased buildings that are leased out by the Company under an operating
             lease are classified and treated as investment property.
             Property in the process of being constructed for future use as investment property are
             treated as fixed assets until the construction or development is concluded, at which time it
             is remeasured according to fair value and classified as investment property. Any gain or
             loss from the remeasurement is recorded as income or expense. The land on which the
             building is located is classified upon its acquisition as investment property and is
             presented at fair value.
             When property is transferred from owner-occupied property to investment property,
             measured at fair value, the asset is remeasured according to fair value and is classified as
             investment property. Any gain from the remeasurement is included directly in equity.
             Any loss is included directly as an expense. When the investment property measured
             according to fair value becomes a fixed asset (owner-occupied property) or inventory, the


                                                   77
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

F.   Reclassification and restatement (cont'd)
     2.      Investment property (cont'd)
             fair value becomes the cost of the fixed asset or inventory, for purposes of consistent
             accounting treatment. When inventory becomes investment property measured at fair
             value, any difference between the fair value of the property on that date and its previous
             value on the books is included directly as income or expense.
             The Company has chosen to implement the fair value model as from the financial
             statements for 2007. The fair value of the investment property in the consolidated balance
             sheet as at January 1, 2007 was decided to be NIS 4.9 billion. The valuations of the
             investment property are based on the valuations of independent appraisers, having
             relevant and recognized professional skills and current experience regarding the location
             and type of the investment property being valued.
             The valuations were mainly prepared by capitalizing the cash flows anticipated to derive
             from the assets. The appraisers used capitalization rates of 8%-11% p.a., which are based
             on the type of the property and its designation, its location and the nature of the lessees.
             Capitalization rates of 8%-9% were used in the valuations of office buildings and
             buildings used in the hi-tech industry and for commercial purposes (located mainly in the
             center of the country and in parks for know-how intensive industries), whereas
             capitalization rates of 9%-11% were used in the valuations of workshops, storage and
             industrial buildings (located mainly in the periphery).
             The effect of the implementation of Standard 16 on the consolidated balance sheet of the
             Company as at January 1, 2007 (the comparative figures were not restated) is as follows:
                                                                                           NIS millions

              Increase in balance of investment property                                      1,729
              Increase in balance of investment in affiliated companies                          74
              Increase in long-term liabilities (in respect of lease payments and
                appreciation levies)                                                            (88)
              Increase in provision for deferred taxes                                         (431)
              Increase in minority interest                                                    (764)
              Total increase in retained earnings                                               520
             None of the aforementioned valuations is material for the Group and therefore were not
             attached as required in Regulation 8B of the Securities Regulations (Periodic and
             Immediate Reports) – 1970. For this purpose the Company used a materiality test of the
             value of a single asset being in excess of 10% of total assets on the consolidated balance
             sheet.

     3.      Following the initial consolidation of the financial statements of Ham-Let (Israel Canada)
             Ltd. (hereinafter – Ham-Let), which is controlled by the Company by means of a voting
             agreement, the comparative figures for prior years have been changed. This change did
             not have a material effect on the comparative figures in the financial statements other
             than on the following items: in 2006 the inventory amounted to NIS 114 million, credit
             from banks and current maturities amounted to NIS 40 million and liabilities for
             employee severance benefits, net, amounted to NIS 4 million.




                                                   78
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 1 - Financial Reporting and Accounting Policies (cont'd)

G.   Disclosure of the effect of new accounting standards in the period prior to their
     implementation
     In July 2006 the Israel Accounting Standards Board published Accounting Standard No. 29,
     “Adoption of International Financial Reporting Standards (“IFRS”)” (hereinafter – Standard
     29). Standard 29 provides that entities subject to the Securities Law – 1968 that are required to
     report according to the regulations of this law, are to prepare their financial statements for
     periods beginning as from January 2008 according to IFRS. Standard 29 permits early adoption
     as from financial statements published after July 31, 2006.
     The initial implementation of IFRS will be effected along with the implementation of IFRS 1,
     “First Time Adoption of International Financial Reporting Standards”, for purposes of the
     transition.
     In accordance with Standard 29, the Company is required to include in a note to its annual
     financial statements for December 31, 2007, balance sheet data as at December 31, 2007 and
     statement of income data for the year then ended, that have been prepared according to the
     recognition, measurement and presentation principles of IFRS (see Note 30).
     The Company plans to implement IFRS as from the financial statements for the period
     beginning on January 1, 2008.




                                                 79
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 2 - Investments in Investee and Other Companies

A.   Composition
                                                         Consolidated        Company
                                                        December 31        December 31
                                                       2007      2006*    2007    2006*
                                                       N I S        m i l l i o n s

      Cost of shares                                    4,662    3,977     8,207   10,782
      Carrying value of shares in excess of cost
          upon acquisition, net                        (1,027)    (726)    2,229     (600)
      Carrying value of shares (1)                      3,635    3,251    10,436   10,182
      Loans                                             1,048      304         -       62
      Total (a)                                         4,683    3,555    10,436   10,244
      (1) Including -
      Net excess of cost, balance for amortization      1,136    1,366     3,236    4,409
      Net excess of cost, original amount **            1,641    1,495     3,817    4,636
      (a) Not including provision for losses in the
          amount of                                        14      22         4         8
      (2) Carrying value of shares:
            Subsidiaries                                    -        -     7,738    7,593
            Proportionately consolidated                    -        -         -       10
            Affiliates                                  3,578    3,164     2,648    2,504
            Other companies                                57       87        50       75
                                                        3,635    3,251    10,436   10,182
      (3) Dividend recorded:
           Subsidiaries                                    -        -       349     3,797
           Affiliates                                    266       43       245         1
                                                         266       43       594     3,798
     * See note 1F regarding classification and restatement.
     ** Not including excess of cost fully amortized.




                                                  80
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 2 - Investments in Investee and Other Companies (cont’d)

A.   Composition (cont’d)
                                                          Consolidated         Company
                                                          December 31         December 31
                                                        2007       2006*    2007     2006*
                                                         N I S        m i l l i o n s

       (4) The movement in investments in the
           consolidated balance sheet:
      Balance as at the beginning of the year           3,555       1,606      10,244        8,660
      Initial implementation of new accounting
           standards as at January 1 :
      Recognition of costs for dismantling and
           removing fixed asset items (standard
           27)                                              -            -          (4)          -
      Implementation of fair value model to
           investment property (standard 16)               73            -        520            -
      Recognition of research and development
           project in process that was recognized
           in a business combination (standard 30)         18            -         18             -
      Reflecting negative goodwill in retained
           earnings                                         -          18            -          19
      Reversal of a provision for dilution due to
           expected exercise of convertible
           securities                                       -           9            -          17
      Other movements:
      Investments                                       1,631       2,588         528        8,548
      Changes in loans, net                                 6           2           8           12
      Dividends received (including dividend
           receivable)                                   (266)        (43)       (594)      (3,798)
      Company’s equity in earnings (losses) of
           investees                                    (77)**        (85)     1,083**         590
      Change in investment due to sales,
           reductions and issuances to third parties       (3)       (394)      (1,063)     (3,565)
      Adjustments arising from the translation of
           financial statements of investee
           companies and other capital reserves          (315)       (163)       (300)        (237)
      Changes in investments due to companies
           that are no longer consolidated                 69          13            -            -
      Change in provision for losses of investee
           companies                                       (8)          4          (4)         (2)
          Total                                         4,683       3,555      10,436      10,244
     * See note 1F regarding classification and restatement.
     ** Not including adjustments deriving from the translation of financial statements in respect of
        the exess cost the Company attributed to ECI Telecom Ltd. and which were included in the
        Company's equity in earnings of investee companies upon its sale.




                                                   81
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 2 - Investments in Investee and Other Companies (cont’d)

B.   Principal Changes in Investments during 2007
     1.      Investments in investee companies
             a.   In April 2007, Expand Networks Ltd. (hereinafter – Expand), at the time held by
                  the Company at the rate of 17%, completed a capital raising in which it raised the
                  amount of $ 14 million. The Company invested NIS 22 million of this amount and
                  the rest was invested by a foreign capital fund and some of the present shareholders
                  of Expand in consideration for an issuance of preferred shares of Expand to the
                  investors. Following the said raising of capital, the holding of the Company in
                  Expand increased to about 31%.
             b.   In May 2007 the Company and Elron purchased 5% of the share capital of Given
                  Imaging Ltd. (hereinafter – Given) for the price of NIS 150 million, at equal parts
                  and terms. As a result of the purchase, the Company acquired excess cost in the
                  amount of NIS 68 million, which was mainly attributed to goodwill in the amount
                  of NIS 28 million and to technology in the amount of NIS 35 million, and is
                  amortized over 8-13 years.
             c.   In 2007 the Company purchased 4.8% of the share capital of Koor Industries Ltd.
                  (hereinafter – Koor) on the Tel Aviv Stock Exchange, in a number of stages, for a
                  total amount of NIS 250 million. As a result of the said acquisitions, the
                  Company’s holding in Koor increased to 47%. Furthermore, as a result of the
                  acquisition of Koor’s shares as aforementioned, the Company acquired excess cost
                  in the amount of NIS 129 million, which was attributed mainly to goodwill in the
                  amount of NIS 57 million, to customer relations – NIS 21 million amortized over
                  15 years, to technology – NIS 17 million amortized over 6-10 years, and to trade
                  names – NIS 15 million amortized over 5 years. See also Note 29A(5) regarding
                  the acquisition of additional shares of the Company subsequent to balance sheet
                  date.
             d.   In July 2007 the Company purchased all the holdings of S.H. Sky Investments
                  (B.R.K.) Limited Partnership in Netvision (11.6%) for the price of NIS 180
                  million. Following the said purchase, the holding of the Company in Netvision
                  increased to 35% and the Company acquired excess cost in the amount of NIS 109
                  million. The excess cost was attributed to tangible and intangible assets of
                  Netvision as follows:




                                                 82
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 2 - Investments in Investee and Other Companies (cont’d)

B.   Principal Changes in Investments during 2007 (cont')
     1.      Investments in investee companies (cont'd)
             d.   (cont'd)
                                           Excess cost
                                          (NIS millions)              Amortization period

                    Customer relations          44         12 years, and according to the economic
                                                           benefits anticipated from the customers in
                                                           each period
                    Trade names                   7        8 years, and according to the economic
                                                           benefits anticipated from the trade names
                                                           in each period
                    Orders backlog                2        1.5 years, and according to the economic
                                                           benefits anticipated from the orders
                                                           backlog in each period
                    Fixed assets                (3)        Parallel to the assets
                    Goodwill                    59
                                               109
             e.   In August 2007 the Company entered into an agreement with Praxair Inc. to buy its
                  entire holding (about 50%) in Maxima Air Separation Center (hereinafter –
                  Maxima) for the price of US$ 24 million. Maxima is held by the Company at the
                  rate of 24%. The transaction is subject to the various approvals required by law,
                  including the approval of the general shareholders’ meeting of Maxima and the
                  approval of the Commissioner of Restrictive Trade Practices.
             f.   In November 2007 Property & Building Corporation Ltd. (hereinafter – Property &
                  Building) issued ordinary shares, by means of rights, in accordance with its shelf
                  registration offer from October 2007. Each share was issued for the price of NIS
                  500 in cash, and the issuance proceeds amounted to NIS 844 million, net. The
                  Company participated in its entire share of the said issuance of rights, and it
                  purchased rights to additional ordinary shares of Property & Building in the course
                  of the stock exchange trade in such rights. In total the Company paid the amount of
                  NIS 666 million for its share in the issuance of rights and for the additional rights
                  and their exercise into shares, and the Company’s holding in Property & Building
                  increased from 60.6% to 65.3%.
             g.   In December 2007 American-Israeli Paper Mills Ltd, a 21% investee company
                  (hereinafter (AIPM), issued shares of AIPM in a private placement. The shares
                  were issued partly to institutional and other investors and partly to the controlling
                  shareholders of AIPM – the Company and Clal Industries and Investments Ltd.
                  (hereinafter – CII), a subsidiary of IDB Development Corporation Ltd. (hereinafter
                  – IDB Development), the parent company of the Company.




                                                 83
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 2 - Investments in Investee and Other Companies (cont’d)

B.   Principal Changes in Investments during 2007 (cont')
     1.      Investments in investee companies (cont'd)
             g.   (cont'd)
                  The total amount of NIS 213 million was raised in this private issuance, and it will
                  serve to partly finance the purchase of a new system for manufacturing wrapping
                  paper by AIPM. The Company’s investment in AIPM, in the framework of this
                  private placement, amounted to NIS 46 million, following which the Company’s
                  holding in AIPM increased from 21.37% to 21.45%.

     2.      Disposal of investee companies
             a.   In January 2007 the Company sold its entire holding (50%) in General Engineers
                  Ltd. for the price of NIS 10 million. The Company recorded an insignificant gain
                  from the sale.
             b.   In February 2007 Cellcom Israel Ltd. (hereinafter – Cellcom) published in the USA
                  a prospectus for a public offering of shares, which was guaranteed by underwriting,
                  by which the Company sold to the public shares of Cellcom constituting 19.5% of
                  the share capital of Cellcom for a total consideration of $ 353 million (net of
                  expenses relating to the offer). Furthermore, in September 2007 the Company sold
                  3% of the issued share capital of Cellcom for the price of NIS 286 million. As a
                  result, the Company recorded a gain in the amount of NIS 761 million and its
                  holding in Cellcom decreased from 78.5% to 56% of the issued share capital and
                  from 84%% to 61.5% of the voting rights. Following the said publication of the
                  prospectus, the shares of Cellcom were listed for trading on the New York Stock
                  Exchange, and in July 2007 they were also listed for trading on the Tel Aviv Stock
                  Exchange. See also Paragraph 7 of Note 20A regarding the commitment of the
                  Company to indemnify the underwriters of the public offering, and Paragraph 1 of
                  Note 29A below regarding the sale of additional shares of Cellcom by the
                  Company subsequent to balance sheet date.
             c.   In February 2007 the Brazilian company that at the time was indirectly wholly
                  owned by GVT Holding (NV), a 16% investee of the Company (hereinafter –
                  GVT), executed an initial issuance of its shares to the public. In consideration of
                  the issuance to the public, the Brazilian company received 1,013 million Brazilian
                  reals (net, after the underwriters’ commissions and issuance expenses). Before the
                  issuance to the public, convertible debentures of the Brazilian company in the total
                  amount of $ 243 million were converted into shares of the Brazilian company. In
                  total, the Brazilian company issued shares constituting 73.3% of its share capital
                  after the issuance, and the holding of GVT in the share capital of the Brazilian
                  company decreased to 26.7%. The Company’s share in the earnings of GVT, which
                  are mainly due to the capital gain GVT recognized in respect of the said issuance,
                  amounted to NIS 108 million.
             d.   In March 2007 the Company reached an agreement with a company controlled by
                  Messrs. Matthew Bronfman and Shalom Ya’acov Fisher (hereinafter – the
                  Bronfman-Fisher company) by which the Company would sell about 19% of the
                  issued share capital of Super-Sol Ltd. (hereinafter – Super-Sol) to the Bronfman-



                                                 84
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 2 - Investments in Investee and Other Companies (cont’d)

B.   Principal Changes in Investments during 2007 (cont')
     2.      Disposal of investee companies (cont'd)
             d.    (cont'd)
                   Fisher company at a price per share of $ 5.30 and a total consideration of $ 214
                   million (subject to certain adjustments) in one transaction comprised of two phases:
                   the first phase will be executed within 90 days from the day of the agreement, and
                   the second phase will be executed in June 2008.
                   The agreement, as later amended, includes arrangements in respect of transactions
                   involving Super-Sol shares and, inter alia, regarding first refusal rights of the
                   Company in respect of sale of Super-Sol shares by the Bronfman-Fisher company;
                   right of first offer by the Bronfman-Fisher company in respect of sale of Super-Sol
                   shares by the Company (if such a sale should take place within one year from the
                   date of executing the first phase of the transaction, the Bronfman-Fisher company
                   has the right to purchase the shares at the aforementioned price per share, subject to
                   certain adjustments); tag-along rights of each party to the sale of Super-Sol shares
                   by the other party; and the Company’s right, in the event of the sale of all its
                   holdings in Super-Sol, to compel the Bronfman-Fisher company to tag-along with
                   the sale transaction, all under certain conditions detailed in the agreement. The
                   agreement (as amended) also includes instructions regarding, inter alia, the
                   Company voting at general meetings of Super-Sol in favor of the appointment of
                   directors, a few of which will be agreeable to the Bronfman-Fisher company;
                   instructions relating to the service of the Chairman, Deputy Chairman and Vice
                   Chairmen of Super-Sol’s Board of Directors without them having preferential
                   voting rights in the board; and instructions relating to adoption of an annual
                   maximum dividend policy by Super-Sol. These arrangements and instructions will
                   become effective upon execution of the first phase of the transaction and will
                   expire 20 years from that date or when one of the parties no longer holds 10% or
                   more of Super-Sol’s issued share capital as it is on the date of the agreement,
                   according to the earlier of the two dates.
                   The first part of the transaction described above was executed in May 2007.
                   Accordingly the Company sold 13.3% of the issued share capital of Super-Sol for
                   the price of $ 152 million (after adjustments). As a result, the Company recorded a
                   gain in the amount of NIS 353 million.
                   In September 2007 the Company signed an additional agreement, by which the
                   parties moved up execution of the second phase of the transaction from the original
                   date of June 2008 to September 2007. As a result, in September 2007 the Company
                   sold to the Bronfman-Fisher company 5.7% of the issued share capital of Super-Sol
                   for the price of $ 65.6 million, and provided to the Bronfman-Fisher company a
                   loan in the amount of $ 22.25 million in order to pay part of the aforementioned
                   amount. This loan bears interest of 6% p.a. and will be repaid in June and
                   September 2008.
                   Following the execution of the second phase of the transaction, the Company
                   recorded a gain of NIS 153 million and its holding in Super-Sol decreased from
                   59% to 40% (this rate includes a relative part of the 4% of the shares of Super-Sol
                   that are held by a wholly owned subsidiary of Super-Sol).




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              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 2 - Investments in Investee and Other Companies (cont’d)

B.   Principal Changes in Investments during 2007 (cont')
     2.      Disposal of investee companies (cont'd)
             e.    In June 2007 the Company sold the rest of its holding (1.3%) in Bluephoenix
                   Solutions Ltd. for the price of NIS 10 million. As a result of the sale, the Company
                   recognized a gain in the amount of NIS 8 million.
             f.    In September 2006 an agreement was signed between Netvision, Barak I.T.C.
                   (1995) - The International Telecommunication Corporation Ltd. (hereinafter –
                   Barak) and all the shareholders of Barak, including – CII, by which Netvision
                   would purchase full ownership over Barak in consideration for an allotment of
                   shares of Netvision to the shareholders of Barak. At the same time an agreement
                   was signed between Netvision, the Company and Globecall Communications Ltd.,
                   a wholly owned subsidiary of the Company at the time (hereinafter – Globecall),
                   by which the Company would sell all its holdings in Globecall to Netvision in
                   consideration for an allotment of shares of Netvision to the Company.
                   In December 2006 this transaction was approved by the special shareholders’
                   meetings of the Company, CII and Netvision. In January 2007 the transaction was
                   completed following which the holding of the Company in Netvision declined from
                   36% to 25% (21% in full dilution), the holding of Elron Electronic Industries Ltd.
                   (hereinafter – Elron), a 49% investee of the Company, declined from 36% to 18%
                   (16% in full dilution) and CII received shares of Netvision that directly and
                   indirectly confer to it a 29% holding in Netvision (25% in full dilution). These
                   rates were determined in accordance with the aforementioned agreements and on
                   the basis of the valuations of independent appraisers of both parties, by which the
                   value of Netvision was estimated to be between NIS 533 million and NIS 621
                   million, the value of Barak was estimated to be between NIS 456 million and NIS
                   529 million and the value of Globecall was estimated to be between NIS 67 million
                   and NIS 90 million. Fairness opinions regarding the fairness of the consideration
                   were received in respect of the aforementioned valuations. Upon completion of the
                   transaction in January 2007, the Company, Elron and CII entered into a
                   shareholders’ agreement regarding their holdings in Netvision. This agreement
                   arranges, inter alia, the composition of Netvision’s board of directors on the basis
                   of the relative holdings of the parties, as well as rights of first refusal and tag along
                   rights in sales of shares of Netvision by the parties.
                   In accordance with the decision of the Securities Authority from April 2007
                   regarding the accounting treatment of transactions regarding business combinations
                   under common control, this transaction is accounted for under the “As Pooling”
                   method. According to this method, Netvision reported the assets and liabilities of
                   Barak and Globecall in its financial statements according to their book value on the
                   financial statements of CII and the Company, as from the dates CII and the
                   Company obtained control over Barak and Globecall, respectively. The difference
                   between the share of the Company in the new shareholders’ equity of Netvision
                   and the Company’s investment in Globecall and in Netvision before the transaction
                   was included in the financial statements of the Company under a capital reserve,
                   and as from the first quarter of 2007 the Company includes its share in the results
                   of Netvision, on the basis of the said financial statements of Netvision.




                                                    86
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 2 - Investments in Investee and Other Companies (cont’d)

B.   Principal Changes in Investments during 2007 (cont')
     3.      Other changes in investments (cont'd)
             a.   Cellcom
                  1.    As from July 1, 2007 the shares of Cellcom are traded also on the Tel Aviv
                        Stock Exchange and Cellcom begain reporting only according to American
                        Law.
                  2.    In 2007 Cellcom distributed a cash dividend in the total amount of NIS 655
                        million. The Company’s share in the said dividend amounted to NIS 379
                        million.
             b.   Super-Sol
                  In 2007 Super-Sol distributed a cash dividend in the total amount of NIS 350
                  million. The Company’s share in the said dividend amounted to NIS 133 million.
             c.   Property & Building
                  1.    In March 2007 a company registered in Holland, which is 42.5% held by a
                        wholly owned subsidiary of Property & Building and 42.5% held by a
                        foreign company of the Electra Real Estate Group, purchased rights in rental
                        property located near the city of Keln in Germany.
                        The asset is a technological park having an area of 127 dunams, which
                        includes 15 buildings and is comprised of 72,000 square meters of rental
                        property and 1,600 stores. Furthermore, the park includes additional building
                        rights for 50,000 square meters of rental property. The park is fully leased
                        out. The gross annual rent amounts to € 7.6 million (about NIS 42 million),
                        and net of management and maintenance expenses the annual rent amounts
                        to € 7.25 million (about NIS 40 million).
                        The total cost of the asset including related expenses is € 106.7 million
                        (about NIS 588 million) of which the amount of € 93.7 million (about NIS
                        517 million) was financed by means of a non-recourse loan from a German
                        financial institution and the rest was financed by shareholders’ equity. The
                        loan bears interest at the rate of 5.25% for a period of 5 years and is secured
                        by a first degree fixed lien on the asset and the receipts from the asset.
                  2.    In April 2007 Property & Building entered into an agreement with Gav Yam
                        (a subsidiary of Property & Building) by which Property & Building shall
                        purchase all the shares of Ispro held by Gav Yam, constituting 43.36% of the
                        issued share capital and voting rights of Ispro, for the price of NIS 144.4
                        million (about NIS 110.7 million net of the dividend Ispro paid before
                        completing the transaction). The consideration for the shares was determined
                        on the basis of an independent valuation.
                        The transaction was completed in June 2007, after being approved by the
                        general meeting of Gav Yam. The gain Gav Yam reported on the
                        aforementioned transaction was eliminated in the financial statements of
                        Property & Building, since the transaction is between Property & Building
                        and its subsidiary.



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              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 2 - Investments in Investee and Other Companies (cont’d)

B.   Principal Changes in Investments during 2007

     3.   Other changes in investments
             c.   Property & Building (cont'd)
                  3.    In June 2007 IDB Development and a subsidiary equally owned by Property
                        & Building and IDB Development (hereinafter – the subsidiary) signed a
                        binding memorandum with a private American company from the Elad
                        Group that is controlled by Yitzchak Tshuva (hereinafter – Elad), regarding
                        a joint venture of the said subsidiary and Elad, in equal parts, in the
                        framework of which the parties will purchase real estate rights to 34.5 acres
                        (16.2 acres of which are leased) on the strip of Las Vegas, USA, on which
                        the parties will construct a real estate project that will include a prestigious
                        hotel, casino, commercial center and residential project. The real estate
                        rights will be purchased from a third party according to a purchase
                        agreement Elad signed with the third party before signing the
                        aforementioned memorandum. In August 2007 the purchase of the real estate
                        in Las Vegas was completed. The project is anticipated to include a
                        prestigious hotel, casino, modern commercial center and exclusive
                        residential towers over a total built area of 1.5 million square meters that will
                        be built in a number of stages. The acquisition was carried out by an entity
                        held jointly in equal parts (“the project company”) by the subsidiary and
                        Elad.
                        The investment in the real estate amounted to $ 1.24 billion. For the purpose
                        of the acquisition, the project company took out a loan in the total amount of
                        $ 625 million, in two layers, that bears an effective weighted interest rate of
                        Libor + 3.8% p.a. (calculated according to the stated interest rates of Libor +
                        2.75% and Libor + 4% with the addition of certain commissions and
                        payments), and is guaranteed by a first degree lien on the land (the lenders
                        agreed that the first layer lenders have priority over the lien before the
                        second layer lenders). The loan is for one year and can be extended for two
                        periods of half a year each, under certain circumstances, for the payment of
                        an extension commission in respect of each of the extension periods at the
                        rate of 0.25%. The balance of the investment, in the amount of $ 600
                        million, was financed by the parties. The investment in the various stages of
                        the project is anticipated to amount to an additional cost of $ 5-7 billion,
                        which will be financed by shareholders’ equity and external financing, and
                        execution of the project is anticipated to take four to five years.
                        Upon concluding the acquisition of the real estate, the parties signed a
                        collaboration agreement that replaces the memorandum they signed in June
                        2007. This agreement provides, inter alia, for the establishment of a joint
                        steering committee comprised of two representatives of each party. The
                        steering committee will be responsible for management of the project,
                        including all the material decisions regarding the project.
                        The parties granted to each other first refusal and tag along rights if they
                        should sell their rights in the project to a third party. Property & Building as
                        well as IDB Development guaranteed the liabilities of the subsidiary in equal
                        parts (without mutual liability). Furthermore, in the collaboration agreement


                                                 88
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 2 - Investments in Investee and Other Companies (cont’d)

B.   Principal Changes in Investments during 2007

     3.   Other changes in investments
             c.   Property & Building (cont'd)
                  3.     (cont'd)
                         the parties agreed as follows: a) the subsidiary and Elad will have equal
                         rights and obligations in the joint venture, including equal rights to profits;
                         b) in addition to the amount of $ 60 million the subsidiary undertook to pay
                         to Elad in respect of the share of the subsidiary in payments made by Elad in
                         the past in respect of the project, the subsidiary will pay to Elad an additional
                         amount of $ 15 million, of which $ 10 million will be paid within 10 days
                         from the date of completing the acquisition of the real estate and $ 5 million
                         upon receipt of the first building permit for the project. The parties also
                         agreed to try and execute cash distributions at the maximum amounts
                         possible.
                         In March 2008, subsequent to balance sheet date, the planning authorities in
                         Law Vegas approved plans that were submitted to them, which include
                         building rights in the total amount of 1.5 million square meters for the
                         aforementioned project.
                  4.     In October 2007 Property & Building (by means of a wholly owned
                         subsidiary) and Amot Investments Ltd. (hereinafter – the buyers) signed a
                         memorandum, in equal parts, with a company wholly owned by Azorim
                         Investment Development and Construction Ltd. (hereinafter – the seller), by
                         which the buyers shall purchase from the seller all its rights in an asset
                         known as the “Kiryat Ono Mall” (hereinafter – the mall), for the price of
                         NIS 820 million plus VAT as required by law. The transaction was
                         completed on December 31, 2007.
                         Property & Building financed its share in the purchase of the mall in the
                         amount of NIS 410 million, as well as the taxes on the transaction, out of its
                         own resources.
             d.   Koor
                  1.     In 2007, Koor purchased shares of Makhteshim Agan Industries Ltd.
                         (hereinafter – Makhteshim Agan) for the price of NIS 24 million. As at
                         December 31, 2007 Koor holds 37% of Makhteshim Agan.
                  2.     In 2007 Koor recorded capital gains in the total amount of NIS 135 million
                         on the sale of its holding (56.5%) in Sheraton Moriah Hotels Israel Ltd. and
                         its holding (9.2%) in Knafaim Holdings Ltd., the sale of its holdings (23%)
                         in Scopus Video Networks Ltd., the sale of its holdings (3.3%) in Elbit Ltd.
                         as well as in respect of Koor’s share in the gain recorded by ECI Telecom
                         Ltd. (hereinafter – ECI), which was then 28% held by Koor, from the shares
                         issued by Veraz Networks Inc. (hereinafter – Veraz), which is held by ECI,
                         and from the sale of 2.25 million shares of Veraz by ECI.




                                                  89
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 2 - Investments in Investee and Other Companies (cont’d)

B.   Principal Changes in Investments during 2007

     3.   Other changes in investments
             d.    Koor (cont'd)
                   3.    In May 2007 Koor raised the amount of NIS 640 million in an issuance of
                         debentures that constituted an expansion of its existing CPI-linked series of
                         debentures. The issuance price reflected interest of 4.05% p.a.
                   4.    In July 2007, at the request of Koor, its ADR units were delisted from the
                         New York Stock Exchange.
                   5.    In July 2007, ECI signed a merger agreement by which ECI would be fully
                         sold for the price of $ 1.2 billion. The transaction was completed in
                         September 2007. Upon the completion of the transaction, Koor received the
                         amount of $ 330 million in consideration of its entire holding in ECI (about
                         28%), and recorded on its books a gain in the amount of NIS 514 million. As
                         a result, the Company recorded a loss in the amount of NIS 70 million,
                         which takes into account the share of the Company in the gain Koor
                         recorded as aforementioned, net of the excess cost on the books of the
                         Company that is attributed to the holding of Koor in ECI.
                   6.    In 2007 Koor distributed a cash dividend in the total amount of NIS 530
                         million. The Company’s share in the said dividend amounted to NIS 244
                         million.


C.    See the annex to the financial statements regarding further details on the investments in investee
      companies.




                                                  90
             Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



Note 3 - Receivables, Long Term Deposits and Loans

A.    Receivables due to sales and services
                                                         C o n s o l i d a t e d
                                                          D e c e m b e r    3 1
                                                           2007            2006
                                                         N I S   m i l l i o n s

       On open accounts and accrued income                       974                    913
       Credit card                                               180                    171
                                                               1,154                  1,084
       Less deferred interest income                             (47)                   (46)
                                                               1,107                  1,038
       Less provision for doubtful debts                          (3)                    (4)
                                                               1,104                  1,034
       Less current maturities                                  (626)                  (565)
                                                                 478                   469


B.   Deposits and loans
                                                         Consolidated          Company
                                                         December 31          December 31
                                                       2007      2006      2007      2006
                                                         N I S        m i l l i o n s

       Deposits with banks                                 -              8      -               -
       Deposits with banks for the granting of loans       2              2      2               2
       Loans                                              81            107     53              76
       Other                                             101             60*     -               8
                                                         184            177     55              86
       Less current maturities                           (13)           (16)   (12)            (14)
                                                         171            161     43              72
                                                         649            630    43              72
      * Reclassified.




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            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 3 - Receivables, Long Term Deposits and Loans (cont'd)
C.   Repayment schedule of long term deposits and loans
                                                          Consolidated          Company
                                                          December 31          December 31
                                                        2007      2006      2007      2006
                                                          N I S        m i l l i o n s

      Within 12 months – current maturities                   13    16           12       14
      During second year                                      57    32           12       14
      During third year                                       18    20           20       14
      During fourth year                                      71    28           11       22
      During fifth year                                        2    15            -       14
      From sixth to tenth year                                 8    40            -        -
      From eleventh year onward                                -     2            -        -
      Without fixed repayment date                            15    24            -        8
                                                             184   177           55       86


D.   Classification of loans - consolidated balance sheet
             Total balance               Number of borrowers                Total balance
                                        2007           2006              2007          2006
          NIS thousands                                                    NIS millions

      101 - 1,000                             1                1             -            1
      1,001 – 5,000                           2                1            28            2
      Over 5,000                              1                3            53          104
                                                                            81         107


E.   See Note 28 in respect of linkage and interest terms.




                                                  92
                  Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 4 - Fixed Assets

A. Composition
                         Balance as Transfer to                                                  Transfers   Change in
                              at    Investment                                                   including    provision Balance as
                         December Property                    Withdrawal                             to      for decline     at
                          31, 2006 January 1, Translation      from the                         Investment   in value of December
                             (1)     2007 (1)    differences consolidation Additions Disposals Property         assets   31, 2007
                                       C       o    n      s     o      l   i      d    a     t       e      d
                                       N       I    S           m        i   l     l    i     o       n      s

Cost:
Land and buildings (3)      2,164       (518)         -           (8)          50        (5)        (49)                   1,634
Rental properties (3)       3,476     (3,476)         -            -            -         -           -                        -
Machinery, plant and
   equipment                1,981*       (80)       (15)          (3)         118       (41)          -                    1,960
Telephone switchboards        118          -          -         (118)           -         -           -                        -
Telecommunications
   network                  7,706          -          -            -          347       (34)          9                    8,028
Orchards                        9          -          -            -            -         -           -                        9
Motor vehicles                 65          -          -            -            8       (10)          -                       63
Computers, office
   furniture and
   equipment                1,336*        (2)        (2)         (12)          84      (286)          -                    1,118
Installations and
   leasehold
   improvements             1,165         16         (1)          (4)          62       (20)          -                    1,218


Total cost                18,020      (4,060)       (18)        (145)         669      (396)        (40)                  14,030
Accumulated depreciation:(2)
Land and buildings            501       (114)         -           (1)          32          -        (23)         (1)         394
Rental properties             800       (800)         -            -            -          -          -           -            -
Machinery, plant and
   equipment                1,277        (42)        (9)          (1)         130       (31)          -          (7)       1,317
Telephone switchboards         81          -          -          (81)           -         -           -           -            -
Telecommunications
   network                  6,014          -          -            -          432      (158)          4            -       6,292
Orchards                        8          -          -            -            -         -           -            -           8
Motor vehicles                 34          -          -            -            7        (8)          -            -          33
Computers, office
   furniture and
   equipment                  993*        (2)        (1)         (10)         141      (284)          -            -         837
Installations and
   leasehold
   improvements               652         11         (1)          (3)          68       (19)          -          (4)         704
Total accumulated
   depreciation            10,360       (947)       (11)         (96)         810      (500)        (19)        (12)       9,585

Net book value as at
  December 31, 2007                                                                                                        4,445
Net book value as at
  December 31, 2006
  after transfer to
  investment property,
  1.1.2007.                                                                                                                4,547

* Reclassified.




                                                           93
               Discount Investment Corporation Ltd.

           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 4 - Fixed Assets (cont’d)

(1) See note 1F regarding classification and restatement.
(2) The balances include provision for net decline in value of assets:
                                                                 December 31,
                                                               2007             2006
                                                                    NIS millions

      Land and buildings                                            82                    83
      Machinery, plant and equipment                                18                    25
      Installation and leasehold improvements                       19                    23
      Total provision for decline in value of assets               119                   131
(3) Including land held as follows:
                                                                                    Consolidated
                                                 Final year of lease period        December 31
                                              (including optional extension)      2007       2006
                                                                                    NIS millions

       Freehold                                                                    539           943
       Capitalized leases                                   2101                   651         1,483
       Non capitalized leases                               2077                    33            42
       Development contracts                                2098                    88          113
      1.    Most of the land is registered in the books of the Land Registry Office in the names of
            subsidiaries.
      2.    Fixed assets include capitalized financing costs of NIS 16 million.
      3.    The cost in the consolidated balance sheet is stated net of an investment grant in the
            amount of NIS 34 million (December 31, 2006 – NIS 29 million).
      4.    The Residential Building Committee approved the change in the designation of land
            amounting to NIS 11.8 million from agricultural to residential and commercial.
      5.    The orchards are on land covering an aggregate area of 334 dunams (97 dunams of
            freehold land and 237 dunams leased until the year 2062). The net book value reflects the
            cost of the land.




                                                   94
            Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



Note 4 - Fixed Assets (cont’d)

B.   Company balance sheet
                                                     Balance as at        Balance as at
                                                    January 1, 2007     December 31, 2007
                                                    N I S         m i l l i o n s

      Cost:
      Computers and related equipment                       1                      1
      Furniture                                             1                      1
      Leasehold improvements                                1                      1
      Total cost                                            3                      3
      Accumulated depreciation:
      Computers and related equipment                       1                      1
      Furniture                                             -                      -
      Leasehold improvements                                -                      1
      Total accumulated depreciation                        1                      2
      Net book value as at December 31, 2007                                       1
      Net book value as at December 31, 2006                                       2




                                               95
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 5 – Investment property

A.   Changes in fair value of investment property in 2007
                                                                Buildings    Rental
                                                  Available       under     buildings Total fair
                                                land (2, 3, 4) construction   (2, 3)   value
                                                       N I S       m i l l i o n s

      Balance as at December 31, 2006                  242             83          2,811       3,136

      Additions during the year
      Adjustment of fair value as at January
          1, 2007 (implementation date of
          Standard 16) (1)                             143              4          1,603       1,750
      Acquisitions and investments in
          existing assets                              137            167           789        1,093
      Increase in fair value (1)                         -              -           181          181
      Net translation differences from
          translation of financial statements
          of foreign operation                           -               -           (25)        (25)
      Transfer from fixed assets                         -               -            18          18
      Transfer from investment property
          under construction and land                  (10)           (99)          109             -

      Total additions                                  270             72          2,675       3,017

      Disposals during the year
      Sales                                              -               -          (154)       (154)

      Total disposals                                    -               -          (154)       (154)

      Balance as at December 31, 2007                  512            155          5,332       5,999

     1.      See Paragraph 2 of Note 1F regarding the methods by which the fair value of investment
             property was determined.

     2.      The fair value of investments property as at December 31, 2007 includes NIS 1,719
             million in respect of land owned by the Company, NIS 3,836 million in respect of land
             under a capitalized lease, NIS 426 million in respect of land under a non-capitalized lease
             and NIS 18 million in respect of land under a development contract. The lease periods
             end until 2061 with an option to extend the lease for an additional 49 years. Some of the
             land has not yet been registered in the names of the companies on the Land Registry,
             mainly because the property rights in certain areas in which part of the assets are located
             have not yet been arranged.

     3.      Includes capitalized credit costs in the amount of NIS 7,994 thousand (December 31,
             2006 – NIS 51,551 thousand).




                                                  96
              Discount Investment Corporation Ltd.

         Notes to the Financial Statements for the Year Ended December 31, 2007



Note 5 - Investment property (cont'd)

B.    Amounts that were recognized in the statement of income for the year ended December 31:
                                                                    2007   2006     2005
                                                                       NIS millions

       Revenues from the rental of investment property              486          443          376
       Direct operating expenses deriving from investment
           property *                                               108           92           75
       Increase in fair value of investment property                181            -            -
      * Including expenses in the amount of NIS 4 million (2006 and 2005 – NIS 3 million) in
        respect of an investment that did not produce rental revenue




Note 6 - Real Estate
Composition
                                                               Consolidated
                                                               December 31
                                                            2007              2006
                                                             N I S m i l l i o n s

Freehold (a)(b)                                               228                      141
Capitalized development rights and leased land (b)              5                        5
Inventory of shops for sale                                     1                        1
Car park and sports center                                      2                        2
Payments related to future stages of construction              15                       27
                                                              251                      176
(a) Including NIS 14.7 million in respect of rights in land that have not yet been registered in the
    name of a subsidiary. Caveats were registered in respect of this land.
(b) The provision for decline in value of assets as at December 31, 2007 and 2006, included in this
    item is NIS 12 million. Management of the subsidiary is considering future means of realizing the
    land, either by construction or by its sale.




                                                     97
               Discount Investment Corporation Ltd.

         Notes to the Financial Statements for the Year Ended December 31, 2007



Note 7 - Deferred Charges and Other Assets

Consolidated
                                                              N e t   b o o k   v a l u e
                                                                D e c e m b e r    3 1
                                                                2007             2006*
                                                                N I S   m i l l i o n s

Original amount
 Excess cost attributed
    Customer relations                                            423              593
    Brand name                                                    278              389
    Rights                                                         43               43
 Goodwill                                                       2,961            3,909
 License                                                          550              559
 Software                                                         972              844**
 Other assets                                                       7               10
 Total original amount                                          5,234            6,347

Accumulated amortization
 Excess cost attributed
    Customer relations                                            212              181
    Rights                                                          9                4
 Goodwill                                                         236              314
 License                                                          131              101
 Software                                                         683              551**
 Other assets                                                       2                5
 Total accumulated amortization                                 1,273            1,156
Net book value                                                  3,961            5,191
Deferred tax assets                                                 5               17
Purchase tax in respect of long-term lease contracts                7                8
Other deferred costs                                               54               29
                                                                   66               54
Provision for decline in value of assets                           (7)              (7)
                                                                4,020            5,238
*    See note 1.F regarding classification and restatement.
**   Reclassified.




                                                   98
              Discount Investment Corporation Ltd.

         Notes to the Financial Statements for the Year Ended December 31, 2007



Note 8 - Sundry Receivables

                                                 Consolidated                  Company
                                                December 31                  December 31
                                              2007       2006*             2007      2006
                                                           N I S     m i l l i o n s

Accrued income                                   64             40           11             7
Wholly owned subsidiaries                         -              -            -             1
Affiliates, including dividend receivable         -              -            1             -
Deferred taxes                                  131            156            -             -
Tax advances net of provisions                   24             25            -             -
Prepaid expenses                                 73             75            1             1
Institutions                                     28             18            -             -
Derivative financial instruments                 60              -           30             -
Advances to suppliers                            22             17            -             -
Sundry debtors and debit balances                77             50            -             1
                                                479            381           43            10




Note 9 - Trade Receivables
                                                                   Consolidated
                                                                   December 31
                                                               2007           2006*
                                                                      NIS millions

On open account                                                  990                931
Post dated checks receivable                                      56                 68
Less provision for doubtful debts                               (188)              (199)
                                                                 858                800
Credit card companies                                          1,094              1,004
                                                               1,952              1,804
Current maturities of long term trade receivables                626                565
                                                               2,578              2,369
* See note 1.F regarding classification and restatement.




                                                    99
              Discount Investment Corporation Ltd.

         Notes to the Financial Statements for the Year Ended December 31, 2007



Note 10 - Inventory

                                                               Consolidated
                                                               December 31
                                                            2007        2006 *
                                                             NIS millions

Manufactured products:
Raw and auxiliary materials                                   67             52
Work in process                                               23             19
Finished goods                                                19             43
                                                             109            114

Telephones and other telecommunication equipment             245            136
Other inventory and purchased goods                          635            546
                                                             880            682
Inventory of buildings for sale
Costs invested:
Land                                                         175            424
Construction                                                 434            700
                                                             609          1,124
Less provision for loss                                       20             28
                                                             589          1,096
Less amount charged to the statement of income               205            704
                                                             384            392
Less advances from customers not yet recognized as income     33             70

Inventory of completed buildings                              38             25
                                                             389            347
                                                            1,378         1,143
* See note 1.F regarding classification and restatement.




                                                  100
              Discount Investment Corporation Ltd.

         Notes to the Financial Statements for the Year Ended December 31, 2007



Note 11 - Deposits, Short-Term Loans and Current Maturities

                                                         Consolidated               Company
                                                         December 31               December 31
                                                        2007    2006              2007   2006
                                                           N I S         m i l l i o n s

Current maturities of long-term deposits and loans        13            16           12           14
Short-term bank deposits                                 217            32            -            -
Short-term loans and deposits                            144             5          110           15 *
                                                         374            53          122           29
* Loans to a wholly-owned subsidiary.
See Note 28f regarding linkage terms.




Note 12 - Marketable Securities

                                                      Consolidated                 Company
                                                      December 31                 December 31
                                                     2007     2006               2007   2006
                                                         N I S          m i l l i o n s

Marketable Government bonds                             239            65             -             -
Debentures                                              361 *         163           124*           86
Shares and options                                        6             6             -             -
Mutual funds                                            173            60            47             -
                                                        779           294           171            86
* Of these debentures, the Company holds debentures having a value of $9 million through Bear
  Stearns. Subsequent to balance sheet date it became known that Bear Stearns is in financial
  difficulties. In the opinion of the Company, which is based on legal advice it received, the
  Company is not anticipated to be significantly affected with respect to these securities as a result of
  the situation of Bear Stears, as it became known.




                                                  101
               Discount Investment Corporation Ltd.

           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 13 - Shareholders’ Equity

A.    Historical data regarding share capital
                                                                  D e c e m b e r       3 1
                                                           2007 and 2006    2007           2006
                                                            Authorized         Issued and paid
                                                             N I S       t h o u s a n d s

       Ordinary shares of a par value of NIS 1 each           100,000        85,205            77,831

     All the ordinary shares are registered and traded on the Tel Aviv Stock Exchange.


B.   Details of the Company’s option plans
                                          Number of                                       Date on which the
                         Number of        exercised /                    Basic exercise    options can be
     Month of plan        options       lapsed options       Balance     price * (NIS)        exercised

      August 2003          22,004           22,004                 -
                           22,004           22,004                 -
                           22,003           22,003                 -
                           22,002            1,047            20,955             -           8/08 – 8/10
     * Linkage as at December 31, 2007 and after adjustment in respect of dividend and benefit
       component included in the issuance of rights (See comment 2 below).

      Comments:
      1.      All the options of this plan were granted on one date and were divided into four equal
              portions. The options are exercisable for a period of two years which begin in respect of
              each one of the said portions two, three, four and five years, respectively, from the date
              they were granted. The exercise price of all the portions was established according to the
              average price of the Company's share on the Tel Aviv Stock Exchange in the 30 days
              before approval of the plan, less 10%, and linked to the CPI of February 2003. All these
              exercise prices are subject to adjustments in respect of dividend distributions and the
              benefit component included in an issuance of rights (see 2 below).
      2.      In November 2005 the Company’s Board of Directors approved a reduction of NIS 8.12
              from the exercise price of all the options to shares of the Company that were granted to
              employees of the Company that have not yet been exercised or expired. The reduction is
              in respect of the benefit component included in the debentures (Series E) that were issued
              by the Company in accordance with a prospectus for the issuance of rights from May
              2005. The reason for this is that the aforementioned option plans included an adjustment
              mechanism in respect of the benefit component in an issuance of shares by means of
              rights, and did not include an adjustment mechanism in respect of the benefit component
              in an issuance of convertible securities by means of an issuance of rights. As a result and
              in accordance with Standard 24, the Company recorded in 2006 an expense in the amount
              of NIS 1 million in respect of the aforementioned adjustment which for the most part was
              included in the results for 2005 by means of a restatement.



                                                     102
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 13 - Shareholders’ Equity (cont'd)

B.   Details of the Company’s option plans (cont'd)
     3.      The sole purpose of the exercise prices of this plan is to calculate the benefit inherent in
             the options in comparison with the price of the Company's shares on the Stock Exchange
             when the options are exercised. In any event of an exercise of options, only shares of a
             total market value, according to their price on the Stock Exchange at such time, which is
             equal to the said benefit, will be issued and the Company will receive in return only their
             par value.
     4.      This plan is subject to the rules provided on this matter in the Income Tax Ordinance
             which provide, inter alia, that an expense can be recognized for tax purposes, in respect of
             amounts that were attributed to the employees as a benefit from the sale of shares
             deriving from the options they received under the plan, if the shares are sold at a price
             higher than the payment for such shares and when the said benefit is taxable for the
             employee.


C.   In June 2007 the Company distributed a cash dividend in the amount of NIS 816 million, which
     constituted NIS 10.484 per share, in September 2007 the Company distributed an additional
     cash dividend in the amount of NIS 900 million, which constituted NIS 11.563 per share; and in
     December 2007 the Company distributed an additional cash dividend in the amount of NIS 360
     million, which constituted NIS 4.225 per share.


D.   In May 2007 the Company published a prospectus on the basis of its financial statements for
     December 31, 2006, in order to offer in a shelf registration prospectus shares, convertible
     debentures, non-convertible debentures, and options exercisable into shares and debentures, and
     for the purpose of listing for trade on the stock exchange the Series F debentures and Series G
     debentures that were allotted in a private placement to institutional investors and others. This
     prospectus will also be used in order to release from lock-up the Series C debentures and Series
     D debentures of private placements made in 2006 and March 2007.


E.   In October 2007 the Company published a shelf registration offer in accordance with the shelf
     registration prospectus it published in May 2007 (See Paragraph D above). In this offer, the
     Company offered to the public 800 thousand units by means of a tender on the price of the unit,
     at a minimum amount of NIS 500 million. Each unit included 5 ordinary shares and 5 options
     (Series 1). Each option is exercisable into one share as from the date of issuance until December
     2, 2007, at the price of NIS 125 per option. Before the publication of the shelf registration offer,
     the Company received early commitments from classified investors, by which the classified
     investors submitted orders for 574 thousand units in the tender for the price of NIS 360 million.
     In the public tender, orders were made for 904 thousand units (including orders in the
     framework of the early commitments of classified investors), at a total amount of NIS 569
     million. A unit price of NIS 625 was established in the tender, which is also the minimum unit
     price stated in the shelf registration offer. The Company responded to 864 thousand units for the
     price of NIS 540 million, and it issued 4,320,000 shares and 4,320,000 options.
     In December 3,033,358 options were converted into 3,033,358 shares for which the Company
     received the amount of NIS 379 million. The rest of the options expired.



                                                  103
               Discount Investment Corporation Ltd.

           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 14 - Long-Term Liabilities

                                                     Consolidated                     Company
                                                     December 31                     December 31
                                                     2007   2006*                    2007  2006
                                                          N   I    S     m i     l    l   i   o   n     s

A.   Composition
     Debentures                                           14,362        9,447         5,384           4,094
     Bank loans                                            1,899        2,276            77              84
     Loans from others                                       163          208         1,656**         1,722 **
     Liabilities in respect of construction                   58           64             -               -
     Liabilities in respect of investment property            95            -             -               -
     Other liabilities                                        54           21            16              16
                                                          16,631       12,016         7,133           5,916
      Less current maturities                              1,213          565           311             101
                                                          15,418       11,451         6,822           5,815


B.   Repayment schedule
     Current maturities                                    1,213          565           311             101
     Second year                                           1,469        1,065           390             303
     Third year                                            1,191        1,373           328             390
     Fourth year                                           1,045        1,688           339             320
     Fifth year                                            1,477          945           805             332
     From sixth to tenth year                              7,510        5,322         3,519           3,453
     From eleventh to nineteenth year                      2,557        1,032         1,351             927
     Without fixed date of repayment                         169           26            90              90
                                                          16,631       12,016         7,133           5,916
* See note 1F regarding classification and restatement.
** Loans from wholly-owned subsidiaries.
See Note 28 regarding linkage bases and interest.


C.    Changes in the long-term liabilities of the Company
      1.      In March 2007 the Company executed a private placement to institutional investors of
              Series D and Series F debentures of the Company for a total consideration of NIS 700
              million. The debentures are an expansion of the existing series of debentures of the
              Company. Prior to the said issuance the existing Series D debentures of the Company
              were registered for trading on the stock exchange and the existing Series F debentures of
              the Company were not registered for trading on the stock exchange. In this private
              placement the Company issued NIS 514,361,034 par value of Series D debentures for a
              consideration of NIS 567 million, at the price of NIS 1.102 per each NIS 1 par value of
              debentures from this series, which reflects a yield to maturity of 4.48%. The Company
              also issued NIS 130,180,000 par value of Series F debentures for a consideration of NIS
              133 million, at the price of NIS 1.023 per each NIS 1 par value of debentures from this
              series, which reflects a yield to maturity of 4.80% (without taking into account additional
              interest of 0.5% p.a. that these debentures bear until they are registered for trading on the


                                                    104
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 14 - Long-Term Liabilities (cont'd)

C.   Changes in the long-term liabilities of the Company (cont'd)
     1.      (cont'd)
              stock exchange). The debentures that were issued as aforementioned are in addition to
             the existing Series D and Series F debentures of the Company, and their terms are
             identical to the terms of the existing debentures of those series, respectively.

     2.      In May 2007 the Company raised NIS 5.18 million in a private placement of Series G
             debentures, in an expansion of the Company’s existing series of debentures.

     3.      In June 2007 the Company issued debentures to institutional investors and the public in
             accordance with the shelf registration prospectus mentioned in Note 13E above, in the
             framework of which it raised the amount of NIS 366 million by means of expanding its
             existing Series F debentures, with the price of the debentures in this placement reflecting
             interest of 4.76% p.a., and the amount of NIS 187 million by means of issuing new
             debentures (Series H). This series bears interest of 4.45%, is linked to the CPI and will be
             repaid in 6 equal payments as from 2014.

     4.      The debentures of the Company are rated AA/Stable by Ma’a lot the Israeli Securities
             Rating Company Ltd. and Aa2 by Midrug Ltd.


D.    Changes in long-term liabilities of the Company’s subsidiaries
     1.      In January 2007 Property & Building raised NIS 500 million in a private placement of
             Series D debentures. These debentures bear interest of 4.95%, are linked to the CPI and
             are repayable in 6 equal annual payments as from 2020. In May 2007 Property &
             Building published a shelf registration prospectus, by which these debentures were also
             registered for trading on the Tel Aviv Stock Exhange. Until the date the aforementioned
             debentures were registered for trading, Property & Building paid additional interest of
             0.5% p.a. in their respect. Furthermore, in January 2007 Property & Building replaced
             Series A debentures with Series B debentures in an amount of NIS 261 million. In
             February and March 2007 Ispro and Gav Yam (subsidiaries of Property & Building)
             raised in debentures the amounts of NIS 180 million and NIS 518 million, respectively.
             Gav Yam registered the aforementioned debentures for trading, in the framework of a
             shelf registration prospectus it published in May 2007.

     2.      In July 2007 Property & Building raised the amount of NIS 892 million in an issuance of
             debentures to institutional investors and the public in accordance with the shelf
             registration prospectus mentioned in Paragraph 1 above. This issuance was an expansion
             of its existing series of CPI-linked debentures (Series C and D). The price of the
             debentures in the aforementioned issuance reflected interest of 4.08% p.a. with respect to
             Series C and of 4.8% p.a. with respect to Series D.

     3.      See Paragraph 3(c)(3) of Note 2B regarding loans a 50% owned company of Property &
             Building took for purposes of the Las Vegas project.




                                                  105
               Discount Investment Corporation Ltd.

           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 14 - Long-Term Liabilities (cont'd)

D.     Changes in long-term liabilities of the Company’s subsidiaries (cont'd)
      4.      In February 2007 Super-Sol issued to investors additional Series B debentures that were
              registered for trading on the Tel Aviv Stock Exchange. These debentures were issued for
              a total consideration of NIS 500 million, which reflects a yield to maturity of 4.3% for the
              debentures.

      5.      In October 2007 Cellcom raised the amount of NIS 1,072 million in an issuance to the
              public in Israel of two new series of debentures (Series C and D) that were listed for
              trading on the Tel Aviv Stock Exchange.
              The aforementioned debentures are linked to the CPI. One series, in the amount of
              NIS 245 million, bears interest of 4.6% p.a. and is repayable in nine equal semi-annual
              payments as from March 2009. The second series, in the amount of NIS 827 million,
              bears interest of 5.19% p.a. and is repayable in five equal semi-annual payments as from
              July 2013.

      6.      In November 2007 Cellcom voluntarily made a partial early repayment of 50% of the
              loan it had received from a syndicate of banks, in the total amount of $ 140 million
              (comprised of a dollar component of $ 85 million and a shekel component of NIS 253
              million). The payment was made in accordance with the terms of the financing
              agreement. After the aforementioned early repayment, the balance of the loan amounts to
              a total of $ 140 million (comprised of a dollar component of $ 85 million and a shekel
              component of NIS 253 million). See also Note 29A6 regarding the early repayment of the
              balance of the loan that was made subsequent to balance sheet date.




Note 15 - Liabilities for Employee Severance Benefits, Net

                                                      Consolidated                   Company
                                                     December 31                    December 31
                                                     2007    2006*                  2007  2006
                                                         N    I   S     m i     l    l   i    o   n   s

Provisions:
   For severance pay                                         55         49               10               9
   For pension                                                4          1                -               -
   For unutilized sick leave                                  -          1                -               -
                                                             59         51               10               9
Less:
   Amounts funded in severance pay funds                     32         33               10               9
                                                             27         18                -               -
* See note 1.F regarding classification and restatement.
The liability included in the balance sheet presents the liabilities of the Company and its subsidiaries
towards their employees for the payment of employee severance benefits, which is not covered by
deposits in pension or severance pay funds and/or insurance policies.


                                                   106
              Discount Investment Corporation Ltd.

         Notes to the Financial Statements for the Year Ended December 31, 2007



Note 16 - Short Term Credit and Current Maturities of Long Term Liabilities

                                                  Cnsolidated                      Company
                                                  December 31                    December 31
                                                  2007  2006*                    2007   2006
                                                    N      I    S      m i   l   l   i   o   n   s

A.    Bank credit and current maturities:
      Current maturities of liabilities              479               183           -               -
      Short-term loans                               123               170           -               -
      Revolving credit                                 2                 3           -               -
                                                     604               356           -               -


B.   Short-term credit and current
      maturities of liabilities to others:
      Current maturities of liabilities              734               382        311            101
      Short term credit                                2                 2          -              -
                                                     736               384        311            101
                                                   1,340               740        311            101
* See note 1.F regarding classification and restatement.
See Note 28 regarding linkage bases and interest.




Note 17 - Trade Payables

                                                                  Consolidated
                                                                  December 31
                                                               2007         2006*
                                                                  NIS millions

On open account                                                1,966                     1,677
Post dated checks payable                                        574                       521
                                                               2,540                     2,198
* See note 1.F regarding classification and restatement.




                                                  107
               Discount Investment Corporation Ltd.

           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 18 - Sundry Payables

                                                     Consolidated        Company
                                                     December 31       December 31
                                                    2007    2006*     2007    2006
                                                       N I S    m i l l i o n s

Accrued expenses                                       480            491           175           150
Liabilities to employees                               308            285            30            26
Provisions for taxes, net of advance payments           62            165            12           117
Tax provision                                           27             26             -             -
Government institutions                                207            132            12             1
Provision for losses of investee companies              14             22             4             8
Advances from customers **                             165            148             -             -
Wholly owned subsidiaries                                -              -             7            33
Derivative financial instruments                        95            166             1            54
Other creditors and credit balances                    236            225             9             -
                                                     1,594          1,660           250           389
** Net of advanced, charged to the statement
  of income                                               70         110
* See note 1F regarding classification and restatement.



Note 19 - Contingent Claims

The amounts of the claims described below are true for the dates on which they were filed, unless
otherwise indicated. Details on claims against the Company and its subsidiaries are included hereunder
to the extent that the possible effect of each one of them on the financial results of the Company is
higher than NIS 10 million. Details are not provided regarding claims against the Company and the
subsidiaries that were concluded in the current year, before balance sheet date.

A.    Claims against the Company
      1.      An indictment against the Company and officers of the Company
              In November 2004 the Tel Aviv-Jaffa District Court decided to accept the appeal that was
              submitted to it by the Company, the former CEO, the legal adviser and the former finance
              manager of the Company, on the ruling of the Tel Aviv Magistrate’s Court, and cleared
              them of the offences they and two other former officers of the Company were convicted
              of in February 2002 in the said ruling of the Magistrate’s Court following their indictment
              in August 1999. The indictment attributed offences under Section 53A(4) of the
              Securities Law regarding the inclusion of a misleading detail in the Company’s annual
              and quarterly financial statements, for the purpose of misleading the reasonable investor.
              This related to the non-attachment of the financial statements of Iscar Ltd., Blades
              Technology Ltd. and Tefron Holdings (1990) Ltd., to the Company’s financial
              statements, which had been filed with the Stock Exchange and the Registrar of
              Companies, in respect of reporting periods from 1990 until the first quarter of 1995
              (inclusive). In December 2004 the State Attorney submitted a request to the Supreme Court



                                                   108
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

A.   Claims against the Company (cont'd)
     1.      An indictment against the Company and officers of the Company (cont'd)
             by which the State of Israel requests to be allowed to appeal the aforementioned ruling of
             the District Court. The hearing of the parties’ arguments on this request has ended and the
             Court has not yet made its ruling.

     2.      In December 2007 a motion was filed against the Company with the Tel Aviv Jaffa
             District Court by a company that in its name is registered 2% of the issued share capital
             of Cellcom (hereinafter – the petitioner), in which the Court was requested to declare that
             the Company’s Board of Directors is required to make a decision that explains why it
             denies or accepts the request of the petitioner from the Company to allow it to sell the
             aforementioned shares, and to order the Company to transfer to the petitioner a copy of
             the aforementioned decision of the Company’s Board of Directors. The Company
             disagrees with the alleged right of the petitioner to receive such a declaration. The Court
             has not yet held a hearing on this matter.
             The aforementioned motion was submitted to the Court with respect to an agreement that
             exists between the Company and the petitioner, which provides, inter alia, that the
             company has voting rights in respect of the aforementioned Cellcom shares and that the
             petitioner is not allowed to sell these shares without the prior consent in writing of the
             Company’s Board of Directors. A similar agreement exists between the Company and
             three other shareholders of Cellcom, which hold together 3.5% of the issued share capital
             of Cellcom. In August 2007 the petitioner requested from the Company that it allow it to
             sell the aforementioned shares free of the restrictions provided in the said agreement. The
             Company notified the petitioner that it denies its request at this point.


B.   Claims against subsidiaries
     1.      Claims against Cellcom
             a.    In September 2000 a claim was filed with the Tel Aviv-Jaffa District Court against
                   Cellcom by one of its subscribers, with respect to VAT that was charged on
                   insurance premiums and the legitimacy of insurance services provided by Cellcom.
                   A request to certify the claim as a class action in the amount of NIS 402 million
                   was attached to the claim. In February 2006 the request to certify the claim as a
                   class action was summarily dismissed by the District Court. In March 2006 the
                   plaintiff filed an appeal with the Supreme Court on the aforementioned dismissal.
                   In the opinion of Cellcom, which is based on the opinion of its legal counsel,
                   Cellcom has good defense arguments against the appeal. Therefore no provision
                   was included in the financial statements of Cellcom in respect thereto.
             b.    In August 2001 a claim and a request to certify the claim as a class action were
                   filed against Cellcom with the Tel Aviv-Jaffa District Court by one of its
                   subscribers regarding the prices charged for air time and subscription fees, which
                   he alleges were not in accordance with the agreement the customers of Cellcom
                   sign when they join the network. If this claim is certified as a class action the
                   amount being requested is NIS 1.26 billion, as well as punitive compensation of at
                   least 100% of the damage. In February 2004 the District Court rejected the request


                                                  109
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

B.   Claims against subsidiaries (cont'd)
     1.      Claims against Cellcom (cont'd)
             b.   (cont'd)
                  to certify the claim as a class action. In March 2004 the plaintiff submitted an
                  appeal with the Supreme Court on the rejection of the request. In May 2006,
                  following amendment of the Consumer Protection Law – 1981, the plaintiff
                  submitted to the District Court amended statements of claim, after receiving the
                  approval of the Court to do so. In October 2006 the District Court approved an
                  additional amendment to the statements of claim, following the enactment of the
                  Class Actions Law – 2006 (hereinafter – the Class Actions Law). In the opinion of
                  Cellcom, which is based on the opinion of its legal counsel, Cellcom has good
                  defense arguments against certification of the claim as a class action. Therefore no
                  provision was recorded in respect of this claim in the financial statements of
                  Cellcom.
             c.   In August 2001 a claim was filed against Cellcom with the Tel Aviv Jaffa District
                  Court by one of its subscribers in respect of the rates of outgoing calls under the
                  Talkman plan and the collection of a distribution commission in respect of
                  Talkman cards. A request to certify the claim as a class action was attached to the
                  claim. If the claim is certified as a class action, the compensation requested from
                  Cellcom is NIS 135 million. In June 2004 the Court decided to strike the request to
                  certify the claim as a class action. In September 2004 the plaintiff filed an appeal to
                  the Supreme Court on this decision. In July 2007, in the framework of the
                  aforementioned appeal, the Supreme Court accepted the mutual request of the
                  parties, which was submitted in light of the Class Actions Law – 2006, to remand
                  to the Tel Aviv Jaffa District Court the claim and the request to certify it as a class
                  action.
                  In the opinion of Cellcom, which is based on the opinion of its legal counsel,
                  Cellcom has good defense arguments against certification of the claim as a class
                  action. Therefore no provision was included in the financial statements of Cellcom
                  in respect thereto.
             d.   In December 2002 a claim was filed with the Tel Aviv Jaffa District Court against
                  Cellcom and another cellular operator, along with a request to certify the claim as a
                  class action, regarding prices of incoming calls charged to other operators’
                  customers when calling customers of either of the defendants in the period prior to
                  the establishment of the Connectivity Payments Regulations. The plaintiffs contend
                  that each one of the defendants is a monopoly with respect to the incoming calls to
                  its network from a number not belonging to its network, and that each one of the
                  defendants charged an unfair price on the incoming calls while taking advantage of
                  their monopolistic status in the incoming calls market. If this claim is certified as a
                  class action, the amount the plaintiffs claim from Cellcom is NIS 1.6 billion. In the
                  opinion of Cellcom, which is based on the opinion of its legal advisors, Cellcom
                  has good defense arguments against certification of the claim as a class action.
                  Therefore, no provision has been included in the financial statements of Cellcom in
                  respect of the aforesaid claim.




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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

B.   Claims against subsidiaries (cont'd)
     1.      Claims against Cellcom (cont'd)
             e.   In April 2003 a claim together with a request to certify the claim as a class action
                  was filed with the Tel Aviv-Jaffa District Court against Cellcom and two other
                  cellular operators with respect to the rates of SMS messages that were sent from
                  the network of any one of the defendants into the network of any one of the other
                  defendants. The plaintiffs contend that each one of the defendants is a monopoly
                  with respect to the SMS messages that enter the cellular network it operates an that
                  each one of them took advantage of this status and charged an unfair price for the
                  SMS messages coming into its network. If this claim is certified as a class action
                  the amount demanded from all the defendants together is NIS 90 million without
                  the amount claimed from Cellcom being specified. In the opinion of Cellcom,
                  which is based on the opinion of its legal advisors, Cellcom has good defense
                  arguments against certification of the lawsuit as a class action. Therefore, no
                  provision has been made in the financial statements of Cellcom in respect of the
                  aforesaid claim.
             f.   In August 2003 a claim was filed with the Tel Aviv-Jaffa District Court against
                  Cellcom by one of its customers, together with a request to certify the claim as a
                  class action, regarding the amounts Cellcom charged for airtime on the calls of its
                  customers on its network in 1996-1999. The main allegation in the claim was
                  against the method of rounding amounts and of linking to the CPI the rates of the
                  calls, as well as that a certain rate that was approved by the Ministry of
                  Communications in 1996 was illegally approved. The aforementioned proceedings
                  were transferred to the Central Region District Court. If the claim is certified as a
                  class action, the plaintiff estimates the amount claimed at NIS 150 million. As a
                  result of an amendment to the Consumer Protection Law in December 2005 that
                  expands the definitions of misleading to include an act or omission occurring after
                  the date the agreement was signed, the plaintiff filed an amended statement of
                  claim against Cellcom in March 2006.
                  In the opinion of Cellcom, which is based on the opinion of its legal advisors,
                  Cellcom has good defense arguments against certification of the claim as a class
                  action. Therefore no provision has been included in the financial statements of
                  Cellcom in respect thereto.
             g.   In April 2005 a claim in the amount of NIS 24 million was filed with the Tel Aviv-
                  Jaffa District Court against Cellcom by one of its authorized dealers, alleging that
                  Cellcom has violated the agreement between them. In February 2006 the plaintiff
                  submitted to the court a revised statement of claim in the amount of NIS 28
                  million. In the opinion of Cellcom, which is based on the opinion of its legal
                  counsel, Cellcom has good defense arguments against the claim. Accordingly no
                  provision was included in the financial statements of Cellcom in respect of this
                  claim.
             h.   In August 2006 a claim was filed with the Tel Aviv-Jaffa District Court against
                  Cellcom and two other cellular operators, together with a request to certify the
                  claim as a class action according to the Class Actions Law, in which it is alleged
                  that subscribers of the cellular companies are charged in respect of phone calls they


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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

B.   Claims against subsidiaries (cont'd)
     1.      Claims against Cellcom (cont'd)
             h.   (cont'd)
                  make to subscribers of Bezeq for the time segment between the time the subscriber
                  of Bezeq disconnects the telephone connection and the time the subscriber of the
                  cellular company disconnects from the same telephone connection, when the
                  subscriber of Bezeq does this before the subscriber of the cellular company. The
                  aforementioned claim and request were filed by three plaintiffs, each of whom
                  contends to being a subscriber of one of the defendants. In their statement of claim
                  the plaintiffs contend that charging for this time is contrary to the licenses of the
                  defendants and agreements between them and their subscribers, and that its
                  collection is illegal. The Court is requested by the plaintiffs to order the defendants
                  to return the amounts they collected from their subscribers in respect of the
                  aforementioned time segment. If the claim is certified as a class action, the
                  plaintiffs estimate the total refund requested from all the defendants to amount to
                  more than NIS 100 million, without specifying the amount requested from
                  Cellcom.
                  In the opinion of Cellcom, which is based on the opinion of its legal counsel,
                  Cellcom has good defense arguments against the claim being certified as a class
                  action. Accordingly no provision was included in the financial statements of
                  Cellcom in respect of this claim.
                  In October 2007 these proceedings were joined with a similar claim and request to
                  certify the claim as a class action in the amount of NIS 159 million that were filed
                  in November 2006 against the aforementioned defendants and two landline
                  operators, and the plaintiffs in the proceedings opened in November 2006 removed
                  their claims against Cellcom and the two cellular operators, following a procedural
                  arrangement between the plaintiffs in both of the claims.
             i.   In November 2006 a claim was filed by a subscriber of Cellcom with the Tel Aviv-
                  Jaffa District Court against Cellcom and against a third party content supplier that
                  had provided services to customers of Cellcom and other parties ostensibly related
                  to the supplier. A request to certify the claim as a class action according to the
                  Class Actions Law was attached to the claim. The claim against Cellcom is
                  regarding its alleged charging of its subscribers in respect of the content services of
                  the supplier without their consent. Should this claim be certified as a class action,
                  the plaintiff estimates the amount being claimed at NIS 28 million (of which NIS
                  10 million is in respect of mental anguish). In the opinion of Cellcom, which is
                  based on the opinion of its legal counsel, Cellcom has good defense arguments
                  against the claim being certified as a class action. Accordingly no provision was
                  included in the financial statements of Cellcom in respect of this claim.
             j.   In January 2007, a lawsuit in the amount of NIS 35 million was filed against
                  Cellcom in an arbitration proceeding by a plaintiff that had an agreement with
                  Cellcom, by which the plaintiff purchased cellular services from Cellcom in order
                  to sell the services to its customers. The aforementioned amount is requested in
                  respect of various types of damages the plaintiff alleges it incurred with respect to,




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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

B.   Claims against subsidiaries (cont'd)
     1.      Claims against Cellcom (cont'd)
             j.   (cont'd)
                  inter alia, allegations that Cellcom had breached agreements between the parties
                  and concerning Cellcom's conduct. In the opinion of Cellcom, which is based on
                  the opinion of its legal counsel, Cellcom has good defense arguments against the
                  claim. Accordingly no provision was included in the financial statements of
                  Cellcom in respect of this claim.
             k.   In January 2007, a claim was filed in the District Court of Jerusalem against
                  Cellcom, two other cellular operators and two landline operators by three plaintiffs
                  claiming to be subscribers of some of the defendants, together with a request to
                  certify the claim as a class action in accordance with the Class Actions Law. In the
                  claim it is alleged that the defendants violate their statutory duty to allow their
                  subscribers to transfer with their number to another operator, thus, allegedly
                  causing monetary damage to the subscribers. If the lawsuit is certified as a class
                  action, the total amount claimed is estimated by the plaintiffs to be NIS 10.6
                  billion.
                  In March 2008, subsequent to balance sheet date, the aforementioned claim and
                  request were dismissed by the Court at the request of the plaintiffs.
             l.   In February 2007 a claim and a request to certify the claim as a class action was
                  filed with the Tel Aviv-Jaffa District Court against Cellcom and two other cellular
                  operators by plaintiffs claiming to be subscribers of the defendants. In the claim the
                  plaintiffs request the refund of amounts they contend the customers of the
                  defendants were overcharged in respect of calls they made and/or received when
                  they were abroad on the basis of a charge unit higher than that which the
                  defendants allegedly were allowed to charge, and in doing so the defendants
                  allegedly violated their licenses. If the claim is certified as a class action, the total
                  amount claimed from all the defendants together is NIS 449 million, of which NIS
                  193.5 million is attributed to Cellcom.
                  In the opinion of Cellcom, which is based on the opinion of its legal counsel,
                  Cellcom has good defense arguments against certification of the claim as a class
                  action. Accordingly no provision was included in the financial statements of
                  Cellcom in respect of this claim.
             m.   In April 2007 a claim and a request to certify the claim as a class action were filed
                  with the Tel Aviv-Jaffa District Court against Cellcom by two plaintiffs who
                  contend they are customers of Cellcom. In the claim it is alleged that Cellcom
                  raised its rates unlawfully and contrary to its license, in plans that include a period
                  of commitment to a basket of services. If the claim is certified as a class action, the
                  plaintiffs estimate the amount claimed from Cellcom at NIS 230 million.
                  In February 2008, subsequent to balance sheet date, the Court dismissed the
                  aforementioned claim and request.




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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

B.   Claims against subsidiaries (cont'd)
     1.      Claims against Cellcom (cont'd)
             n.   In May 2007 an additional claim and request to certify the claim as a class action
                  according to the Class Actions Law, similar to those filed against Cellcom in April
                  2007 as described in Item (m) above, were filed with the Tel Aviv-Jaffa District
                  Court by two other plaintiffs who contend they are customers of Cellcom. If the
                  claim is certified as a class action, the plaintiffs estimate the amount claimed from
                  Cellcom at NIS 875 million.
                  In the opinion of Cellcom, which is based on the opinion of its legal advisors,
                  Cellcom has sound defense arguments against certification of the claim as a class
                  action and therefore no provision was included in respect thereto in the financial
                  statements of Cellcom.
             o.   In May 2007 the Ministry of Communications announced its intention to impose
                  monetary sanctions on the telephony companies, including Cellcom and Cellcom
                  Line Communications Limited Partnership (hereinafter – the Cellcom Partnership)
                  because of the failure to implement and put into operation number portability as
                  from September 1, 2006. The monetary sanction specified in the announcement of
                  the Minister of Communications for the period from September 1, 2006 to
                  November 30, 2007 is NIS 6 million for Cellcom and the Cellcom Partnership.
                  Cellcom and the Cellcom Partnership submitted to the Ministry of
                  Communications their objection to the aforementioned sanctions. Number
                  portability has commenced in December 2007. For further details see Paragraph 3
                  of Note 20B.
             p.   In September 2007 a claim and a request to certify the claim as a class action were
                  filed with the Jerusalem District Court against Cellcom and two other cellular
                  operators by three plaintiffs who contend that they are customers of the defendants.
                  The plaintiffs allege that the defendants charge their customers in respect of SMS
                  messages that are sent to subscribers who have chosen to block the possibility of
                  receiving SMS messages, and/or that they mislead the senders by providing an
                  indication on their cellular phones that their message has been sent. If the claim is
                  certified as a class action, the plaintiffs estimate the amount claimed from the
                  defendants at NIS 182 million, without specifying the amount claimed from
                  Cellcom. At this initial stage, before Cellcom has submitted its reply to the Court,
                  Cellcom believes, on the basis of the opinion of its legal counsel, that Cellcom has
                  good defense arguments against certification of the claim as a class action.
                  Therefore, no provision was included in the financial statements of Cellcom in
                  respect of this claim.
             q.   In November 2007 a claim and a request to certify the claim as a class action were
                  filed against Cellcom with the District Court of Central Region by a plaintiff who
                  contends to be a customer of Cellcom. The plaintiff alleges that Cellcom charged
                  its customers in respect of content services without receiving the specific approval
                  of the customers to do so in a manner that complies with the provisions of
                  Cellcom’s license. If the claim is certified as a class action, the amount claimed
                  from Cellcom is estimated by the plaintiff to be NIS 432 million. At this initial
                  stage, before Cellcom has submitted its reply to the Court, Cellcom believes, on the


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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

B.   Claims against subsidiaries (cont'd)
     1.      Claims against Cellcom (cont'd)
             q.   (cont'd)
                  basis of the opinion of its legal counsel, that Cellcom has good defense arguments
                  against certification of the claim as a class action. Therefore, no provision was
                  included in the financial statements of Cellcom in respect of this claim.
             r.   In December 2007, a petition was filed with the High Court of Justice against the
                  Minister of Communications and a cellular operator as the principal respondents,
                  and against Cellcom and another cellular operator as formal respondents. The
                  petition seeks to retroactively apply the amendment from September 2007 to the
                  licenses of the cellular operators, which prevents the operators from offering
                  subscribers calling plans using airtime units that are different from the basic airtime
                  unit provided in the license. Alternatively, the petition seeks to retroactively cancel
                  any charges which may be imposed on subscribers when transferring from such
                  plans to calling plans based on the basic airtime unit, before the lapse of a
                  predetermined period.
                  At this initial stage, before Cellccom has submitted its reply to the Court, Cellcom
                  believes, on the basis of the opinion of its legal counsel, that the High Court of
                  Justice will not accept the request of the petitioners. Therefore, no provision was
                  included in the financial statements of Cellcom in respect of this petition.
             s.   In December 2007, a claim and a request to certify the claim as a class action were
                  filed against Cellcom with the District Court of Central Region by plaintiffs who
                  contend to be customers of Cellcom. The plaintiffs allege in the claim that Cellcom
                  overcharged in customers when it raised its rates in certain calling plans. If the
                  claim is certified as a class action, the plaintiffs estimate it to amount to NIS 44
                  million.
                  At this initial stage, Cellcom is unable to evaluate the chances of the claim and the
                  request to certify it as a class action. Therefore, no provision was included in the
                  financial statements of Cellcom in respect of this claim.
             t.   In December 2007, a claim and a request to certify the claim as a class action were
                  filed with the Tel Aviv Jaffa District Court against Cellcom and two other cellular
                  operators by plaintiffs who claim to be residing next to cellular antennas of the
                  defendants which the plaintiffs claim were built in violation of the law. The
                  plaintiffs allege that the defendants have created environmental hazards by
                  unlawfully erecting cellular antennas and therefore demand that the defendants
                  compensate the public for damages (other than personal damages, such as decline
                  in value of property and/or health related damages which are excluded from the
                  claim), remove antennas the were built against the law and refrain from unlawfully
                  building new antennas. If the claim is certified as a class action, the compensation
                  claimed from all the defendants, without any allocation of this amount among the
                  defendants, is estimated by the plaintiffs to be NIS 1 billion.




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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

B.   Claims against subsidiaries (cont'd)
     1.      Claims against Cellcom (cont'd)
             t.    (cont'd)
                   At this initial stage, before Cellccom has submitted its reply to the Court, Cellcom
                   believes, on the basis of the opinion of its legal counsel, that Cellcom has good
                   defense arguments against certification of the claim as a class action. Therefore, no
                   provision was included in the financial statements of Cellcom in respect of this
                   claim.
             u.    In February 2008, a claim and a request to certify the claim as a class action were
                   filed against Cellcom with the District Court of Central Region by plaintiffs who
                   contend to be customers of Cellcom. The plaintiffs allege in the claim that Cellcom
                   overcharged in customers when it raised its rates for SMS message plans. If the
                   claim is certified as a class action, the plaintiffs estimate it to amount to NIS 43
                   million.
                   At this initial stage, Cellcom is unable to evaluate the chances of the claim and the
                   request to certify it as a class action. Therefore, no provision was included in the
                   financial statements of Cellcom in respect of this claim.
             v.    In March 2008, a claim and a request to certify the claim as a class action were
                   filed against Cellcom with the District Court of Central Region by plaintiffs who
                   contend to be customers of Cellcom. The plaintiffs allege in the claim that Cellcom
                   illegally charged its customers for the records it provided them with details of the
                   calls they made. If the claim is certified as a class action, the plaintiffs estimate it to
                   amount to NIS 440 million.
                   At this initial stage, Cellcom is unable to evaluate the chances of the claim and the
                   request to certify it as a class action. Therefore, no provision was included in the
                   financial statements of Cellcom in respect of this claim.

     2.      Claims against other subsidiaries
             a.    Legal claims have been asserted against Super-Sol, its officers and directors and
                   subsidiaries, the majority of which relate to the ordinary course of business of the
                   companies, including claims related to the cessation of employee/employer
                   relationships. Similarly, claims for damages have been asserted against Super-Sol
                   in its role as an employer or an owner of real estate. Claims for damages are
                   covered by adequate insurance policies. Based on the opinion of its legal advisors
                   Super-Sol and its subsidiaries have recorded provisions which they estimate will
                   cover these liabilities if they occur. The exposure of Super-Sol and its subsidiaries
                   according to these claims for, which no provision was made in their financial
                   statements, amounts to NIS 20 million (including claims that were filed against
                   Super-Sol subsequent to balance sheet date).
             b.    In July 2005 a claim and a request to certify the claim as a class action were filed
                   with the Haifa District Court against Super-Sol and seven other companies in the
                   amount of NIS 187 million for all the defendants jointly and severally, without
                   attributing any amount of the claim to any of the defendants. The other defendants
                   are Clubmarket and other companies, which the plaintiffs contend were involved in
                   importing the product that is the cause of the claim. In the request and the claim, it is


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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

B.   Claims against subsidiaries (cont'd)
     2.      Claims against other subsidiaries (cont'd)
             b.    (cont'd)
                   alleged that mushroom preserves that had been manufactured in China and had
                   been marked as being Kosher, had been sold, inter alia, in branches of Super-Sol
                   although they were not Kosher and the Chief Rabbinate had cancelled their Kashrut
                   certificate. In light of this the plaintiffs request compensation in the amount of NIS
                   2,000 for each one of them and for each member of the represented group in
                   respect of non-pecuniary damages.
                   In the opinion of the management of Super-Sol, which is based on the opinion of
                   its legal advisors, the exposure anticipated for Super-Sol in respect of the claim,
                   should it be certified as a class action, is low.
             c.    In January 2008, subsequent to balance sheet date, a claim and a request for its
                   certification as a class action were filed against Super-Sol in the District Court of
                   Tel-Aviv–Jaffa. The plaintiffs contend that Super-Sol refuses to provide cash
                   refunds of deposits on empty beverage containers and instead opts to give credit
                   slips that are limited in validity and may be used only in its stores, and that in doing
                   so Super-Sol violates various laws including the Beverage Bottle Deposit Law,
                   1999 and the Consumer Protection Law. If the claim is certified as a class action,
                   the plaintiffs estimate their claim at the amount of NIS 70 million and they also
                   request that Super-Sol be prohibited from refunding the deposits in the manner
                   described above.
                   At this early stage, Super-Sol is unable to assess the claim’s chances of success or
                   the chance it will be certified as a class action. Therefore, no provision was
                   included in the financial statements of Super-Sol in respect of this claim.
             d.    In February 2008, subsequent to balance sheet date, a claim and a request to certify
                   the claim as a class action were filed with the District Court of Central Region
                   against Super-Sol, three egg distributors and five other food chains in Israel, in
                   which the plaintiff alleges that the defendants apply inappropriate measures in
                   order to cause the consumers to pay an excessive price for “Super Fresh Eggs”,
                   which according to the plaintiff are a fictive product and have characteristics that
                   are identical or similar to regular eggs. The plaintiff requests from the Court, inter
                   alia, to prohibit the defendants from applying the aforementioned measures and to
                   impose on them, jointly and severally, the payment of monetary compensation to
                   the plaintiff and the members of the Group he represents. If the claim is certified as
                   a class action, the plaintiffs estimate the total amount claimed from all the
                   defendants at NIS 1.1 billion.
                   At this early stage, Super-Sol is unable to assess the claim’s chances of success or
                   the chance it will be certified as a class action. Therefore, no provision was
                   included in these financial statements in respect of this claim.
             e.    There are various legal claims in the total amount of NIS 42 million pending
                   against Property & Building and a number of its subsidiaries. Such claims include
                   claims of home purchasers with respect to building defects and/or delays in
                   delivery, and demands in respect of appreciation tax assessments. In respect of the
                   aforementioned claims and demands, the said companies recorded provisions on


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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

B.   Claims against subsidiaries (cont'd)
     2.      Claims against other subsidiaries (cont'd)
             e.    (cont'd)
                   their books in the total amount of NIS 9 million, which were required according to
                   the opinion of their legal advisors regarding the chances of the aforementioned
                   claims and demands. Property & Building and its subsidiaries do not record on
                   their books material provisions for inspection and warranty, since in accordance
                   with agreements between the companies and the builders, the builders are
                   responsible for the inspection period and have undertaken to indemnify the
                   companies in respect of such claims.
             f.    In August 2007 a claim was filed in Nevada, USA, by an American corporation
                   against companies of the Elad Group that is controlled by Yitzchak Tshuva and a
                   company held indirectly by a company of the Elad Group and Property & Building.
                   It is alleged that the defendants violate the plaintiff’s rights in the “Plaza”
                   trademark in Nevada. The plaintiff requested, inter alia, to receive an injunction
                   against the defendants that prohibits them from using the “Plaza” trademark in
                   Nevada, as well as monetary relief in an unspecified amount. In the opinion of
                   Property & Building, the claim is not expected to have a material effect on
                   Property & Building and it is does not expect incurring a significant monetary
                   expense in its respect.
             g.    There are other legal claims pending against subsidiaries of the Company in the
                   total amount of NIS 93 million in respect of which the subsidiaries recorded
                   immaterial amounts of provisions, to the extent necessary.


C.   Claims against affiliates
     1.      Claims against Elron
     a.      In September 1999, a shareholder of Elscint Ltd. (hereinafter – "Elscint"), a subsidiary of
             Elbit Medical Imaging Ltd. (hereinafter – "Elbit Imaging") which was an investee
             company of Elron up to May 1999, filed a claim with the District Court of Tel-Aviv Jaffa,
             along with a request for recognition thereof as a class action on behalf of the public
             shareholders of Elscint, against various defendants, including Elscint, Elbit Imaging,
             Elron and former directors of Elscint. The claim alleges, primarily, that in the sale of
             Elscint's assets, which was finalized in 1998, Elscint's minority shareholders were
             prejudiced, and it requests that the Court order the defendants to acquire the Elscint
             shares which were held by the public at a price of $27 per share. In October 1999 the
             plaintiff amended his claim and according to the amended claim the total amount of the
             class action (if certified) was estimated by the plaintiff to be $ 158 million or alternatively
             $ 123 million. The parties have agreed to suspend the proceedings in respect of this claim
             until the appeal on another claim against Elscint as described in (b) below is ruled upon.
             If the appeal in respect of that claim is accepted the proceedings for certifying the claim
             as a class action will be renewed and if the said appeal is rejected the request to certify
             the claim as a class action will be rejected.




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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

C.   Claims against affiliates (cont'd)
     1.      Claims against Elron (cont'd)
             b.   In November 1999, a number of institutional shareholders of Elscint filed a claim
                  in the District Court of Haifa, together with a request for certification thereof as a
                  class action on behalf of the public shareholders of Elscint, against various
                  defendants, including, Elbit Imaging, Elron, companies to which Elron sold its
                  holdings in Elbit Imaging in May 1999, and certain officers in the defendant
                  companies. The claim contends, mainly, that Elbit Imaging is duty bound to make a
                  tender offer for the shares of Elscint held by the public and that it unlawfully
                  refuses to do so and, in addition, it raises contentions of preference of the interests
                  of the defendants over those of Elscint and its public shareholders with respect to a
                  number of transactions involving Elscint which discriminated against Elscint's
                  public shareholders. The relief requested in the claim, is the ordering of Elbit
                  Imaging to make a tender offer for the publicly held shares of Elscint at a price of
                  $14 per share or, alternatively, to require the defendants to compensate Elscint's
                  public shareholders or Elscint itself for the damage which the plaintiff's allege were
                  caused to them by the defendants’ actions, without actually indicating any amount
                  of damages in the said claim. In August 2000, the District Court rejected the
                  request for certification of the claim as a class action. Some of the plaintiffs have
                  requested the Supreme Court for leave to appeal the aforesaid judgment. In
                  November 2001 the Supreme Court awarded the plaintiffs the leave to appeal as
                  mentioned. In December 2006 the Supreme Court accepted the aforementioned
                  appeal and ordered that the matter of certification of the claim as a class action
                  would be remanded to the District Court for hearing and ruling. Following this, in
                  January 2007, the plaintiffs submitted to the District Court a request for a ruling
                  certifying their claim as a class action. Furthermore, in February 2001 the plaintiffs
                  filed a new claim which is similar to the previous one but which is not for
                  certification of a class action. In August 2004 the Haifa District Court decided to
                  cancel the demand that the plaintiffs pay a fee in the amount of NIS 20 million in
                  respect of the filing of the claim. Certain of the defendants requested leave to
                  appeal this decision.
                  This request was accepted and in October 2006 the Supreme Court ruled that the
                  matter of the court fee in respect of this claim would be remanded to the District
                  Court for hearing and ruling. In June 2007 the plaintiffs submitted to the Haifa
                  District Court a revised statement of claim and a revised request to certify the claim
                  as a class action. The revised claim requests relief of monetary compensation in
                  respect of damages caused by the failure to execute the purchase offer of Elscint’s
                  shares and other matters as alleged by the plaintiffs, but does not request relief of
                  enforcing the purchase offer of Elscint’s shares that was included in the original
                  claim. The revised claim does not specify the amount demanded but includes
                  various arguments regarding the method of determining the damages caused to the
                  plaintiffs, which depends, inter alia, on the specific circumstances of each
                  individual shareholder of Elscint and the nature of the alleged damages. Elron
                  rejects the allegations raised against it in the revised claim. The District Court has
                  concluded the hearings on the request to certify the revised claim as a class action,
                  and has not yet ruled on the request



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              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

C.   Claims against affiliates (cont'd)
     1.      Claims against Elron (cont'd)
             c.    With respect to the two claims described in Paragraphs (a) and (b) above against
                   Elron and various other defendants, with respect to Elscint, in September 2006 two
                   additional claims were submitted with the Haifa District Court against the same
                   defendants and on the basis of the same main facts of the claims from 1999, along
                   with requests to certify the claims as class actions. The amount being claimed was
                   not stated in these additional claims. The Court decided that at this stage the
                   defendants are not required to reply to these additional claims.
             Elron rejects the allegations set forth against it in the claims described above in
             Paragraphs (a), (b) and (c), and in the assessment of Elron's management, based on the
             opinion of its legal advisors, Elron has good defenses against the claims, to the extent
             they are directed at Elron. Therefore, no provision in connection with the claims
             described above has been included in Elron's financial statements.

     2.      Claims against Koor and its investee companies
             a.    In September 2004, a claim and a request to certify the claim as a class action in
                   accordance with the Law for Restrictive Trade Practices – 1988 and the Civil Law
                   Regulations was filed with the Tel Aviv District Court against Koor, Telrad
                   Networks Ltd. (presently 61% held by Koor), Bezeq – the Israel Communications
                   Company Ltd., Tadiran Ltd. (a wholly owned subsidiary of Koor), Tadiran
                   Communications Ltd. (a former subsidiary of Koor that in 1999 was merged with
                   ECI Telecom Ltd. that is presently held by Koor at the rate of 28%) and Tadiran
                   Public Switching Ltd. (a former subsidiary of Tadiran Communications Ltd.), on the
                   matter of public switching. In the statement of claim, the plaintiff alleges that the
                   actions of the defendants in the previous decade violated the aforementioned law
                   and inflicted damage on the customers of Bezeq that the plaintiff seeks to represent
                   in the class action.
                   If the claim is certified as a class action, the plaintiff demands the amount of NIS
                   1.7 billion. Koor evaluates, on the basis of the opinion of its legal counsel, that the
                   chances of the claim being accepted and being certified as a class action against
                   Koor, Telrad and Tadiran Ltd. are low. Accordingly, no provision was included in
                   the financial statements of Koor in respect of this claim.
             b.    In October 2007 a claim and a request to certify the claim as a class action were filed
                   by three plaintiffs with the Be’er Sheva District Court against a subsidiary of
                   Makhteshim Agan Industries Ltd. (hereinafter – Makhteshim Agan), a 40% investee
                   of Koor. The claim and the request to certify it as a class action involve the alleged
                   pollution of the air with dangerous substances by the defendant in its plant at Ramat
                   Hovav. The group the plaintiffs wish to represent in their claim includes the
                   population in a number of areas in the south of the country. In the claim the plaintiffs
                   request compensation for the members of the group in respect of the alleged damage
                   to their health as a result of various causes involving the alleged air pollution as
                   aforementioned. If the claim is certified as a class action, the total amount specified
                   in it, as estimated by the plaintiffs, is NIS 1,086 million. The defendant intends to
                   reject the allegations in the claim and in the request to certify it as a class action. As


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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

C.   Claims against affiliates (cont'd)
     2.      Claims against Koor and its investee companies (cont'd)
             b.   (cont'd)
                  at the date of this report, on the basis of the opinion of the legal counsel of
                  Makteshim Agan, after examining the allegations of the plaintiffs as reflected in the
                  claim and in the request to certify it as a class action, and the nature of the claim, and
                  in light of the initial stage of the claim, the information and the data in the possession
                  of Makhteshim Agan, and taking note that there are no precedents regarding this kind
                  of class action in which a ruling was made on the merits of the claim with respect to
                  damages of the kind set forth in the class action, and the absence of precedents
                  regarding this kind of class action with respect to the amount of the damage, in the
                  opinion of the legal advisors of Makhteshim Agan it is very difficult to assess the
                  chances of the claim being certified as a class action, and it is very difficult to assess
                  the risk or the chances of success of the claim in particular, should it be certified.
                  Therefore no provision was included in the financial statements of Makhteshim Agan
                  in respect of this claim.
             c.   In 2002 a private environmental organization filed a claim against a subsidiary of
                  Makhteshim Agan containing allegations that the plant of the subsidiary in Brazil
                  pollutes the environment and causes damages to the environment and the
                  surrounding population. The plaintiff demands that a survey be performed regarding
                  the effect on the environment, that the employees of the subsidiary and the
                  surrounding population undergo tests, that the manufacturing activity of the plant be
                  discontinued and that compensation be paid to the surrounding population. In the
                  opinion of the subsidiary’s legal counsel, it has good defense arguments against the
                  claim. Accordingly, no provision was included in the financial statements of
                  Makhteshim Agan in respect of this claim.
             d.   In 2004 a water supplier in the State of Illinois, USA, filed claims and requests to
                  certify them as class actions against a number of companies that manufacture plant
                  protection products, including against a subsidiary of Makhtehsim Agan in the USA,
                  alleging that the Atrazine product that is sold by the defendants pollutes the waters of
                  the plaintiff. The plaintiff does not base its claim on concentration or deviation from
                  standards, but argues that damages are caused to health also in concentrations lower
                  than that provided in the federal water standard, which the defendants hide from the
                  public and the authorities. No hearing has as yet been held on the certification of the
                  claim as a class action and discovery of documents proceedings have not yet
                  commenced. To the best of Makhteshim Agan’s knowledge, the part of the said
                  subsidiary in the sales of the aforementioned product in Illinois is low compared to
                  the share of the other defendants. In the opinion of the aforementioned subsidiary,
                  which is based on the opinion of its legal counsel, the chances of the claim against it
                  being rejected are higher than its chances of success. Therefore, no provision was
                  included in the financial statements of Makhteshim Agan in respect of this claim.




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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 19 - Contingent Claims (cont'd)

C.   Claims against affiliates (cont'd)
     3.      Claim against Netvision
             In September 2007 a claim and a request to certify the claim as a class action were filed
             with the Tel Aviv Jaffa District Court against Netvision, Nana 10 Ltd. (hereinafter – Nana
             10) (which 50% of its shares are held by Netvision), other companies that operate
             electronic commerce websites and various suppliers. The claim relates to online auctions
             on the internet (hereinafter – the auctions). In the claim it is alleged that the defendants or
             someone on their behalf unfairly interfere in auctions by using fictive participants for the
             purpose of raising the final prices of products offered for sale in these auctions, or that
             they have made such interference possible. The plaintiffs request from the Court to
             provide various relief against the defendants, including declaratory orders and the
             imposing of monetary charges. The plaintiffs do not specify the amount claimed.
             At this stage, the question of there being fictive participants on the part of the suppliers
             has not yet been clarified, nor the matter of the connection, or relation, between such
             fictive participants and the websites. In the opinion of Netvision and its legal counsel,
             since most of the suppliers have not yet presented to the Court their replies, it is not
             possible at this stage to evaluate whether there is even any cause against the websites and
             to evaluate the extent of the damage in respect of such causes, if at all. Under these
             circumstances, in the opinion of Netvision and its legal counsel, it is not possible at this
             stage to evaluate the chances of the request to certify the claim as a class action to the
             extent it is directed against Netvision and Nana 10. Accordingly, no provision was
             included in respect thereto in the financial statements of Netvision.




Note 20 - Contingent Liabilities

A.   Contingent Liabilities of the Company
     1.      In November 2003 the Company sold its entire holding (12%) in the shares of
             Productivity Solutions Inc. (hereinafter – PSI) for the price of $ 6 million, in the
             framework of a transaction in which the majority of the shareholders of PSI sold their
             shares to the same buyer for the total price of $ 60 million (hereinafter – the total price).
             In accordance with the terms of the transaction, all the sellers are liable towards the buyer
             for damages and losses incurred by the buyer as a result of misrepresentations regarding
             any one of the sellers and the situation of PSI, which were provided to the buyer in the
             sale agreement. The said liability of the sellers with respect to most of the representations
             regarding the situation of PSI is limited to the total amount of $ 19.5 million for a period
             of two years from the date of the sale, but with respect to certain representations (mainly
             representations regarding each one of the sellers and regarding the tax liabilities of PSI
             and the intellectual property it uses) the liability of the sellers is limited to the amount of
             the total price and to a period of 6 years from the date of sale.




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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 20 - Contingent Liabilities (cont'd)

A.   Contingent Liabilities of the Company (cont'd)
     2.      The Company has issued for certain officers of its investee companies advance letters of
             commitment to indemnify such officers in respect of their responsibility for acts
             performed in the course of their duty as officers, subject to certain conditions and with
             respect to certain monetary obligations that can be indemnified in accordance with the
             law and which can be imposed on them due to their responsibility as mentioned.
     3.      In March 2003 the Company and Clal Capital Markets, a wholly owned subsidiary of
             IDB Development, sold their entire holdings, 50% each, in Ilanot Betucha Investment
             House Ltd., which is presently named Clal Finance Management Ltd. (hereinafter –
             Betucha) to Clal Insurance Enterprises Holdings Ltd. (hereinafter – Clal), a subsidiary
             controlled by IDB Development. The sale agreement included an undertaking of the
             sellers to indemnify Clal, in equal parts, in respect of certain events relating to Betucha,
             and, inter alia, to each indemnify it by 50% of the amount that is reduced from the
             shareholders’ equity of Betucha as a result of legal proceedings against Betucha that
             relate to the period prior to the transaction. In accordance with a notice Clal provided the
             sellers in January 2007 upon the completion of the aforementioned sale, Clal assigned all
             its rights and liabilities under the sale agreement, including its rights to indemnification as
             aforementioned, to Clal Finance Ltd., a subsidiary of Clal (hereinafter – Clal Finance). In
             respect of the Company’s aforementioned indemnification liability, it included in its
             books a provision in the amount of NIS 40 million. In the opinion of the Company, the
             provisions on its books cover its aforementioned indemnification liability, if and to the
             extent it applies to the Company. This provision included, inter alia, an amount of NIS 35
             million that may be required from the Company as indemnification following an
             arbitration award that was granted in February 2006 in an arbitration proceeding
             regarding a claim that was filed in March 2002 against Betucha and a former subsidiary
             of it by certain former customers of it, in which Betucha and the said subsidiary were
             required to pay to the plaintiffs the amount of NIS 95 million with the addition of linkage
             differences and interest as required by law from the date of the arbitration award.
             Court proceedings are presently being held regarding the request of the plaintiffs to
             approve the arbitration award and the request of Betucha to annul it, and these
             proceedings have not yet been concluded. Furthermore, the aforementioned provision
             includes amounts that may be required from the Company as indemnification for
             expenses relating to the aforementioned proceedings.

     4.      A transaction for the purchase of shares of Ilanot Discount Ltd. (hereinafter – Ilanot) from
             Betucha by the Company and IDB Development took place along with the
             aforementioned transaction for the sale of the Company’s shares in Betucha. In respect of
             the aforementioned purchase transaction, the Company and IDB Development each
             submitted a transaction report in February 2003 according to the Securities Regulations
             (Transaction between a company and its controlling shareholder) – 2001, which includes,
             inter alia, a description, as well as financial statements, of Ilanot. The Company and IDB
             Development undertook to indemnify Ilanot, in equal parts, with respect to the amounts
             Ilanot will be required to pay in the framework of third party claims against it or its
             officers, if any are filed, with respect to violation of the said regulations or the inclusion
             of a misleading detail in the aforementioned report, if any, with respect to that mentioned
             in it regarding Ilanot.



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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 20 - Contingent Liabilities (cont'd)

A.   Contingent Liabilities of the Company (cont'd)
     5.      One of the conditions included in the permit that was granted in May 2003 by the
             Governor of the Bank of Israel to the purchasers of the control of IDB Holding, was that
             until the Supervisor of Banks has advised otherwise, the Nochi Dankner Group, including
             companies under its control (which includes the Company and the companies it controls),
             would not increase in real terms its debt to the Bank Hapoalim Group as it was on the
             date of the permit. Any change in the said debt is to be approved in accordance with the
             procedures of Bank Hapoalim regarding the approval of transactions with “related
             parties”. Management of the Company cannot evaluate the possible effects of the above
             mentioned on the Company, including on its business, assets and management.

     6.      In May 2006 the Company, together with CII, entered into an agreement (hereinafter –
             the sale agreement) to sell all the holdings of the Company (24.54%) and of CII (24.85%)
             in Scailex Corporation (hereinafter – Scailex) to Israel Petrochemical Enterprises Ltd.
             (hereinafter – Petrochemical Enterprises) for the price of $ 165 million. The transaction
             was consummated in July 2006.
             The sale agreement provides price adjustment mechanisms as follows:
                If after the signing of the sale agreement, Scailex receives from Scailex Vision (Tel
                Aviv) Ltd. (hereinafter – Vision), a subsidiary of Scailex, in the framework of
                distributions of Vision to its shareholders (net after tax, to the extent any is required on
                these distributions, and after certain other deductions), an overall amount of more than
                $ 30 million, with this amount bearing interest at a specified rate from the date of
                consummation of the transaction, the Company and CII (hereinafter together – the
                sellers) will be entitled to an additional consideration in the amount of 54% of the
                difference, and if after the signing of the sale agreement Scailex receives from Vision
                amounts lower than $ 30 million with the addition of interest as aforementioned, the
                sellers will return to Petrochemical Enterprises 54% of the difference.
                If during the two years from the date of signing the sale agreement, certain
                subsidiaries of Scailex receive a tax refund higher than $ 7.8 million, the sellers will
                be entitled to an additional consideration of 54% of the difference. If the tax refund is
                lower than $ 7.8 million, the sellers will return to Petrochemical Enterprises 54% of
                the difference.
                If Scailex and its wholly owned subsidiaries pay taxes of more than $ 4 million in
                respect of a tax liability relating to the period from before consummation of the
                transaction, the sellers will return to Petrochemical Enterprises 54% of the difference
                but no more than $ 5.4 million.
             The sellers undertook to indemnify Petrochemical Enterprises at various rates of between
             50% and 75% from the amount equal to 54% of amounts exceeding $ 5 million that are
             paid by Scailex and/or its wholly owned subsidiaries: (1) according to a final court ruling
             (or compromise approved by the parties) in respect of third party claims filed during the
             two years following consummation of the transaction, the cause of which originates from
             before consummation of the transaction; and (2) in respect of tax payments relating to the
             period until consummation of the transaction, if these tax payments are in total higher than




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          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 20 - Contingent Liabilities (cont'd)

A.   Contingent Liabilities of the Company (cont'd)
     6.      (cont'd)
             $ 14 million. The maximum indemnity that may be received from the sellers according to
             the aforementioned is limited to the amount of the consideration according to the sale
             agreement.
             Petrochemical Enterprises undertook to indemnify the sellers for 49% of payments
             imposed on them according to a final court ruling in claims filed against them by Scailex
             and/or its subsidiaries, the cause of which originates from before consummation of the
             transaction.

     7.      In February 2007 Cellcom published a prospectus in the USA for the sale of shares of
             Cellcom by the Company and an additional shareholder of Cellcom in the framework of
             their offer to the public that was guaranteed by underwriting. For this purpose, Cellcom,
             the underwriters of the offer to the public and the selling shareholders signed an
             underwriting agreement that includes, inter alia, commitments of Cellcom and the selling
             shareholders, including the Company, to indemnify the underwriters of the public offer in
             respect of any damage or expense incurred by them as a result of information in the
             prospectus that is incorrect or was omitted. The indemnity liability of Cellcom is
             unlimited in amount. The indemnity liability of the Company is limited to certain cases
             (including Cellcom being legally prevented from indemnifying the underwriters as
             aforementioned) and to an amount equal to the gross proceeds it received from selling
             shares of Cellcom in the offer to the public.

     8.      In respect of economic work that was prepared for the Company by external experts, the
             Company has provided indemnity to these experts in respect of damages caused to them
             as a result of third party claims against them regarding such economic work.


B.   Contingent liabilities of subsidiaries
     1.      Effects of new legislation and standards on Cellcom
             In December 2005 the Non-Ionizing Radiation Law (hereinafter – the Radiation Law)
             was passed, in the framework of which also the Planning and Building Law was
             amended. The main provisions of the Radiation Law came into effect at the beginning of
             2007. This amendment provides, among other things, that as a condition for the issuance
             of a permit for construction of a broadcasting device, a planning institution will request a
             letter of indemnification for claims and compensation under Section 197 of the Planning
             and Building Law in respect of the decline in value of real estate (hereinafter – Section
             197 indemnity letters), pursuant to the directives of the National Council. These
             directives will be in effect until a change is made to NZP 36. At the beginning of January
             2006, official directives of the National Planning and Building Council were published
             which provide an indemnification requirement of 100%. It was also provided that the
             grantor of the indemnity letter will be allowed to conduct the legal proceeding against
             such a claim and a form of the indemnity letter was attached to it. The Radiation Law
             does not provide a date for amendment of the NZP.




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           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 20 - Contingent Liabilities (cont’d)

B.    Contingent liabilities of subsidiaries (cont’d)
      1.      Effects of new legislation and standards on Cellcom (cont’d)
              Some local planning and building committees have sought to attach the cellular
              companies, including Cellcom, as defendants in claims that were filed against them in
              accordance with Section 197 of the Planning and Building Law, in respect of facilities
              that were built by the cellular companies according to NZP 36, even though Section 197
              indemnity letters were not provided. Cellcom was attached as a defendant in a small
              number of cases.
              As at the date of these financial statements, Cellcom has deposited more than 150 Section
              197 indemnity letters that are unlimited in amount, and has provided 3 letters of
              commitment for indemnity as a condition for receiving permits. In some of these
              instances, the Company has not yet constructed the sites. Cellcom expects that it will be
              required to continue to provide indemnity letters as part of the process of constructing
              base sites.
              Cellcom estimates that the changes referred to above may have the following impacts:
              a.    The management of Cellcom estimates, based on the opinion of its legal advisors,
                    that no indemnity can be demanded with respect to sites built based on a permit
                    issued under the NZP prior to the amendment of the Radiation Law coming into
                    effect. Nevertheless, no judicial decision has been made on this matter.
              b.    As from the date of the amendment coming into effect, as part of Cellcom’s
                    considerations for establishment of new sites, Cellcom also examines the potential
                    for a claim under Section 197. To the best of Cellcom’s knowledge, at this point
                    no court decision has been made indicating a decline in the value of property due to
                    the construction of a cellular site.
              c.    At this point Cellcom is unable to estimate the future impact of the indemnification
                    requirement, due to, inter alia, that described in (a) and (b) above. Nonetheless, if
                    Cellcom is required to make substantial payments under the Section 197 indemnity
                    letters, it may have an adverse effect on Cellcom’s financial results.
              d.    In the opinion of Cellcom, the need to dismantle and remove existing sites, and the
                    difficulties in establishing alternative sites, could have an adverse effect on
                    Cellcom’s operations.

      2.      In December 2004 the Communications Regulations (Bezeq and Broadcasting)
              (Connectivity Payments) were amended so as to provide as follows:
              a.    The connectivity rates in respect of calls made on a cellular network from an inland
                    telephony operator or another cellular operator will be reduced in a number of
                    stages so that as of March 1, 2005 the maximum rate of NIS 0.45 per minute will
                    be reduced to a maximum rate of NIS 0.32 per minute; as of March 1, 2006 the
                    maximum rate will be reduced to NIS 0.29 per minute; as of March 1, 2007 the
                    maximum rate will be reduced to NIS 0.26 per minute; and as of March 1, 2008 the
                    maximum rate will be reduced to NIS 0.22 per minute.
              b.    As of March 1, 2008 the connectivity rates for calls made on a cellular network
                    from an international operator will be reduced from the maximum rate of NIS 0.25
                    per minute to the maximum rate of NIS 0.22 per minute.


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           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 20 - Contingent Liabilities (cont’d)

B.    Contingent liabilities of subsidiaries (cont’d)
      2.      (cont’d)
              c.    As of March 1, 2005 the connectivity rates of SMS messages received from
                    another cellular network will be reduced from the maximum rate of NIS 0.285 per
                    message to the maximum rate of NIS 0.05 per message, and as of March 1, 2006
                    they will be further reduced to the maximum rate of NIS 0.025 per message.
              d.    The rates specified in items a through c above do not include VAT, and they will
                    be adjusted once a year according to the annual rate of change in the CPI in
                    accordance with the aforementioned regulations.
              Furthermore, in December 2004 the license of Cellcom was amended so that as of
              January 1, 2009 the basic time unit for charging airtime will be changed from a time unit
              of 12 seconds to a time unit of one second. As a result of this change, also the payments
              for connectivity services will change. In September 2007 the general license under which
              Cellcom operates was changed so that Cellcom is not allowed to offer to its customers
              plans based on an airtime unit that is different from the basic airtime unit provided in the
              general license (which is presently 12 seconds and as from January 1, 2009 will be one
              second). Cellcom has taken steps to contend with the effects of the change in its license,
              and it is presently unable to evaluate the potential effect of the change on its financial
              results.
              Cellcom evaluates that the aforementioned changes will have an adverse effect on its
              financial results, and is therefore taking various measures so as to reduce the effect of the
              Ministry of Communications’ decisions on its financial results.
              In August 2006 the Bezeq Regulations (Royalties) – 2001 were amended in a manner that
              reduces the royalties Cellcom pays as from January 1, 2006 to 3% for 2006 and by an
              additional 0.5% every year until 1% in 2010.

      3.      In August 2005 Cellcom received from the Ministry of Communications a notice on the
              publication of guidelines regarding number portability. Number portability allows each
              subscriber of a cellular telephone company to become a subscriber of another cellular
              telephone company without any change in the subscriber’s cellular telephone number. In
              accordance with the guidelines, anyone holding a general license to provide telephone
              services was required to allow number portability to anyone requesting this as from
              September 1, 2006. Number portability has commenced in December 2007. For further
              details see Paragraph 1(o) of Note 19B.

      4.      A dispute exists between Cellcom and the Ministry of Communications with respect to
              the fees Cellcom has to pay for GSM and UMTS frequencies. As at December 31, 2007,
              the amount in dispute totals NIS 69 million including interest and CPI-linkage
              differences. Until a final decision is made on the matter, Cellcom has deposited half of
              this amount with the Ministry of Communications. The management of Cellcom believes,
              on the basis of the opinion of its legal advisors, that the method it uses is the legal method
              and therefore no provision was included in the financial statements of Cellcom with
              respect to the amount under dispute. Cellcom has applied to the Court on this matter.




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           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 20 - Contingent Liabilities (cont’d)

B.    Contingent liabilities of subsidiaries (cont’d)
      5.      Subsidiaries of the Company received grants from the State of Israel in respect of their
              investments in various assets. The receipt of the grants is contingent upon compliance
              with various conditions included in the letters of approval of such investments. If the
              companies do not comply with these conditions, they will be required to refund the
              grants, fully or partly, with the addition of interest from the date of their receipt. In the
              opinion of the subsidiaries, they are in compliance with the conditions of such grants. As
              at December 31, 2007, grants in the amount of NIS 44 million have been received.

      6.      In January 2005 the Commissioner of Restrictive Trade Practices (hereinafter – the
              Commissioner) published a document describing his position regarding trade
              arrangements between suppliers and retail chains, including Super-Sol (hereinafter – the
              position document). In the position document the Commissioner presents his opinion with
              respect to various trade practices that he contends are applied between suppliers and retail
              chains, which in his opinion are prohibited according to the Law of Restrictive Trade
              Practices. These practices include, inter alia, the purchase of large amounts of display
              areas, category management of a retail chain by a supplier, the arranging of shelves in the
              stores of the chains by the supplier and exclusive sales campaigns.
              In August 2005 the Commissioner published his decision, which conditionally approves
              the merger of Super-Sol and Clubmarket. This decision imposed on Super-Sol a number
              of restrictions: Super-Sol was forbidden to use price lists that create a clear loss for the
              chain, are not reasonable and are intended at removing competitors from the market;
              Super-Sol was forbidden to sign agreements with its supplies that include various
              restrictions on engagements between the suppliers and Super-Sol’s competitors; Super-
              Sol was forbidden to interfere with the trade terms determined between suppliers and
              Super-Sol’s competitors.
              Subsequent to the publication of the position document and as part of the Commissioner’s
              actions to regulate the retail market, the Commissioner published in December 2005, an
              agreed order pursuant to article 50b of the Restrictive Trade Practices Law, applicable to
              the major food suppliers. According to this order, restrictions regarding agreements with
              Super-Sol and Blue Square were imposed on food suppliers which are parties to the order.
              The order imposes restrictions and prohibitions concerning a series of arrangements and
              customs between the retail chains and the suppliers, regarding limits to the numbers of
              suppliers; large-scale purchases of display areas; management of a chain’s product
              category by a supplier; shelf-arranging by suppliers; bonuses and benefits for obtaining
              sales targets; determination of market shares; exclusivity in special offers, and prices
              dictated by suppliers. Regarding shelf-arranging, a 30-month extension was granted from
              the publication date of the agreed order, during which the Commissioner would refrain
              from taking any action to enforce this matter, provided that the shelf-arranging
              arrangements comply with a series of conditions set forth in the order. Super-Sol is not a
              party to the agreed order and it does not apply to the relationship between major suppliers
               and other retail chains and grocery stores. The agreed order came into effect after it was
              approved by the Restrictive Trade Practices Court in August 2006. Among the issues
              emerging from the position document and the agreed order, the issue of shelf-arranging is
              the single issue which may have a material effect on Super-Sol’s financial results
              according its estimates. On the issue of shelf-arranging - according to the agreed order, 30
              months from its issuance (in December 2005), the shelves of a category in which there is


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           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 20 - Contingent Liabilities (cont’d)

B.    Contingent liabilities of subsidiaries (cont’d)
      6.      (cont’d)
              a major supplier will be arranged by the employees of the retail chain or someone acting
              on its behalf that is not related to the supplier (hereinafter – independent shelf- arranging).
              In view of the agreed order, the transition period prior to the implementation of the
              Commissioner’s instructions on shelf-arranging was effectively extended up to
              February 2, 2009. At this stage, Super-Sol does not operate independent shelf-arranging.
              At this point, Super-Sol is not able to estimate the impact of independent shelf-arranging
              on its financial results.




Note 21 - Guarantees and Liens

A.    All the property of the Company is charged with equal degree floating charges as security for
      payment of part of the debentures that were issued by the Company. As at balance sheet date the
      overall balance of the debentures that are thus secured totaled NIS 122 million.


B.    Certain debentures that were issued by the Company or its subsidiaries limit their ability to
      create a lien on their assets except in the circumstances and at the conditions provided in them.


C.    Subsidiaries of the Company guaranteed to banks money in the total amount of NIS 497 million,
      which the banks may be required to pay to purchasers of apartments to whom the banks had
      issued guarantees according to the Sale Law (Apartments) (Securing the Investments of Home
      Purchasers) - 1974.


D.    Subsidiaries have provided guarantees in the total amount of NIS 491 million as security for
      their liabilities and the liabilities of their affiliated companies to banks and others.


E.    As security for the liabilities of subsidiaries and their subsidiaries to banks and others, in the
      total amount of NIS 980 million, these companies registered charges on various assets which
      they own.


F.    For the purpose of securing the terms of receipt of an investment grant and letters of approval
      issued by the Investments Center, subsidiaries have placed floating liens on various assets.


G.    With respect to a dividend the Company received from El-Yam Ships Ltd., the Company and a
      wholly owned subsidiary provided written assurances in the amount of $ 53.7 million. In these
      assurances, the Company and its subsidiary undertook to pay to El-Yam any amount requested
      by El-Yam up to the aforementioned amount in respect of certain expenses and liabilities of El-
      Yam.


                                                     129
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 22 - Commitments

A.   Commitments of Cellcom
     1.      Cellcom has commitments regarding the license it was granted in 1994. These
             commitments relate, inter alia, to the establishment of a communications network, to not
             pledging assets used to execute the license, the payment of royalties, and minimum
             capital requirements from Cellcom and its shareholders. Cellcom believes that it is in
             compliance with these undertakings.

     2.      Cellcom has an agreement with Beeri Printing Limited Partnership and with Beeri
             Technology (1977) Ltd. (hereinafter together – Beeri Printing), according to which
             Cellcom will purchase from Beeri Printing a minimum amount per month of printed
             material and distribution services, which can be reduced if Cellcom changes its bill
             distribution policy. This agreement is in effect until July 2008.

     3.      In September 2005, Cellcom signed an agreement with Ericsson Israel Ltd., according to
             which Cellcom will acquire a UMTS system, including all the required services for
             establishment and maintenance of the system. The aggregate scope of the agreement is
             $27.5 million payable over the next 5 years. Cellcom is required to purchase from
             Ericsson until 2010 at least 60% of the base sites of Cellcom, and to purchase
             maintenance services until 2011. Cellcom also has an option to purchase maintenance and
             support services until 2026.

     4.      As at December 31, 2007, Cellcom has commitments to purchase equipment for the
             communications’ network and cellular telephone equipment, at an estimated amount of
             NIS 221 million.


B.   Commitments of Property & Building
     1.      Subsidiaries have commitments related to the purchase of real estate, residential
             construction, the development and construction of buildings and the purchase of fixed
             assets which, as at the balance sheet date, are estimated at NIS 670 million.

     2.      Subsidiaries of Property & Building have various agreements for the purchase of land,
             and they are obligated to pay for the land using the proceeds from the project and/or part
             of the apartments that will be built on the project.


C.   Other commitments
     1.      Subsidiaries of the Company have commitments to purchase equipment and raw materials
             in the total amount of NIS 30 million.




                                                  130
               Discount Investment Corporation Ltd.

           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 22 - Commitments (cont'd)

C.    Other commitments (cont'd)
      2.      Subsidiaries of the Company have commitments to pay rent as follows:
                      Year           NIS millions

               2008                       541
               2009                       511
               2010                       460
               2011                       374
               2012                       310
               2013 and thereafter      1,379
                                        3,575




Note 23 - Supplementary Statement of Income Data – Income

A.    Sales and services
                                                              C o n s o l i d a t e d
                                                             For the year ended December 31
                                                           2007         2006*        2005 *
                                                              N I S m i l l i o n s

 Sales of purchased products                               9,861          8,998**    6,593
 Lease of buildings and storage services                     486            443        376
 Construction                                                351            365        482
 Sales of communication equipment                            663            651        177
 From sales of manufactured products                         305            298        218
 Work performed and services rendered specially from
    communications services                                5,403         5,082       1,215
                                                          17,069        15,837       9,061
* See note 1.F regarding classification and restaement.
** Reclassified.




                                                 131
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 23 - Supplementary Statement of Income Data – Income (cont'd)

B.   Company’s share in the net earnings (losses) and reductions of investees
                                                Consolidated               Company
                                                  For the year ended      For the year ended
                                                     December 31             December 31
                                                2007    2006* 2005*     2007    2006* 2005*
                                                        N I S      m i l l i o n s

      Earnings on the equity basis:
      Subsidiaries                                     -        -      -    1,143   641      352
      Proportionately consolidated
        companies                                   -        -         -       -       2       -
      Affiliated companies (1)                  (102)      (85)      436     (85)    (53)    150
      Total net earnings (losses) on the
        equity basis                            (102)      (85)      436    1,058   590      502
      Including amortization of original
        difference in the amount of             (426)      (95)      (28)   (442)   (131)    (20)
      (1) Including loss of the decline in
          value of the investment, net             15           2      -      15         2        -
     * see note 1.F regarding classification and restatement.


C.   Income from management fees and other expenses, net
                                                 Consolidated         Company
                                                 For the year ended December 31
                                               2007 2006 2005 2007 2006 2005
                                                   N I S     m i l l i o n s

      Management fees, other income and
        dividend from investee companies           13           26    23       4     6        6
      Expenses relating to future rent and
        the dismissal of employees                   -     (11)       (8)      -     -        -
      Other income (expenses)                      (9)        3       (4)      -     -        -
                                                     4       18       11       4     6        6




                                                 132
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 23 - Supplementary Statement of Income Data – Income (cont'd)
D.   Gain on sale and revaluation of investments , net of reductions of investments and assets, net
                                                Consolidated          Company
                                                 For the year ended December 31
                                              2007 2006 2005 2007 2006 2005
                                                   N I S     m i l l i o n s

      Gain on sale of investments in
        investee and other companies, net      1,276      442**    95*       815     369**       81*
      Increase in fair value of investment
        propery                                  181        -       -          -       -              -
      Net gain on sale of fixed assets             7       64      23          -       -              -
      Gain (loss) on issue of capital by
        investee companies to third parties       (2)      (7)     (1)         2      (2)         (1)
      Reduction of investments in
        consolidated and other companies,
        net                                           -     -       7          -       -          2
      Provision for decline in value of
        assets                                     -       (8)     (1)        -        -          -
                                               1,462      491     123       817      367         82
     * Including provision in the amount of NIS 40 million in respect of an indemnity claim, as
        mentioned in paragraph 3 in Note 20A.
     ** See note 1F regarding classification and restatement.




                                                133
               Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 24 - Supplementary Statement of Income Data - Expenses

A.   Cost of sales and services
                                                                    C o n s o l i d a t e d
                                                                   For the year ended December 31
                                                                  2007         2006*       2005*
                                                                        NIS millions

         From construction:
         Materials                                                  215         195         259
         Land                                                        80         102         129
         Provision for loss                                           -           5           6
         Total from construction                                    295         302         394
         Sales of manufactured products:
         Materials                                                   68          55          38
         Depreciation                                                16          12          13
         Salaries                                                    49          36          27
         Outwork                                                     33          31          15
         Others                                                      24          38          40
         Total from sale of manufactured products                   190         172         133

         Lease of buildings and storage services                    104          89**        72**
         Work performed and services rendered specially
           from communications services                            2,341      2,287**        572**
         Sales of purchased products                               7,241      6,650**      4,858
         Sales of communications equipment                           800        791          251
         Royalties                                                   177        179          112
         Total                                                    11,148     10,470        6,392
     * See note 1.F regarding classification and restatement.
     ** Reclassified


B.   Selling expenses
                                                                       Consolidated
                                                                   For the year ended December 31
                                                                  2007         2006*       2005*
                                                                        NIS millions

         Salaries                                                  1,137     1,113         684
         Advertising                                                 245       208         112
         Depreciation                                                188       222         139
         Rent and building maintenance                               472       459         288
         Other                                                       788       717         486
                                                                   2,830     2,719       1,709
          Net of participation of suppliers                           47        47          46
     *     See note 1F regarding classification and restatement



                                                    134
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 23 - Supplementary Statement of Income Data – Expenses (cont'd)

C.   General and administrative expenses
                                    C o n s o l i d a t e d               C o m p a n y
                                        For the year ended                For the year ended
                                          December 31                       December 31
                                    2007     2006* 2005*               2007    2006* 2005*
                                       N I S             m i          l l i o n s

      Salaries **                      280           260       124      23      16       11
      Depreciation and
        amortization                   363           491       210       -       -        -
      Provision for doubtful and
        bad debts                       17          46         (10)      -       -        -
      Other                            367         351         212      18      16       21
                                     1,027       1,148         536      41      32       32
      ** Including salary in
        respect of share-based
        payment                         37            16         -       -       1        -
     * See note 1F regarding classification and restatement.




                                               135
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 23 - Supplementary Statement of Income Data – Expenses (cont'd)

D.   Net financing expenses
                                            Consolidated                       Company
                                              For the year ended              For the year ended
                                                December 31                     December 31
                                           2007     2006* 2005*            2007     2006      2005
                                             N I S             m i        l l i o n s

      Financing income:
      From long term loans                     6             9     11         5       8        11
      From short term loans and
        deposits, net                        193           44      72         7      52        63
      Gain on securities and other
        gains, net                            17             -     42         3       3         -
      Investee companies                       1             -      2         -       3        19
      Transactions in derivative
        financial instruments, net            32            -       -        34       -        20
      Installment sale transactions           46           58      13         -       -         -
                                             295          111     140        49      66       113
      Financing expenses:
      Financing expenses on long
        term liabilities                   1,134          528     462       389     129       185
      Amortization of deferred
        charges                                3             3       2        3       3         2
      Interest to investee companies           -             -       -       51     116        16
      Loss on securities and other
        losses, net                             -          42        -        -        -        -
      Transactions in derivative
        financial instruments, net             -           76       4         -      58         -
                                           1,137          649     468       443     306       203
                                            (842)         (538)   (328)    (394)   (240)      (90)
     * See note 1.F regarding classification and restatement.




                                                    136
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 25 - Taxes on Income

A.   Composition
                                        Consolidated                         Company
                                       Year ended December 31            Year ended December 31
                                      2007    2006* 2005*               2007     2006     2005
                                      N    I   S       m      i       l   l    i   o   n   s

      Current taxes                    (460)      (418)        (88)       -        (7)      -
      Taxes in respect of prior
        years                            91           (4)      28        95         -       -
      Deferred taxes (see B.
        below)                          (37)          (5)      (21)       -         -       -
      Adjustment of deferred
        taxes due to changes of
        tax rates                         -         (2)         10        -         -       -
                                       (406)      (429)        (71)      95        (7)      -
     * See note 1F regarding classification and restatement.




                                                137
             Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 25 - Taxes on Income (cont'd)

B.   Deferred taxes in the consolidated statements
                                                               In
                                                            respect   Timing
                                                               of   differences
                                                   In        fixed        in    Losses and
                                                respect      assets recognition inflationary
                                                   of         and    of income   deductions
                                                current      other       and       carried
                                                 assets      assets  expenses     forward      Total
                                                             N I S     m i l l i o n s

       Balance as at January 1, 2005 *               62     (151)         (51)         70       (70)
      Changes included in the financial
        statements of 2005                          (20)       28         (25)         (1)      (18)
      Changes in deferred taxes in respect of
        companies consolidated for the first
        time                                         62     (356)           -           2      (292)
      Cumulative effect as at beginning of
        year of the initial implementation of
        Standard 19                                    -        3           -           -        3
      Adjustment due to changes of tax rates         (4)       17          (1)         (2)      10
      Changes in respect of decline in value
        of investments                                -       (8)           -           -        (8)
      Other changes                                   -        9          (98)          -       (89)
      Balance as at January 1, 2006 *               100     (458)        (175)         69      (464)
      Changes included in the financial
        statements of 2006                          (16)       22           3         (12)       (3)
      Changes in respect of decline in value
        of investments                                  -       (2)         -           -        (2)
      Changes in deferred taxes in respect of
        companies consolidated for the first
        time                                            -      (14)         -           -       (14)
      Changes in respect of hedge
        transactions                                 11          -          -           -       11
      Changes in respect of disposal of part
        of subsidiary                                 -       21            -           -        21
      Other changes                                   -        -          175           -       175
      Balance as at January 1, 2007 *                95     (431)           3          57      (276)
      Effect of implementing of new
        accounting standards                            -   (430)           -           -      (430)
      Changes included in the financial
        statements of 2007                              2        8        (12)        (35)      (37)
      Changes in respect of hedge
        transactions                                  1        -            -           -         1
      Other changes                                   -       23            9           -        32
      Balance as at December 31, 2007                98     (830)           -          22      (710)
     * See note 1F regarding classification and restatement.




                                                  138
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 25 - Taxes on Income (cont’d)

B.   Deferred taxes in the consolidated statements (cont'd)
     The deferred taxes are presented in the balance sheet as follows:
                                                                     Consolidated
                                                                       As at December 31
                                                                  2007                   2006
                                                                          NIS millions

      Under current assets                                    131                        156
      Under other assets                                        5                         17
      As long-term deferred taxes                            (819)                      (423) *
      Under current liabilities                               (27)                       (26)
                                                             (710)                      (276)
     * See note 1.F regarding classification and restatement.


C.   Reconciliation between the theoretical tax payable, should reported earnings be taxable at the
     statutory tax rate, and the tax provision made in the statement of income.
                                                  Consolidated                       Company
                                            Year ended December 31            Year ended December 31
                                            2007    2006*      2005*          2007    2006*    2005*
                                                 N I S          m i          l l i o n s

      Tax expense (saving) calculated
        at the statutory tax rate
        (2007 – 29%; 2006 – 31%;
        2005 – 34%)                         (750)         (430)      (226)    (419)   (214)       (159)

      (Tax) tax saving in respect of:
      The Company's equity after tax
         in the earnings (losses) and
         tax exempt capital gains and
         reductions of investee
         companies                           216           69         151     511     264         187
      Provision for tax with respect to
         investee companies                  (13)           (8)      (7)         -      -             -
      Permanent differences                    1           (50)       3        (25)    23             3
      Taxes in respect of prior years         91            (4)      28         95      -             -
      Adjustment provision for tax due
         to reduction in tax rates              -           (2)      10          -       -            -
      Losses and timing differences in
         respect of which no deferred
         taxes were created, and others       49            (4)      (30)      (67)    (80)        (31)
      Provision for taxes on income         (406)         (429)      (71)       95      (7)          -
     * See note 1F regarding classification and restatement.


                                                    139
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 24 - Taxes on Income (cont’d)

D.   In July 2005 the Knesset passed the Law for the Amendment of the Income Tax Ordinance (No.
     147 and Temporary Order) – 2005 (hereinafter – Amendment 147). Amendment 147 provides
     for a gradual reduction in the company tax rate in the following manner: in 2006 the tax rate
     will be 31%, in 2007 the tax rate will be 29%, in 2008 the tax rate will be 27%, in 2009 the tax
     rate will be 26% and from 2010 onward the tax rate will be 25%. Furthermore, as from 2010,
     upon reduction of the company tax rate to 25%, all real capital gains will be subject to tax of
     25%. As a result of Amendment 147, the Company recorded in 2005 net earnings in the amount
     of NIS 8 million in respect of the adjustment to the current taxes and deferred tax balances of
     the investee companies as at January 1, 2005, of which NIS 10 million is presented under taxes
     on income.


E.   As at balance sheet date, the Company has tax losses and inflationary deduction carry forwards
     in the amount of NIS 1,702 million, for which it did not create deferred taxes. Subsidiaries of
     the Company have tax losses and inflationary deduction carry forwards in the amount of NIS
     418 million, which includes losses in the amount of NIS 402 million for which the subsidiaries
     did not create deferred taxes.


F.   The Company and the subsidiaries received final tax assessments as follows:
     The Company – up to and including the 2000 tax year.
     The subsidiaries – up to and including the 1996-2005 tax years.
     The reports of the Company and the subsidiaries that were submitted until and including 2003
     are considered a final assessment in accordance with Section 145 of the Income Tax Ordinance.


G.   PEC Israel Economic Corporation (hereinafter – PEC), a wholly owned subsidiary of the
     Company, is subject to tax in Israel and in the USA, where it was incorporated. PEC may be
     required to pay tax under certain circumstances in respect of Israeli companies held by it that are
     considered PFIC, meaning Passive Foreign Investment Companies. The classification of such
     companies as PFIC depends on the volume of their passive assets and operations.


H.   In 2007 the Company recorded income in the amount of NIS 95 million under the item of taxes
     on income. This income derives from the reversal of tax provisions that were included in the
     past in the financial statements of the Company.


I.   Following the ruling of the Supreme Court from November 20, 2006 on the matter of Paz Gas
     Marketing Company Ltd. and others vs. the assessing officer and others, which overturned the
     rules regarding the recognition of financing expenses, Cellcom included in its financial
     statements for 2006 an additional provision for taxes in the amount of NIS 55.5 million. This
     provision is an estimate of the additional tax expense relating to the possibility that part of the
     financing expenses accrued in 2006 in respect of a financial debt, which is attributable, inter
     alia, to the financing of a dividend that was distributed by Cellcom in this period, will not be
     recognized as an expense for tax purposes. Cellcom has reasons justifying the recognition of
     these expenses for tax purposes, or part of them, but in order to be prudent and since at that time



                                                 140
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 25 - Taxes on Income (cont’d)

I.   (cont'd)
     the level of certainty required in order to recognize these expenses did not exist, the
     aforementioned provision was recorded in the financial statements of Cellcom for 2006. The
     Company’s share in the aforementioned additional provision amounted to NIS 44 million.
     In October 2007 the Supreme Court handed down two new rulings that refer to its previous
     ruling from November 2006 regarding the allowing for tax purposes of financing expenses that
     may be attributed by the tax authority to the financing of dividend distributions. As at June 30,
     2007, Cellcom had on its books a tax provision in the amount of NIS 72 million that was based
     on the possibility that part of the financing expenses of Cellcom would not be recognized for tax
     purposes. As a result of the new rulings of the Supreme Court from October 2007, and on the
     basis of the opinion of its legal counsel, Cellcom reversed the aforementioned provision, and
     reduced the tax expenses in the third quarter of 2007 by the amount of NIS 72 million. The
     Company’s share in the aforementioned provision reversal is NIS 42 million.


J.   Industrial company
     1.      A subsidiary of the Company qualifies as an “Industrial Company” as defined in the Law
             for the Encouragement of Industry (Taxes) – 1969 and accordingly it claims accelerated
             depreciation in accordance with the regulations of the Income Tax Law (Adjustments for
             Inflation), and amortizes know-how over 8 years.

     2.      A subsidiary of the Company has a number of investment plans that were awarded
             approved enterprise status in accordance with the Law for the Encouragement of Capital
             Investments – 1959. All the plans were completed and approved by the Investments
             Center. The last plan ended in 2006. The income from these enterprises is exempt from
             tax in the first two years and is subject to company tax of 25% for an additional 5 years.
             The benefits are provided on the basis of the addition to turnover and are calculated
             according to the rules provided in the letter of approval. The benefits in respect of the
             plans are granted from the first year in which taxable income is generated by the plan, for
             a period of 7 years, and providing that 14 year have not passed from the year the plan was
             approved by the Investments Center or 12 years from the year in which the qualifying
             plan was put into operation. Receipt of the benefits is contingent upon compliance with
             the conditions of the letter of approval.

     3.      An investment plan of a subsidiary was granted beneficiary enterprise status in
             accordance with Section 51 of the Law for the Encouragement of Capital Investments –
             1959. The income from this enterprise is exempt from tax for 10 years. Receipt of the
             benefits is contingent upon compliance with the provisions of the law.


K.   In February 2008 the Knesset enacted the Income Tax Law (Adjustments for Inflation)
     (Amendment No. 20) (Restriction of Effective Period) – 2008 (hereinafter – Amendment No.
     20). In accordance with Amendment No. 20, the effective period of the Adjustments Law will
     cease at the end of the 2007 tax year and as from the 2008 tax year the provisions of the law
     shall no longer apply, other than the transitional provisions intended at preventing distortions in
     the tax calculations.



                                                  141
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 25 - Taxes on Income (cont’d)

K.   (cont'd)
     In accordance with Amendment No. 20, as from the 2008 tax year income for tax purposes will
     no longer be adjusted to a real (net of inflation) measurement basis. Furthermore, the
     depreciation of inflation immune assets and carried forward tax losses will no longer be linked
     to the CPI, so that these amounts will be adjusted until the end of the 2007 tax year after which
     they will cease to be linked to the CPI.




                                                142
              Discount Investment Corporation Ltd.

         Notes to the Financial Statements for the Year Ended December 31, 2007



Note 26 - Business Segments

See Annex for a list of the companies that operate in the company's segments.
                                                        Retail
                                                         and        Real-
                           Communications   Technology services     estate   Industry      Total
                              N   I     S        m    i   l     l     i    o    n     s

 1. Data from the 2007
    statement of
    income:
 A. Income
 Sales and services             6,045              -     9,883       836       305        17,069
 Company's equity in net
    earnings and
    reduction net, of
    affiliated companies         125           (133)        (6)       52      (140)         (102)
 Gain (loss) on sale and
    revaluation of
    investments, net of
    reductions of
    investments and
    assets, net                  762               2       511       191         (4)       1,462
 Other income, net                (9)              -         7         6          -            4
 Total segment income
    in 2007                     6,923          (131)    10,395      1,085      161        18,433
 B. Allocated expenses
 Cost of sales and
    services                    3,312              -     7,258       400       178        11,148
 Selling expenses                 685              -     2,077         8        60           2,830
 General and
    administrative
    expenses                      736              -       146        72        22           976
                                4,733              -     9,481       480       260        14,954
 2007 segment results           2,190          (131)       914       605        (99)       3,479
 Unallocated income /
   expenses
 Unallocated
   administrative and
   general expenses                                                                          (51)
 Net unallocated
   financing expenses                                                                       (842)
 Tax expense                                                                                (406)
 Minority interest in
   earnings of
   subsidiaries                                                                             (641)
                                                                                           1,539
 C. Minority interest in
   income                       1,836              -     4,930       428       168         7,362
* Reclassified.


                                             143
              Discount Investment Corporation Ltd.

         Notes to the Financial Statements for the Year Ended December 31, 2007



Note 26 - Business Segments (con't)

                                                             Retail
                                                              and       Real-
                              Communications     Technology services    estate   Industry     Total
                                N    I    S           m    i  l     l    i     o    n     s

 2. Data from the 2006
    statement of income*:
 A. Income
 Sales and services              5,706                   -    9,023**   810       298         15,837
 Company's equity in net
    earnings (losses) and
    reduction net, of
    affiliated companies            25                 (34)      2        7       (85)          (85)
 Other income, net                   3                   2       6        6         1            18
 Gain on sale and
    revaluation of
    investments, net of
    reduction of
    investments and assets,
    net                            334                 26        3      82         46          491
 Total segment income in
    2006                         6,068                  (6)   9,034     905       260         16,261
 B. Allocated expenses
 Cost of sales and services      3,270                   -    6,637**   391       172         10,470
 Selling expenses                  670                   -    1,988       5        56         2,719
 General and
    administrative
    expenses                       818                   -      143     127        21         1,109
                                 4,758                   -    8,768     523       249         14,298
 2006 segment results            1,310                  (6)    266      382        11         1,963
 Unallocated income /
   expenses
 Unallocated
   administrative and
   general expenses                                                                             (39)
 Net unallocated financing
   expenses                                                                                    (538)
 Tax expense                                                                                   (429)
 Minority interest in
   earnings of subsidiaries                                                                    (273)
 Cumulative effect as at
   beginning of year of
   change in accounting
   method, net                                                                                  17
                                                                                               701
 C. Minority interest in
   income                         897                   -     3,689**   395       164         5,145
* See note 1F regarding classification and restatement.
** Reclassified


                                                 144
               Discount Investment Corporation Ltd.

         Notes to the Financial Statements for the Year Ended December 31, 2007



Note 26 - Business Segments (cont’d)

                                                                 Retail
                                                                  and       Real-
                                   Communications    Technology services    estate Industry   Total
                                    N    I     S          m    i  l     l     i    o   n    s

 3. Data from the 2005*
    statement of income:
 A. Income
 Sales and services                   1,349                 -     6,634      860      218    9,061
 Company's equity in net
    earnings (losses) and
    reduction net, of affiliated
    companies                           121               260        (2)      48        9     436
 Gain (loss) on sale and
    reduction of investments             (2)               (4)      66        23       40     123
 Other income (expenses), net            (4)                -        5         5        -       6
 Total segment income in
    2005                              1,464               256     6,703      936      267    9,626
 B. Allocated expenses
 Cost of sales and services             903                 -     4,889      467      133    6,392
 Selling expenses                       178                 -     1,476        9       46    1,709
 General and administrative
    expenses                            253                 -       124      109       15      501
                                      1,334                 -     6,489      585      194    8,602
 2005 segment results                   130               256      214       351       73    1,024
 Unallocated income /
   expenses
 Net unallocated income from
   management fees and
   other expenses                                                                                5
 Unallocated administrative
   and general expenses                                                                        (35)
 Net unallocated financing
   expenses                                                                                   (328)
 Tax expense                                                                                   (71)
 Minority interest in earnings
   of subsidiaries                                                                            (127)
 Cumulative effect as at
   beginning of year of
   change in accounting
   method, net                                                                                  2
                                                                                              470
 C. Minority interest in
   income                                70                 -     2,710      382      119    3,281
* See note 1.F regarding classification and restatement.




                                                    145
              Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



Note 26 - Business Segments (cont’d)

                                                              Retail
                                                               and       Real-
                                Communications    Technology services    estate Industry   Total
                                 N    I     S          m    i  l     l     i    o   n    s

4. Balance sheet data as at
   December 31, 2007:
Segment assets
Investments in affiliated and
   other companies                   521               630         28    1,482   2,022     4,683
Other assets                       7,673                 -      4,583    8,317     376    20,949
                                   8,194               630      4,611    9,799   2,398    25,632
Unallocated assets                                                                         5,039
                                                                                          30,671
Segment liabilities                1,010                  -     1,463       53      40     2,566
Unallocated liabilities                                                                   22,460
                                                                                          25,026
5. Balance sheet data as at
   December 31, 2006*:
Segment assets
Investments in affiliated and
other companies                      128               681         21      453   2,272     3,555
Other assets                       7,854                 -     4,379**   4,564     337    17,134
                                   7,982               681      4,400    5,017   2,609    20,689
Unallocated assets                                                                         2,515 **
                                                                                          23,204

Segment liabilities                  841                  -     1,607       65      65     2,578
Unallocated liabilities                                                                   15,620
                                                                                          18,198
* See note 1F regarding classification and restatement.
** Reclassified.




                                                 146
               Discount Investment Corporation Ltd.

           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 26 - Business Segments (cont’d)

                                                                      Retail
                                                                       and          Real-
                                      Communications      Technology services       estate   Industry
                                        N I S               m i l l i              o n       s

 6. Capital investments:
 During the year 2007                        748               99         150      2,488         335
 During the year 2006                        707               73         258      1,026       2,360
 During the year 2005                      6,332               45         215       230           42

 7. Depreciation and reductions *
 During the year 2007                        800                -         210         11          15
 During the year 2006                        889**              -         216         77          14
 During the year 2005                        249**              -         199         62          17
* Not including reduction of investments included in the Company’s equity in the net earnings
   (losses) and reductions of affiliated companies and in the gain (loss) on sale and reduction of
   investments.
** See note 1F regarding classification and restatement.




Note 27 - Related and Interested Parties

A.    1.      The Company has an agreement with IDB Development whereby the Company pays
              management fees at a fixed annual rate linked to the CPI in return for management
              services provided by IDB Development to the Company. This amount is payable
              quarterly. These management services include, inter alia, consultations and the provision
              of employees to serve as directors of the Company.

      2.      In 2007 the officers’ liability of the Company and a number of its subsidiaries was
              insured by Clal Insurance Company Ltd. (hereinafter – Clal Insurance), an interested
              party of the Company, with part of the insurance coverage being in respect of officers of
              the Company and its wholly owned subsidiaries, for which the Company paid $ 90
              thousand (last year - $ 120 thousand), and part of it being joint with officers of IDB
              Holdings and certain of its investee companies, including the Company, for which the
              Company paid a proportionate part of the insurance in the amount of $ 72 thousand (last
              year - $ 90 thousand). In addition, in 2007 subsidiaries of the Company paid to Clal
              Insurance the amount of NIS 5.1 million in respect of their officers’ liability insurance
              (2006 – NIS 4.7 million).

      3.      In 2007, two joint chairmen were appointed to the Board of Directors of Super-Sol, one
              of whom is a director of the Company, and both of whom are employed in the equivalent
              of one-quarter of a full-time position.




                                                   147
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 27 - Related and Interested Parties (cont'd)

A.   3.      (cont'd)
             The main conditions of their employment include a monthly salary of NIS 50 thousand
             plus a bonus of 0.75% of Super-Sol’s net earnings before the annual bonuses (the
             calculation of the bonus will not take into account non-recurring gains or losses deriving
             from non-recurring events). See Item (4) hereunder regarding the terms of options that
             were granted.

     4.      In January 2008 the general meeting of Super-Sol decided to approve the issuance of
             options to the Joint Chairman of the Board of Directors, who is a director of the
             Company. In accordance with the plan he was issued 625,000 options that are exercisable
             into 625,000 ordinary shares of a par value of NIS 0.10 each.
             The options may be exercised in three equal portions subject to the vesting of the
             eligibility Joint Chairman of the Board of Directors as follows:
             The first portion may be exercised commencing from July 30, 2008 and during a period
             of three years. The second portion may be exercised commencing from July 30, 2009 and
             during a period of two years. The third portion may be exercised commencing from
             July 30, 2010 and during a period of two years. The base exercise price of each option is
             NIS 15.07, subject to adjustments.
             The average economic value of each option for purposes of calculating the benefit
             recorded in the statement of income, as at the date of the decision of the Board of
             Directors, calculated in accordance with the Black and Scholes formula, is NIS 5.23 for
             the first and second portions and NIS 6.01 for the third portion.

     5.      The terms of employment of Asaf Livnat (relative of a controlling shareholder), who is
             employed by Super-Sol as a buyer and category manager in the trade department, were
             retroactively approved in January 2008. Asaf Livnat is entitled mainly to the following
             payments: a monthly gross salary of NIS 13,029, with the addition of social benefits and
             an advanced education fund, an additional monthly salary each year and other benefits.
             The total cost of his salary for 2007 was NIS 287 thousand.

     6.      In July 2007 the Chairman of the Board of Property & Building, who is a director of the
             Company, was appointed also as the Chairman of the Board of Super-Sol (and as from
             November 2007 he serves as a Joint Chairman of the Board of Super-Sol). In January
             2008 the general meeting of Property & Building approved changes in his terms of
             service and employment, by which his position in Property & Building would be reduced
             by 25% to a 75% position, retroactively from the date he was appointed Chairman of the
             Board of Super-Sol. Furthermore, the salary and social benefits he is entitled to receive
             will be reduced accordingly, but there will be no change in all the other terms of his
             employment, including in the rate of the annual bonus he is entitled to receive, and he
             will be entitled to continue to hold all the options he received with no change in their
             terms.

     7.      With respect to a public offering of the shares of a subsidiary of the Company on a stock
             exchange in the USA in 2007, in which the Company sold part of its shares, the Company
             has undertaken to return to the subsidiary a proportionate part of the expenses relating to
             the sale of the Company’s shares in the framework of the public offering. In accordance
             with this commitment, the Company paid the subsidiary the amount of NIS 13 million in
             2007.


                                                  148
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 27 - Related and Interested Parties (cont'd)

A.   (cont'd)
     8.      The President of the Company has an option that was granted by Cellcom to purchase
             450,000 shares of Cellcom for the price of $ 12.6 per share (as a result of the dividend
             that was distributed by Cellcom the exercise price of these options as at December 31,
             2007 is $ 10.93 per share).

     9.      The President of the Company has an option that was granted by Elron to purchase 1.5%
             of the securities of certain investee companies of Elron that were purchased by it after
             January 1, 2000 and 0.75% of the securities that were purchased before then. The price
             will be their weighted cost.

     10.     In 2006 the Company paid to Clal Insurance the amount of NIS 847 thousand for
             prospectus liability insurance in respect of the Company’s prospectus from 2005, for a
             period of 7 years from the date of the said prospectus.

     11.     In 2005 a company controlled by an interested party of the Company received $ 2 million
             from an investee company of the Company (a former affiliated company of the Company
             which ceased to be an affiliated company in 2003) that is controlled by a former
             controlling shareholder of the Company, in respect of consultation services, management,
             liquidation and other services that were provided and/or will be provided to the said
             investee company.

     12.     See Paragraph 3 of Note 20A for details regarding a provision the Company recorded for
             the indemnification of Clal Finance in respect of the sale of Betucha.

     13.     In 2007 the Company and a subsidiary paid Clal Finance Underwriting Ltd., an interested
             party of the Company, the total amount of NIS 11 million as a commission in respect of
             issuances of their debentures.

     14.     In 2007 a subsidiary and a related company of the Company purchased from an interested
             party of the Company teleprocessing services for a consideration of NIS 33 million.

     15.     In 2007 a subsidiary of the Company sold gift certificates to interested and related parties
             of the Company in the total amount of NIS 32 million (last year – NIS 19 million).

     16.     In 2007 a subsidiary of the Company executed transactions with interested parties in the
             total amount of NIS 4 million (last year – NIS 5 million) for the purchase of commercial
             motor vehicles, trucks and generators.

     17.     Two subsidiaries of the Company entered into a transaction by which one would sell to
             the other land for the price of NIS 39 million.

     18.     A subsidiary of the Company executed during 2007 a large number of transactions with
             suppliers that are interested and related parties of the Company in the total amount of NIS




                                                  149
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 27 - Related and Interested Parties (cont'd)

A.   18.   (cont'd)
           409 million (last year – NIS 336 million). The transactions included the purchase of food
           and other products for selling in stores.

     19.   In 2007 subsidiaries, related companies and interested parties of the Company purchased
           communication services from another subsidiary of the Company in the amount of NIS
           60 million (last year – NIS 63 million).

     20.   Subsidiaries leased from subsidiaries of the Company and from an interested party
           commercial areas for which they paid NIS 36 million in 2007 (last year – NIS 31
           million).

     21.   In July 2007 a subsidiary entered into an agreement for two years with a related company
           that is also an interested party of the Company for the provision of communication and
           internet services for a consideration of NIS 35 million.

     22.   The Company has an agreement with a subsidiary by which the Company would provide
           to the subsidiary management and financial advisory services in consideration of NIS 2
           million, plus VAT, per year. The agreement is renewed automatically for one year
           periods unless either one of the parties notifies the other in writing at least 60 days in
           advance that it is not interested in the renewal.

     23.   In 2005 the Company together with companies of the IDB Group examined the
           possibility of purchasing shares of Bezeq Israel Telecommunications Company Ltd. in
           the framework of the sale proceeding that was published by the State. In this framework
           the Company paid to the parent company its share in the joint costs of participating in this
           proceeding in the amount of NIS 3.6 million.

     24.   In April 2005 Property & Building approved payment of NIS 900 thousand to an
           interested party in respect of management fees and reimbursement of expenses relating to
           the service of a director of the Company as the Chairman of the Board of Property &
           Building between June 27, 2004 and February 28, 2005.

     25.   In May 2004 the Company entered into an agreement with IDB Development, CII and
           Property & Building regarding the joint lease of offices in the Azrieli center in Tel Aviv
           which are used by the parties to the agreement, and regarding splitting between them the
           uses and expenses of the offices so as to more efficiently take advantage of each one of
           the parties’ resources while reducing costs. The agreement was approved by the audit
           committee, the Board of Directors and the general shareholders’ meeting of each one of
           the parties. In November 2006 also Koor, a related party of the Company, joined this
           agreement. In 2007 the Company’s share in the lease and office expenses as
           aforementioned was NIS 2,642 thousand (last year – NIS 2,658 thousand). The share of
           the subsidiary and the related company of the Company amounted to NIS 2.3 million in
           2007.




                                                150
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 27 - Related and Interested Parties (cont'd)

A.   (cont'd)
     26.   AIPM, which is held by the Company (about 21%) and CII (about 38%), executed in the
           current year a private issuance, in which also the Company and CII, an interested party of
           the Company, participated. See Paragraph 1g of Note 2B for details.

     27.   The Company and its subsidiaries conduct transactions not considered unusual
           transactions with interested parties of the Company, and have commitments regarding the
           execution of such transactions. These transactions are immaterial and to the best of the
           Company’s knowledge are of the following types and nature: (a) transactions for
           receiving banking and financial services from banks and financial institutions that are
           interested parties of the Company; (b) purchase or sale transactions of products and
           services, such as communication products and services, food products, paper products,
           travel services, elementary insurance, leasing of motor vehicles, legal services from a law
           firm in which an interested party is a partner; (c) lease transactions of real estate; (d)
           management of deposits made by employers and employees to provident funds and
           advanced education funds, which are managed by banks or financial institutions that are
           interested parties.




                                                151
            Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



Note 27 - Related and Interested Parties (cont'd)

B.   Details of transactions with related and interested parties
                                                          Consolidated     Company
                                               Interest    December 31      December 31
                                                 rate     2007    2006    2007     2006
                                                  %         N I S    m i l l i o n s

       (1) Balances with related parties:
       Long term capital notes and loans
          with investee companies*
       Linked to the CPI                            0         -      -        -      61
       Linked to the US dollar                     10.9     829      -        -       1
       Linked to Euro                               5.1      77      -        -       -
       Linked to Sterling pounds                    6.0     141      -        -       -
       Accounts receivable with:
       Wholly-owned subsidiaries                               -     -        -       3
       Investee companies and other related
          parties                                            77     81        -       -
       Long-term loans linked to the CPI             0        -      1        -       -
       Cash, deposits and amounts funded in
          severance pay funds                               240    154        -       -
       Short-term loans:
       Wholly-owned subsidiaries                               -     -        -      15
       Accounts payable with:
       Wholly-owned subsidiaries                               -     -        7      33
       Investee companies and other related
          parties                                            41     73        -       -**
       Interested parties                                     9      5**      9       5**
       Loans granted:
       Long term loans from wholly-owned
          subsidiaries                                         -     -     1,657   1,722
       Debentures of consolidated
          companies held by interested
          parties                                           392    321        -       -
       Long term loans from interested
          parties                                             6      7        -       -
     * Before offsetting a provision for losses.
     ** Reclassified.




                                               152
             Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



Note 27 - Related and Interested Parties (cont'd)

B.   Details of transactions with related and interested parties (cont'd)
                                                       Consolidated            Company
                                     Number         Year ended December 31
                                        of        2007   2006     2005   2007   2006   2005
                                    recipients          N I S       m i l l i o n s

       (2) Expenses to and
          income
           from related parties:
       Payments to interested
          parties:
       Salaries and related
          expenses to interested
          parties employed by
          the Company in the
          period of report              2              16    4        4     10       4        4
       Directors fees in the
          Company and
          subsidiaries                12                2    1        1      1       1        1
       Management fees to the
          parent company                                1    1        1     1        1        1
       Rent to an investee
          company                                       -    3        3      -       -       -
       Interest to subsidiaries                         -    -        -     45     116      16
       Interest to the parent
          company                                       -   30       30      -      55      30
       Contributions to a fund
          owned by the parent
          company *                                    5     2        2      -       -        2
       Interest to others                              5    10       10      -       -        -
       Income:
       Interest from investee
          companies                                    33    5        5      -       -        2
       Participation in expenses
          and management fees
          from investee
          companies                                     5    7        7     1        1        4
       Management fees from
          subsidiaries                                  -    -        -     3        3       1
       Interest from subsidiaries                       -    -        -     -        3      17
     * The fund was incorporated by the parent company for the purpose of providing assistance to
       the community.




                                                 153
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 27 - Related and Interested Parties (cont'd)

C.   Indemnification of managers
     1.      The Company and its wholly-owned subsidiaries made decisions by which they issued
             letters of indemnification, pursuant to which each of them will indemnify the officers
             thereof (including former officers), with respect to payments which they must bear as a
             result of any legal proceeding arising out of their activities in the discharge of their duties
             as stated, subject to certain conditions, in every case and to the extent that the
             indemnification as stated stems from a monetary obligation and is of the type which may
             be indemnified under law, from time to time. Every indemnification to an officer, as
             detailed in the said indemnification letter is subject to, among other things, any approval
             required by law, if any is required at that time, and in such a case the indemnifying
             company shall take all steps necessary from its standpoint to obtain it. Any payment not
             approved, as stated, shall be subject to the approval of the court. The Company has issued
             such indemnification letters to directors and other officers of the Company (including
             former directors and officers) and to a number of directors and officers of its investee
             companies.
             In the framework of the aforesaid decisions, in 2001 and 2002 the Company has paid
             legal expenses for officers of the Company (including former officers) in the amount of
             NIS 7 million, in connection with the criminal proceeding that was conducted in respect
             of a claim that was filed with the court as described in Paragraph 1 of Note 19A against a
             commitment of the aforementioned officers to refund to the Company the aforesaid sum
             should it be found that under the law they are not entitled to the indemnification of their
             legal expenses. In 2002 they returned these amounts, on the condition that they will be
             entitled to a refund of their legal expenses if they are acquitted in the appeal court in a
             final ruling.
             The Company issued to officers thereof (including former officers), new certificates of
             release and indemnification, pursuant to the new Companies Law, with respect to their
             liability stemming from their activities in discharge of their duties as stated. The
             indemnification is limited to types of events determined by the Company's Board of
             Directors, as well as to a maximum indemnification amount equal to 25% of the
             Company's shareholders equity as at December 31, 1999, linked to the increase in the CPI
             from that date, plus the full amount of the insurance payments in connection with events
             of the said type which the Company shall receive from time to time in the framework of
             liability insurance for the Company's officers.
             The responsibility of the officers of the Company and the wholly-owned subsidiaries for
             discharge of their duties, as stated, is partly insured under insurance policies of the
             Company and partly under a group insurance policy of IDB Holdings for officers' liability
             of certain companies in the IDB Group.

     2.      Other subsidiaries of the Company have also issued letters of indemnification to their
             officers. These letters of indemnification were limited to certain events and also the total
             amount of indemnification was limited.




                                                    154
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 28 - Financial Instruments

A.   Credit risks
     As at December 31, 2007 the cash and cash equivalents amounted to NIS 5,036 million, the
     marketable securities amounted to NIS 779 million (mainly debentures) and short-term deposits
     to NIS 374 million. All the deposits are in financial institutions of the highest level in Israel.
     The revenues of the Company and its subsidiaries derive mainly from sales to customers in
     Israel. The subsidiaries regularly monitor the debts of customers, and the financial statements
     include provisions for doubtful debts which properly reflect, in the opinion of the subsidiaries,
     the loss included in the debts the collection of which is doubtful.
     The subsidiaries do not have any significant concentration of credit risk due to the policy of the
     subsidiaries that sales are made mostly in cash or by credit card, and in the real estate market are
     guaranteed by the units themselves until they are handed over to the purchaser, which takes
     place only when the payment for them has been completed.


B.   Interest risks
     The interest risk of the Company and its subsidiaries derives mainly from long-term loans
     (debentures and loans), most of which bear a fixed interest rate.
     Some of the long-term loans bear variable interest. In this case, the Company and its
     subsidiaries are exposed to flow risk in respect of interest changes, as detailed hereunder:
     1.      The table below presents the book values as at December 31, 2007 of the groups of
             financial instruments bearing fixed interest rates that are exposed to fair value risk, and of
             financial instruments bearing variable interest that are exposed to flow risk, according to
             maturity dates:




                                                   155
               Discount Investment Corporation Ltd.

           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 28 - Financial Instruments (cont'd)

B.    Interest risks (cont'd)
      1.      (cont'd)
                                 Effective                                                          Over
                                  interest                Up to      1-2     2-3     3-4     4-5      5
                                    rate     Total        1 year    years   years   years   years   years
                                     %

 Assets
 Deposits and long-term loans
   including maturities
         CPI                       6.7         120            14     48      14      22       2        20
         Unlinked                  0.00          2           -        -       -       -       -         2
 Loans granted to affiliated
   companies
         Dollar                  10.9          830              1     -       -       -        -      829
         Euro                     5.1           77              -     -       -       -        -       77
         Sterling pounds          6.00         142              -     -       -       -        -      142
 Deposits and short-term loans
   (not included maturities)
         Dollar                    6.7         191          191       -       -       -        -        -
         Euro                      9.0           7            7       -       -       -        -        -
         Unlinked                  4.8         121          121       -       -       -        -        -
 Cash and cash equivalents
         Dollar                    5.0        1,200       1,200       -       -       -        -        -
         Unlinked                  4.3        3,822       3,822       -       -       -        -        -
         CPI                       3.3            6           6
         Other                     0.00           8           8       -       -       -        -        -
 Liabilities
 Debentures
         CPI                       4.9       14,323         620     930     931     923     1,348   9,571
         Unlinked                  6.4           39           -       -       -       -        -       39
 Bank loans
         Fixed interest:
         Dollar                    6.2        446          69        78       8       9      42       240
         CPI                       5.4        922         210       212     123      96      81       200
         Unlinked                  4.1         35           7         2       2       1       1        22
         Other                     9.0         33           3         3       3       3       -        21
        Variable interest:
          Dollar                   5.7        327         131       131      65       -        -        -
          Unlinked                 5.4        254         101       101      52       -        -        -
 Bank credit (not included
   maturities)
         Fixed interest:
         Unlinked                  6.0         80          80         -       -       -        -        -
         Other                     1.9         26          26         -       -       -        -        -
         Variable interest:
         Dollar                    5.9         18          18         -       -       -        -        -



                                                    156
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 28 - Financial Instruments (cont'd)

B.   Interest risks (cont'd)
     2.      The table below presents the book values as at December 31, 2006 of the groups of
             financial instruments that are exposed to fair value risk, according to maturity dates:
                                Effective                                                          Over
                                 interest                Up to      1-2     2-3     3-4     4-5      5
                                   rate     Total        1 year    years   years   years   years   years
                                    %

 Assets
 Deposits and long-term loans
  including maturities
        CPI                        7.69      108            15     14       14      22      13        30
        Unlinked                   0.00        2             -      -        -       -       -         2
 Loans granted to affiliated
  companies
        Dollar                   11.97       102               -     -       -       -       -      102
        Euro                      3.10        57               -     -       -      57       -        -
        Sterling pounds           6.00       144               -     -       -       -       -      144
        Unlinked                  0.00         1               -     -       -       -       -        1
 Deposits and short-term
  loans (not included
  maturities)
        Dollar                     0.00        2             2       -       -       -       -         -
        Euro                       0.00        6             6       -       -       -       -         -
        Unlinked                   4.60       11            11       -       -       -       -         -
 Cash and cash equivalents
        Dollar                     4.97        65           65       -       -       -       -         -
        Unlinked                   4.90     1,546        1,546       -       -       -       -         -
        Other                      0.00         1            1       -       -       -       -         -
 Liabilities
 Debentures
        CPI                        5.01     9,413          327     586     842     842     1,830   4,986
        Unlinked                   6.35        34            -       -       -       -        -       34
 Bank loans
        Dollar                     6.36      825           -       139     225     428       5       28
        CPI                        5.03      882         215       136     111      96      98      226
        Unlinked                   6.54      520          10       104     101     305       -        -
        Other                      8.60       15           3         2       3       2       3        2
 Others
        CPI                        5.18      264         110       61       53       7       7        26
        Unlinked                   0.00        8           -        -        -       -       -         8
 Bank credit (not included
  maturities)
        Unlinked                   4.94      147         147         -       -       -       -         -




                                                   157
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 28 - Financial Instruments (cont'd)

C.   Foreign currency risks
     The Company and its subsidiaries are exposed to foreign currency risks in respect of their
     foreign investments and in respect of financial liabilities and assets denominated in foreign
     currency. Some of the subsidiaries act to reduce this exposure by investing in companies that are
     managed autonomously and the income of which is denominated in a stable currency or linked
     thereto, and, to the extent possible, by financing the investments in the same currency. Some of
     them also take steps to reduce the exposure by purchasing futures contracts. See Sections D and
     F below for more details.


D.   Changes in the Consumer Price Index
     The Company and its subsidiaries finance their operations mainly with CPI-linked loans. As a
     result, the Company and its subsidiaries are exposed to changes in the Consumer Price Index. In
     order to hedge these liabilities, the Company and its subsidiaries purchased contracts hedging
     against an unusual increase in the CPI. The contracts purchased are as follows:
     Derivatives positions as at December 31, 2007, in NIS millions:
                                                                     CPI / NIS
                                                 Par value    Fair value Pare value Fair value
                                                     Up to one year             Over one year
                                                   Long         Long          Long        Long

      (1) Futures contract for accounting
          hedging purposes (1)                     4,405           52           980            (7)

                                                                   $ / N I S
                                                     Up to one year           Over one year
                                                 Par value    Fair value Par value    Fair value
                                                 Long     Short    Long  Short    Long     Long
      (2) Derivatives for hedging purposes –
          not recognized for accounting
          purposes
          a. call options                        352        65          -       -
          b. put options                          95        18          1       -
          c. future purchases of dollars:
              • Not recognized for accounting
                purposes                         632       204     (27)       (1)     117            2
              • Recognized for accounting
                purposes                          59         (1)        -       -       -         -
          d. CCS (2)                               -          -         -       -     392       (66)




                                                158
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 28 - Financial Instruments (cont'd)

D.   Changes in the Consumer Price Index (cont'd)
                                                                       Libor/Interest
                                                          Par value                      Fair value
                                                                       Over one year
                                                                          Long

      (3) IRS (3)                                             400                            5
     (1) These contracts are intended to protect CPI linked liabilities, such that if the CPI were to
         rise at a higher rate than that provided in the contract, the Company would receive the
         difference and in the reverse case – the Company would pay the difference.
     (2) The purpose of this contract is to change dollar flow into shekel flow.
     (3) The purpose of this future contract is to change the Libor interest from variable interest into
         fixed interest.


E.   Fair value of financial instruments
     The financial instruments of the Company on a consolidated basis include non-derivative assets:
     cash and cash equivalents, marketable securities, receivables and debit balances, as well as non-
     derivative liabilities: short-term credit, payables and credit balances, loans, debentures and other
     liabilities.
     The table below provides the book value and fair value of groups of financial instruments that
     are presented in the financial statements as at December 31, 2007 not according to fair value:
                                                   December 31, 2007      December 31, 2006
                                                 Book value Fair value Book value Fair value
                                                          N I S    m i l l i o n s

      Financial assets
        Deposits and long-term loans,
          included maturities                           184           191           412               418
        Investment in companies presented
          on the cost basis                              57            99               87            112
      Financial liabilities
        Debentures                                 14,362           14,631        9,447           9,858
        Bank loans                                  1,899            1,910        2,245           2,254
        Others                                        163              153          272             278
     (1) The fair value of non-marketable debentures is based on a calculation of the present value
         of the cash flows according to the accepted interest rate for similar loans having similar
         characteristics as at December 31, 2007.
     (2) The fair value is based on quoted prices in an active market as at balance sheet date (the
         Tel Aviv Stock Exchange).
     (3) The fair value of long-term loans received is based on a calculation of the present value of
         the cash flows according to the accepted interest rate for similar loans having similar
         characteristics as at December 31, 2007.




                                                  159
                Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 28 - Financial Instruments (cont'd)

E.     Fair value of financial instruments (cont'd)
       The book value of the cash and cash equivalents, short-term investments, trade receivables,
       other receivables, investment in marketable securities, loans to affiliated companies, long-term
       loans that were granted, credit from banks and others, long-term loans received, trade payables
       and other payables is the same or proximate to their fair value.


F.     Linkage bases of linked assets and liabilities on a consolidated basis
                              D      e       c       e       m    b        e    r           3      1        ,        2     0       0    7
                                                                                                                               Investm
                                                                                                                                ents in
                             Linked to                           In euro                                                        shares
                                the              In dollars          or                           Non                             and
                            Consumer             or linked        linked       In other         monetary                         share
                            Price Index           thereto        thereto       currency          items          Unlinked       indexed    Total
                                      N            I      S                m      i     l        l     i        o     n         s

 Assets:
 Investments in investee
   and other companies                   -               -            -               -          3,634               -           -        3,634
 Loans to investee
   companies                             1           830            76              142                 -            -           -        1,049
 Long-term deposits and
   loans                            100                  -            -               -                13        1,175           -        1,288
 Fixed assets and
   investment property                   -               -            -               -         10,444               -           -       10,444
 Real estate                             -               -            -               -            251               -           -          251
 Deferred expenses and
   other assets                       -                -              -               -          4,009              11           -        4,020
 Sundry receivables                  76               36              5               9            119             234           -          479
 Trade receivables                   23               20              7              21              -           1,881           -        1,952
 Short-term deposits and
   loans                              -              228              7               -              -             126           -          361
 Inventory                            -                -              -               -          1,378               -           -        1,378
 Marketable securities              357               38              -               -              -             307          77          779
 Cash and cash
   equivalents at banks               5            1,195            9                 6              -           3,821           -        5,036
 Total                              562            2,347          104               178         19,848           7,555          77       30,671
 Liabilities
 Minority interest in the
   equity of subsidiaries              -               -              -               -          3,288               -           -        3,288
 Long-term liabilities            15,420             809              -              22             22             358           -       16,631
 Deferred taxes                        -               -              -               -            819               -           -          819
 Liability in respect of
   employee severance
   benefits, net                       -               -              -               -              -              27           -           27
 Short-term credit                     -              18              -              26              -              83           -          127
 Trade payables                       21             213              3               9              -           2,294           -        2,540
 Sundry payables                     362              11              2               3             51           1,165           -        1,594
 Total                            15,803           1,051              5              60          4,180           3,927           -       25,026

 Difference                    (15,241)            1,296            99              118         15,668           3,628          77        5,645
 Previous year difference      (10,531)             (685)           62              (91)        15,562             674          15        5,006




                                                                  160
               Discount Investment Corporation Ltd.

           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 29 - Subsequent Events
The gains included in this note are calculated on the basis of international standards.

A.    Changes in investments in investee companies
      1.      In January 2008 the Company sold 3.3% of the issued share capital of Cellcom for the
              price of NIS 330 million. As a result the Company shall recognize in the first quarter of
              2008 a gain presently estimated at the amount of NIS 172 million and the Company’s
              holding in Cellcom shall decrease to 52.6% in equity and 58.1% in voting.

      2.      In March 2008 KBI Town Builders Ltd. (hereinafter – KBI), a 23% investee of Property
              & Building, entered into an agreement to sell its rights in land in Ashdod for the price of
              NIS 126 million. If and to the extent the transaction is completed, Property & Building
              anticipates recording in its respect a net gain of NIS 18 million upon its completion. The
              Company anticipates recording a net gain that is presently estimated at NIS 12 million in
              respect of its share in the anticipated gain of Property & Building on the transaction. This
              gain will be recorded when Property & Building records its gain on the transaction.

      3.      In February 2008, GVT, which by means of a wholly owned subsidiary holds 26.4% of
              the share capital of a Brazilian company, sold part of its shares in the Brazilian company.
              The shares that were sold constituted 3.5% of the share capital of the Brazilian company,
              and the consideration on them amounted to a total of 167 million Brazilian real, at the
              price of 37.5 Brazilian real per share. The shares of the Brazilian company are traded on a
              stock exchange in Brazil. As a result of the transaction, the Company anticipates
              recording a gain in the first quarter of 2008 that is presently estimated at NIS 35 million
              in respect of the Company’s share in the anticipated gain of the GVT on the transaction.

      4.      In February 2008 Cellcom raised the amount of NIS 600 million by expanding its existing
              Series C and D of debentures.

      5.      In January and February 2008 the Company purchased on the stock exchange 2.7% of the
              share capital of Koor for the price of NIS 110 million. Following this purchase, the
              Company holds 49.5% of the share capital and voting rights in Koor.

      6.      In March 2008 Cellcom voluntarily made an early repayment of the balance of the loan it
              received from a syndicate of banks. The balance of the loan that was repaid as stated was
              $ 140 million (comprised of a dollar component of $ 85 million and a shekel component
              of NIS 253 million). See also Note 14D6.

      7.      In March 2008 Cellcom declared the distribution of a cash dividend in the total amount of
              NIS 700 million. The Company’s share in the aforementioned dividend amounted to NIS
              371 million.

      8.      In March 2008 the Company purchased in an off-floor transaction 2.8% of the share
              capital of Property & Building for the price of NIS 56 million. Subsequent to this
              purchase, the Company holds 68% of the share capital and voting rights in Property &
              Building.




                                                   161
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 29 - Subsequent Events (cont'd)

A.   Changes in investments in investee companies (cont'd)
     9.      Subsequent to balance sheet date and up to shortly before publishing these financial
             statements, the dollar exchange rate decreased by 11.6% from NIS 3.846 to NIS 3.399 per
             dollar. This decrease has a negative effect on the results of the Company.


B.   Claims
     1.      In January and February 2008 claims and requests to certify the claims as class actions
             were submitted to the court against Super-Sol, as described in Paragraphs (c) and (d) of
             Note 19B2.

     2.      In February 2008 the Court rejected the claim against Cellcom and the request to certify it
             as a class action that are described in Paragraph (m) of Note 19B1. In February and
             March 2008 claims and requests to certify the claims as class actions were submitted
             against Cellcom as described in Paragraphs (u) and (v) of Note 19B1.




Note 30 - Disclosure Regarding the Adoption of International Financial Reporting
          Standards (IFRS)

A.   Guidelines of Accounting Standard No. 29 regarding the adoption of IFRS
     In accordance with Accounting Standard No. 29, “First Time Adoption of International
     Financial Reporting Standards (IFRS)” (hereinafter – Standard 29), the Company is required to
     prepare its financial statements according to IFRS as from reporting periods beginning on or
     after January 1, 2008. The opening balance sheet according to IFRS will be as at January 1,
     2007 (the date of the Company’s transition to IFRS, hereinafter – the transition date). The initial
     implementation of IFRS will be effected along with the implementation of IFRS 1, “First Time
     Adoption of International Financial Reporting Standards”, for purposes of the transition.
     In accordance with Standard 29, a company that prepares its financial statements according to
     IFRS for the first time, is required to include in notes to its annual financial statements for the
     year ended December 31, 2007, balance sheet data as at December 31, 2007 and statement of
     income data for the year then ended, that have been prepared according to IFRS. On this matter,
     the Securities Authority issued FAQ 6, “Disclosure Required in the Financial Statements for the
     Year Ended December 31, 2007 Regarding the Adoption of IFRS” (hereinafter – FAQ 6), which
     specifies the disclosures that are to be included in the financial statements for December 31,
     2007.
     This note includes all the financial data required in accordance with Standard 29 and FAQ 6 to
     which the recognition, measurement and presentation principles of IFRS have been applied.




                                                  162
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 30 - Disclosure Regarding the Adoption of International Financial Reporting
          Standards (IFRS) (cont'd)

B.   Implementation of the provisions of IFRS 1 regarding the first time adoption of IFRS and
     choosing the relief provided by IFRS 1 as at the transition date
     According to IFRS 1, IFRS are to be retroactively implemented in the opening balance sheet as
     at the transition date.
     In order to ease the initial implementation, a number of matters were excluded from the
     requirement to be retroactively implemented in the opening balance sheet, and the possibility of
     choosing to use all or part of the exceptions was provided. Furthermore, a number of exceptions
     were provided regarding the retroactive implementation of certain aspects of IFRS.
     Presented hereunder are the exceptions the Company has chosen in accordance with IFRS 1,
     regarding which the Company did not retroactively implement the transition to reporting
     according to IFRS:
     1.      Business combinations – The Company did not retroactively implement IFRS 3 that
             discusses business combinations. Therefore, goodwill and excess cost created in business
             combinations from before the transition date in respect of acquisitions of subsidiaries,
             affiliates, proportionately consolidated companies and minority acquisitions were not
             accounted for in accordance with IFRS 3, but were presented as before in accordance
             with Israeli GAAP.

     2.      Translation differences from foreign operations – The Company did not recognize
             accumulated translation differences as at January 1,207 in respect of all its foreign
             operations. Therefore, the capital reserve from the adjustments deriving from the
             translation of financial statements of all the foreign operations is zero as at the transition
             date.

     3.      Share-based payment – IFRS 2 that discusses share-based payment transactions was not
             implemented to equity instruments that were granted before November 7, 2002, or were
             granted after that date and have vested before the transition date. As regards share-based
             payment transactions settled in cash, the Company has chosen not to implement IFRS 2 to
             liabilities that were paid before the transition date.

     4.      Designation of financial instrument recognized in the past – On the transition date, the
             Company designated financial instruments (that meet certain conditions in accordance
             with IAS 39 that discusses the recognition and measurement of financial instruments) to
             the group of financial instruments measured at fair value through profit and loss, since
             they were not designated as such upon their initial recognition (meaning upon the
             purchase of the financial instrument).


C.   Adjustments between reporting according to Israeli GAP and reporting according to IFRS
     In accordance with Standard 29 and FAQ 6, the Company is required to include in notes to its
     annual financial statements for the year ended December 31, 2007, consolidated balance sheet
     data as at December 31, 2007 and January 1, 2007 and consolidated statement of income data
     for the year then ended, that have been prepared according to IFRS.




                                                   163
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 30 - Disclosure Regarding the Adoption of International Financial Reporting
          Standards (IFRS) (cont'd)

C.   Adjustments between reporting according to Israeli GAP and reporting according to IFRS
     (cont'd)
     The tables below present the accounting effects of implementing IFRS on the consolidated
     balance sheet items as at December 31, 2007 and January 1, 2007, on the Company’s
     shareholders’ equity as at such dates and on the consolidated statement of income of the
     Company for 2007.
     Tables A and C – Adjustments following the transition to IFRS, on the Company’s
     consolidated balance sheets as at December 31, 2007 and January 1, 2007:
     The first two columns of these tables include the various balance sheet items and their amounts,
     as presented in the balance sheets as at the aforementioned dates in accordance with Israeli
     GAAP. Each column after that separately presents the accounting effect of implementing a
     certain IFRS principle on the Company’s consolidated balance sheet, and indicates the
     accounting effects that were already reflected upon the adoption of new Israeli accounting
     standards in 2007. This effect includes also the accounting measurement and recognition effects
     that are reflected in the shareholders’ equity of the Company and also various balance sheet
     classifications that are not reflected in a change in shareholders’ equity.
     Tables B and D – Adjustments following the transition to IFRS, on the Company’s
     shareholders’ equity as at December 31, 2007 and January 1, 2007:
     The first row of these tables presents the composition of the Company’s shareholders’ equity as
     included in its balance sheets as at the aforementioned dates according to Israeli GAAP. Every
     row after that separately presents the accounting effect of implementing a certain IFRS principle
     on each one of the components of the Company’s shareholders’ equity, and indicates the effects
     that were already reflected upon the adoption of new Israeli accounting standards in 2007.
     Table E – Adjustments following the transition to IFRS, on the consolidated statement of
     income of the Company and its subsidiaries for 2007:
     The first two columns of this table include the various statement of income items and their
     amounts, as presented in the consolidated statement of income for 2007 in accordance with
     Israeli GAAP. Each column after that separately presents the accounting effect of implementing
     a certain IFRS principle on the Company’s consolidated statement of income for 2007.
     An explanation regarding the nature of the accounting adjustments and the alternatives the
     Company has chosen as its accounting policy is provided after the aforementioned tables.
     The choice of the alternatives and relief for the transition date took into consideration the nature
     of the Group as a holding company, and accordingly the Company chose the alternatives and the
     relief which in its opinion most appropriately reflect the transactions of the Group and its
     business situation, taking into consideration that the consolidated financial statements of a
     holding company include operations having different kinds of business natures.


D.   This note was prepared on the basis of presently known IFRS, which were issued and will be in
     effect, or can be adopted early, on the first date of the Group’s annual report according to IFRS,
     December 31, 2008, and were the basis for the Company’s accounting policy.
     The IFRS that will be in effect or can be adopted in the annual financial statements for the year
     ended December 31, 2008 are subject to changes and the issuance of further interpretations, and
     therefore full certainty does not yet exist regarding their instructions and provisions.
     Accordingly, the accounting principles that will be applied in respect of the periods presented
     will be determined finally only when the first financial statements are prepared according to
     IFRS for December 31, 2008.


                                                  164
                                                                   Discount Investment Corporation Ltd.

                                                          Notes to the Financial Statements for the Year Ended December 31, 2007



Table A - Adjustments Following the Transition to IFRS, on the Company’s Consolidated Balance Sheet as at December 31, 2007
                                                          Implementati                              Valuation of                                    Reclassification                                  Cessation of     Accounting
                                                               on of           Valuation of           financial                                     of land leased                                    consolidation    for business
                                                             actuarial       available for sale      derivatives                      Classificat   from the Israel                                    of investee    combinations
                                                           calculation            financial         according to      Change in         ion of           Lands                         Liability to     company           under
                                                              when              instruments        fair value and     method of        deferred     Administration     Put option to      Chief         following        common         Proportionate                     Total
                                               In           recording        according to fair        change in      recognizing      taxes as a      to deferred      the minority    Scientist in     transition    control at fair   consolidation                 adjustments
                                           accordance     liabilities for   value and change        their balance   revenue from       separate      expenses and      shareholders    respect of     from control    value as from       in jointly                     for the          In
                                           with Israeli     employee          in their balance          sheet         the sale of     long-term           their             of         governme        to effective   the transition     controlled      Other        transition to   accordance
                                             GAAP            benefits       sheet classification   classification    apartments         items        amortization      subsidiaries     nt grants         control          date          companies      changes           IFRS        with IFRS
                     Item                                        4                    5                   6                7               8                9               11             13               14              15                18        19 - 23
                                                            N                   I                      S                                   m                    i              l                l                 i              o                  n             s


Non-current assets
Investments in affiliated companies            4,683          (20)                (48)                  (27)             (1)                                                (4)            (23)          648                88             (654)          (8)                (49)      4,634
Other investments and loans, including
  derivatives                                     46                             103                                                                                                                     (46)                                             41                98           144
Fixed assets                                   4,445                                                                     (2)                             (39)                                         (1,904)                                              -            (1,945)        2,500
Investment property                            5,999                                                                                                                                                    (531)                                           (155)             (686)        5,313
Investment property under construction             -                                                                                                                                                                                                     155               155           155
Fundings for employee benefits                     -             8                                                                                                                                                                                         -                 8             8
Long-term receivables                            603                                                                                                                                                                                                     (42)              (42)          561
Non-current inventory                            251                                                                     (1)                                                                                                                810            -               809         1,060
Deferred expenses                                 56             2                                                                                        36                                              (35)                              478           (1)              480           536
Deferred tax assets                                5                                                                    21                  63                                                                                                1            1                86            91
Intangible assets                              3,959                                                                                                                         7                          (778)                                              3              (768)        3,191
Current assets:
Other investments, including derivatives      1,153                                  (1)                                                                                                                (261)                                83           (1)             (180)          973
Receivables and debit balances                  479                                                       14              5               (113)                                                          (94)                               (48)         (24)             (260)          219
Current tax assets                                -                                                                                                                                                                                                       24                24            24
Trade receivables                             2,578                                                                    (25)                                                                           (1,085)                                              -            (1,110)        1,468
Inventory                                       989                                                                                                                                                     (597)                                              -              (597)          392
Inventory of buildings held for sale            389                                                                    314                                                                                                                                 -               314           703
Cash and cash equivalents                     5,036                                                                                                                                                     (183)                                41            -              (142)        4,894
Total assets                                 30,671           (10)                  54                  (13)           311                 (50)            (3)               3             (23)       (4,866)               88              711           (7)           (3,805)       26,866




                                                                                                                                    165
                                                                Discount Investment Corporation Ltd.

                                                       Notes to the Financial Statements for the Year Ended December 31, 2007



Table A - Adjustments Following the Transition to IFRS, on the Company’s Consolidated Balance Sheet as at December 31, 2007 (cont’d)
                                                       Implement                                                                                                                                                         Accounting
                                                         ation of                                                                                      Reclassification                                  Cessation of    for business
                                                         actuarial       Valuation of                                                                   of land leased                                   consolidatio    combination
                                                       calculation     available for sale       Valuation of                                           from the Israel                                   n of investee      s under
                                                           when             financial              financial          Change in                             Lands                         Liability to     company         common        Proportionat
                                                        recording         instruments            derivatives          method of       Classification   Administration     Put option to      Chief         following      control at            e                          Total
                                            In          liabilities    according to fair      according to fair      recognizing       of deferred       to deferred      the minority    Scientist in     transition    fair value as   consolidatio                  adjustments
                                        accordance          for       value and change       value and change       revenue from         taxes as a     expenses and      shareholders     respect of    from control      from the       n in jointly                    for the
                                        with Israeli    employee        in their balance       in their balance       the sale of     separate long-         their             of         government      to effective    transition      controlled      Other        transition to   In accordance
                                          GAAP           benefits     sheet classification   sheet classification    apartments         term items      amortization      subsidiaries       grants          control          date        companies      changes           IFRS          with IFRS
                    Item                                     4                  5                      6                   7                 8                 9               11              13              14              15              18        19 - 23
                                                          N                     I                     S                                     m                  i                l                l                 i               o                 n             s


Equity
Equity attributed to the Company’s
  shareholders                             5,645        (20)                        54                  (22)               (31)                                   (2)             3             (23)                             88                 4      (13)               38            5,683
Minority interests                         3,288                                                           5               (26)                                   (1)          (13)                            (873)                                2         3            (903)            2,385
Non-current liabilities
Financial liabilities                    15,364                                                                                                                                                             (1,827)                                          (3)        (1,830)           13,534
Deferred income                               4                                                                                                                                                                                                                -              -                4
Provisions                                   50                                                                                                                                                                  (36)                                          4           (32)               18
Deferred tax liabilities                    819                                                               4                1              (25)                                                               (74)                                          6           (88)              731
Employee benefits                            27            20                                                                                                                                                    (17)                                          -              3               30
Current liabilities
Financial liabilities                      1,260                                                                                                                                                               (119)                             693           6              580           1,840
Payables, credit balances and current
  liabilities                              1,594        (10)                                                                367               (25)                               13                            (476)                               12     (234)           (353)            1,241
Current tax liabilities                                                                                                                                                                                                                                     172             172              172
Trade payables                            2,540                                                                                                                                                             (1,444)                                          (2)        (1,446)            1,094
Revolving credit                             79                                                                                                                                                                                                                -              -               79
Deferred income                               1                                                                                                                                                                                                                -              -                1
Provisions                                    -                                                                                                                                                                                                              54              54               54
Total equity and liabilities             30,671         (10)                        54                  (13)                311               (50)                (3)              3            (23)        (4,866)              88              711         (7)        (3,805)           26,866




                                                                                                                                    166
                                                                  Discount Investment Corporation Ltd.

                                                          Notes to the Financial Statements for the Year Ended December 31, 2007



                                       Table B - Adjustments following the transition to IFRS, on the Company’s shareholders’ equity as at December 31, 2007
                                                                                                                                             Capital
                                                                                                               Capital                       reserves
                                                                                                               reserves                     in respect
                                                                                                                 from                      of available        Other
                                                                      Share        Share      Retained       translation     Hedge           for sale          capital                      Minority       Total
                                                                      capital     premium     earnings       differences    reserves          assets          reserves       Total          interest       equity
    Item                                                                                                                          NIS millions

           Israeli GAAP                                                     742       5,014         233             (518)         (21)                    -          195        5,645                  -       5,645
4          Implementation of actuarial calculations in recording
           liabilities for employee benefits                                                        (20)                                                                             (20)              -        (20)
5           Valuation of available for sale financial instruments
           according to fair value                                                                       1                                           53                               54               -            54
6          Valuation of financial derivatives according to fair
           value and change in balance sheet classification                                         (22)                                                                             (22)              5        (17)
7          Change in method of recognizing revenue from the
           sale of apartments                                                                       (31)                                                                             (31)         (26)          (57)
9          Reclassification of land leased from the Israel Lands
           Administration as deferred expenses and their
           amortization                                                                              (2)                                                                              (2)          (1)              (3)
10         Reclassification of the minority interest as a separate
           component of the Company’s shareholders’ equity                                                                                                                              -        3,288         3,288
11         Put option to the minority shareholders of
           subsidiaries                                                                                  3                                                                             3          (13)          (10)
12         Inclusion in retained earnings of the balance on the
           transition date of capital reserves from         capital
           reserves                                                                                 (18)             215                                           (197)                -              -              -
13         Liabilities to Chief Scientist in respect of
           Government grants                                                                        (23)                                                                             (23)              -        (23)
14         Cessation of consolidation of investee company
           following transition from control to effective control                                                                                                                       -        (873)         (873)
17         Accounting for business combinations under
           common control at fair value as from the transition
           date                                                                                      85                                                                  3            88               -            88
18         Proportionate consolidation in jointly controlled
           companies                                                                                   4                                                                            4                2             6
19-23      Other changes                                                                            (13)                                                                         (13)                3          (10)
           IFRS                                                             742       5,014         197             (303)         (21)               53                  1      5,683            2,385         8,068




                                                                                                  167
                                                                             Discount Investment Corporation Ltd.

                                                                    Notes to the Financial Statements for the Year Ended December 31, 2007



      Table C – Adjustment, following the transition to IFRS, on the Company’s consolidated balance sheet as at January 1, 2007
                                             Material effects reflected upon the adoption of new Israeli
                                                           accounting standards in 2007                                                                                       O      t   h    e     r    e      f    f    e     c    t   s
                                                                                                                                  Valuation
                                                                                                                                        of
                                                                                                                                   available       Valuation
                                                                                                                                    for sale             of
                                                                                                                                   financial         financial                                               Reclassification
                                                                                                                Implementation   instruments       derivatives                                                 of land                             Liabilit
                                                            Revaluation                        Classification         of          according        according                                                    leased                                y to
                                                                 of                                  of          actuarial              to               to                                                   from the                               chief
                                                            investment        Depreciation      computer        calculations      fair value        fair value        Change in                                 Israel                             scientist
                                                             property           of fixed        software            when              and               and            method of                                Lands               Put option         in
                                               In               and              assets            and           recording          change            change          recognizing        Cassification       Administration           to the        respect                   Total
                                           accordance       presentation       according       capitalized       liabilities        in their          in their          revenue           of long-           to deferred             Minority          of                 adjustments       In
                                              with            under              to the         software             for            balance           balance            from               term              expenses              Shareholders    govern                   for the    accordanc
                                             Israeli         separate         components       development       employee            sheet             sheet           the sale of        deferred            and their                  of          ment        Other     transition     e with
                                             GAAP              item             method            costs           benefits        classification   classification     apartments           taxes             amortization           subsidiaries    grants      changes     to IFRS       IFRS
                  Item                                           1                  2                3                4                  5                6                 7                 8                    9                    11             13        19-23
                                                                                                                                                               NIS millions


Non-current assets
Investments in affiliated companies           3,555                73                                                (12)              (68)            (30)                                                           (7)                    2           (62)     29          (75)       3,480
Other investments and loans, including
   derivates                                     17                                                                                  126                                                                                                                          64         190           207
Fixed assets                                  7,712           (3,113)             185             (237)                                                                 (3)                                         (148)                                          7      (3,309)        4,403
Investment property                               -            4,803                                                                                                                                                                                               -       4,803         4,803
Investment property under construction            -               83                                                                                                                                                                                               -          83            83
Fundings for employee benefits                    -                                                                     8                                                                                                                                          -           8             8
Long-term receivables                           613                                                                                                                                                                  21                                          (71)        (50)          563
Non-current inventory                           176                                                                                                                     (2)                                                                                        -          (2)          174
Deferred expenses                                56               (24)                                                  2                                                                                           132                                            1         111           167
Deferred tax assets                              18                                                                                                                     10                   97                                                                   (1)        106           124
Intangible assets                             4,951                                                237                                                                                                                                   48                        1         286         5,237
Current assets:
Other investments, including derivatives        347                                                                                                                                                                                                                6           6           353
Receivables and debit balances                  381                                                                                                     11               5               (158)                                                                   (14)       (156)          225
Current tax assets                                -                                                                                                                                                                                                               24          24            24
Trade receivables                             2,370                                                                                                                    (18)                                                                                        -         (18)        2,352
Inventory                                       795                                                                                                                                                                                                                -           -           795
Inventory of buildings held for sale            348                                                                                                                   243                                                                                         (1)        242           590
Cash and cash equivalents                     1,682                                                                                                                                                                                                                -           -         1,682
Total assets                                 23,021            1,822              185                   -              (2)             58              (19)           235                    (61)                     (2)                50              (62)     45       2,249        25,270




                                                                                                                                 168
                                                                            Discount Investment Corporation Ltd.

                                                                   Notes to the Financial Statements for the Year Ended December 31, 2007



         Table C – Adjustment, following the transition to IFRS, on the Company’s consolidated balance sheet as at January 1, 2007 (cont'd)
                                          Material effects reflected upon the adoption of new Israeli
                                                        accounting standards in 2007                                                                                          O   t     h    e    r     e    f    f      e   c    t    s
                                                                                                                               Valuation
                                                                                                                                     of
                                                                                                                                available       Valuation
                                                                                                                                 for sale             of
                                                                                                                                financial         financial                                           Reclassification
                                                                                                             Implementation   instruments       derivatives                                             of land
                                                        Revaluation                         Classification         of          according        according                                                leased
                                                             of                                   of          actuarial              to               to                                               from the
                                                        investment        Depreciation       computer        calculations      fair value        fair value        Change in                             Israel
                                                         property           of fixed         software            when              and               and           method of                             Lands               Put option     Liability to
                                            In              and              assets             and           recording          change            change         recognizing         Cassification   Administration           to the            chief                    Total
                                        accordance      presentation       according        capitalized       liabilities        in their          in their          revenue           of long-       to deferred             Minority       scientist in             adjustments       In
                                           with           under              to the          software             for            balance           balance            from               term          expenses              Shareholders     respect of                 for the    accordanc
                                          Israeli        separate         components        development       employee            sheet             sheet          the sale of         deferred        and their                  of        government       Other     transition     e with
                                          GAAP             item             method             costs           benefits        classification   classification    apartments            taxes         amortization           subsidiaries       grants      changes     to IFRS       IFRS
                  Item                                       1                  2                 3                4                  5                6                7                  8                9                    11               13         19-23
                                                                                                                                                             NIS millions
Equity
Equity attributed to the Company’s
  shareholders                            4,932              520                  74                              (24)                 28              (25)            (15)                                  (3)                    7             (62)        21         521        5,453
Minority interests                        1,646              766                  62                               (8)                  2                3             (11)                                   3                   (12)                        (2)        803        2,449

Non-current liabilities
Financial liabilities                    11,423               88                                                                                                                                                                                                          88        11,511
Deferred income                              17                                                                                                                                                                                                                            -           17
Provisions                                    6               16                                                                                                                                                                                              15          31           37
Deferred tax liabilities                    377              432                  49                               (7)                   2                3               1                 (38)             (1)                                              11         452          829
Employee benefits                            17                                                                    45                                                                                                                                                     45           62

Current liabilities
Financial liabilities                        718                                                                                                                                                                                                                                      718
Payables, credit balances and current
   liabilities                            1,658                                                                     (8)                26                             260                   (24)             (1)                      55                    (328)        (20)       1,638
Current tax liabilities                       -                                                                                                                                               1                                                              274         275          275
Trade payables                            2,198                                                                                                                                                                                                                                     2,198
Revolving credit                             27                                                                                                                                                                                                                                        27
Deferred income                               2                                                                                                                                                                                                                                         2
Provisions                                                                                                                                                                                                                                                    54                       54
Total equity and liabilities             23,021           1,822                 185                   -             (2)                58              (19)           235                   (61)             (2)                      50          (62)        45       2,249        25,270




                                                                                                                              169
                                                                 Discount Investment Corporation Ltd.

                                                             Notes to the Financial Statements for the Year Ended December 31, 2007



Table D - Adjustments following the transition to IFRS, on the Company’s shareholders’ equity as at January 1, 2007
                                                                                                                                Capital
                                                                                                   Capital                      reserves
                                                                                                   reserves                    in respect
                                                                                                     from                     of available    Other
                                                                Share      Share    Retained     translation    Hedge           for sale      capital            Minority    Total
    Item                                                        capital   premium   earnings     differences   reserves          assets      reserves    Total   interest    equity
                                                                                                                     NIS millions
           Israeli GAAP                                          735      4,109     162              (249)      (22)               -          197       4,932        -      4,932
           Effects reflected upon the adoption of new
           Israeli accounting standards in 2007:
1          Valuation of investment property                                         520                                                                  520       766      1,286
2          Depreciation of fixed assets according to the
           components method                                                          74                                                                  74        62       136
           Other effects:
4          Implementation of actuarial calculations in
           recording liabilities for employee benefits                               (24)                                                                 (24)      (8)       (32)
5           Valuation of available for sale financial
           instruments according to fair value                                         1                                          27                      28         2        30
6          Valuation of financial derivatives according to
           fair value and change in balance sheet
           classification                                                            (25)                                                                 (25)       3        (22)
7          Change in method of recognizing revenue
           from the sale of apartments                                               (15)                                                                 (15)     (11)       (26)
9          Reclassification of land leased from the Israel
           Lands Administration as deferred expenses
           and their amortization                                                     (3)                                                                  (3)       3          -
10         Reclassification of the minority interest as a
           separate component of the Company’s
           shareholders’ equity                                                                                                                                  1,646      1,646
11         Put option to the minority shareholders of
           subsidiaries                                                                7                                                                    7      (12)        (5)
12         Inclusion in retained earnings of the balance
           on the transition date of capital reserves from
           translation differences and other capital
           reserves                                                                  (52)            249                                     (197)          -        -          -
13         Liability to chief scientist in respect of
           government grants                                                        (62)                                                                  (62)       -        (62)
19-23      Other changes                                                             21                                                                    21       (2)        19
           IFRS                                                  735      4,109     604                 -       (22)              27             -      5,453    2,449      7,902



                                                                                               170
                                                                    Discount Investment Corporation Ltd.

                                                              Notes to the Financial Statements for the Year Ended December 31, 2007



Table E - Adjustments following the transition to IFRS, on the Company’s statement of income for 2007
                                                                                    Valuation                                       Inclusion in
                                                                Implementation          of                                             retained
                                                                      of           available        Valuation                       earnings of
                                                                  actuarial         for sale             of                         the balance                     Cessation
                                                                calculations       financial        financial                           on the                           of
                                                                  and their      instruments       derivatives                        transition                   consolidation
                                                                inclusion in       according        according                           date of                          of                        Accounting
                                                                shareholders’           to               to                             capital                      investee      Presentation    for business
                                                                    equity         fair value       fair value       Change in         reserves      Liability      company              of       combinations
                                                                    when               and              and          method of           form        to Chief       following       financing         under
                                                                 recording          change           change         recognizing      translation     Scientist      transition       income          common                           Total
                                                   In            liabilities        in their         in their         revenue        differences    in respect         from             and       control at fair                 adjustments
                                               accordance            for            balance          balance            from          and other         of          control to      expenses      value as from                      for the         In
                                               with Israeli      employee             sheet            sheet         the sale of        capital    Government        effective       on gross     the transition     Other         transition   accordance
                                                 GAAP              benefits       classification   classification   apartments         reserves       grants          control          basis           date         changes         to IFRS      with IFRS
Item                                                                  4                  5                6               7               12            13              14              15              17           19-23
                                                                                                                                                    NIS millions
Revenues
Sales and services                                17,069                                                                (106)                                        (2,579)                                                  -     (2,685)        14,384
The Company’s share in net earnings
(losses) of subsidiaries that were not
consolidated                                        (102)                (5)                 1              (7)             (1)             35             39               38                               25               4          129            27
Gain (loss) from realization and revaluation
of investments, net                                 1,462                  2             (11)               (1)                                                          (21)                                63            3              35        1,497
Other income (expenses), net                            4                                                                                                                 (1)                                            (1)              (2)           2
Financing income                                        -                                    7                 9                                                                         573                               1             590          590
Expenses
Cost of sales and services                      (11,148)                                                    (5)             71                                         1,891                                           (82)           1,875       (9,273)
Selling expenses                                 (2,830)                                                                  (12)                                           551                                              -             539       (2,291)
General and administrative expenses              (1,027)                   1                                                                                              36                                             80             117         (910)
Financing expenses                                 (842)                 (2)               (2)              (1)              6                                          (10)           (573)                           (12)           (594)       (1,436)
Income before taxes on income                      2,586                 (4)               (5)              (5)           (42)              35             39           (95)               -                 88         (7)               4         2,590
Taxes on income                                    (406)                 (2)                                (1)             11                                            34                                            (4)              38         (368)
Net income for the year                            2,180                 (6)               (5)              (6)           (31)              35             39           (61)                 -               88        (11)              42         2,222

Attributable to:
The Company’s shareholders                          1,539                (4)               (4)              (9)           (17)              35             39               -                -               88          (2)            126         1,665
Minority interests                                    641                (2)               (1)                3           (14)               -              -            (61)                -                -          (9)            (84)          557




                                                                                                                              171
             Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



Note 30 - Disclosure Regarding the Adoption of International Financial Reporting
          Standards (IFRS) (cont’d)

Explanation of the adjustments for the transition to IFRS

Accounting effects that were reflected upon the adoption of new Israeli accounting standards as from
January 1, 2007
1.    Revaluation of investment property and its presentation as a separate item – In accordance
      with Israeli GAAP, until December 31, 2006 investment property was presented at its
      depreciated cost as a part of fixed assets. In accordance with IFRS, investment property is
      presented separately in the balance sheet. The Company has chosen the alternative by which
      investment property is presented at fair value because this alternative, which is preferred by
      IFRS, more appropriately reflects the business activity of the Company. Changes in fair value in
      each reporting period are included in the statement of income for that period. The effect of this
      item was reflected upon the adoption of Accounting Standard No. 16 in Israel as from January
      1, 2007.

2.    Depreciation of fixed assets in accordance with the components method – In accordance
      with Israeli GAAP, until December 31, 2006 fixed asset items were depreciated at one rate,
      without differentiating between the components. In accordance with IFRS, any component of a
      fixed asset that has a significant cost in relation to the total cost of that same fixed asset is
      depreciated separately, according to the useful life of that component. The effect of this item
      was reflected upon the adoption of Accounting Standard No. 27 in Israel as from January 1,
      2007.

3.    Classification of computer software and capitalized software development costs – In
      accordance with IFRS, computer software and capitalized software development costs that do
      not constitute an integral part of the related hardware, are accounted for as an intangible asset.
      Therefore, upon the transition to reporting according to IFRS, computer software and
      capitalized software development costs were reclassified from fixed assets to intangible assets.
      The effect of this item was reflected upon the adoption of Accounting Standard No. 27 in Israel
      as from January 1, 2007.

Other accounting effects
4.    Implementation of actuarial calculations when recording liabilities for employee benefits –
      In accordance with Israeli GAAP, liabilities for employee severance benefits are recognized on
      the basis of the full liability, assuming that all the employees will be dismissed at conditions
      entitling them to the full amount of severance pay without taking into account capitalization
      rates, future salary raises and future employee turnover. Furthermore, liabilities for vacation and
      sick leave were calculated on the basis of estimates of utilization and redemption, respectively.
      In accordance with IFRS, all the net liabilities in respect of post-retirement benefits of
      employees and other long-term benefit plans are measured in accordance with the provisions of
      IAS 19 regarding employee benefits. Post-retirement benefits in respect of defined benefit plans
      are measured, inter alia, on the basis of actuarial estimates and capitalized amounts.
      Furthermore, amounts deposited with a related party in respect of employee severance benefits
      are presented in accordance with Israeli GAAP as a deduction from the liability. In accordance
      with IFRS, these deposits do not constitute plan assets and are presented as a separate asset.




                                                  172
             Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



Note 30 - Disclosure Regarding the Adoption of International Financial Reporting
          Standards (IFRS) (cont’d)

     The Company has chosen the alternative provided in IAS 19 regarding employee benefits, by
     which actuarial gains or losses deriving from changes in actuarial assumptions are included in
     retained earnings.
     The Company has chosen the alternative of including the actuarial gains or losses in retained
     earnings since this alternative reflects the proper fair value of the net liabilities to the employees
     on the cutoff date. Furthermore, under this alternative the statement of income more
     appropriately reflects the results of operations of the Company, which prevents fluctuations in
     respect of actuarial gains and losses.

5.   Valuation of available for sale financial instruments according to fair value and balance
     sheet reclassification – In accordance with Israeli GAAP the Company classified its
     investments in non-marketable shares and in non-marketable share options as permanent
     investments that are measured at cost, net of impairment in value not having a temporary nature.
     In accordance with IFRS, the Company classifies these investments as available for sale
     financial assets, and they are measured at fair value on every balance sheet date. Changes in
     their fair value are included in a capital reserve in respect of available for sale financial assets,
     other than prolonged or significant impairment in value that are included in the statement of
     income. Unlike Israeli GAAP, in accordance with IFRS financial instruments classified as
     available for sale and all the deriving financial instruments are recognized as assets or liabilities
     according to fair value.

6.      Valuation of financial derivatives according to fair value and balance sheet
        reclassification – In accordance with Israeli GAAP, embedded derivatives do not have to be
        separated from hybrid contracts. In accordance with IFRS, embedded derivatives are to be
        separated from hybrid instruments and be presented at fair value on every balance sheet date,
        with the changes in fair value being presented each reporting period in the statement of
        income for that period.
        Reclassification of financial derivatives from equity to liability – In accordance with
        Israeli GAAP, liabilities convertible into ordinary shares that are denominated in foreign
        currency (that is not the functional currency of the Company) and/or linked to the Consumer
        Price Index or to foreign currency are accounted for as a compound instrument and were
        therefore split into an equity component and a liability component. In accordance with IFRS,
        these liabilities are classified as liabilities that include an embedded derivative. For
        measurement purposes the amount of the liability is to be separated into two components: the
        liability component with no conversion right which is measured at amortized cost according
        to the effective interest method, and the conversion option, which is measured at fair value
        every period with the changes in the fair value of this component being recognized as
        income or expense on a current basis.

7.   Change in method of recognizing revenue from the sale of apartments – In accordance with
     Israeli GAAP, the revenue of contractors from the sale of apartments is recognized over the
     period of constructing the apartments, subject to the percentage of completion of the project
     equaling or exceeding 25% and the accumulated sales proceeds equaling or exceeding 50% of
     the total proceeds from the project. In accordance with IFRS, the revenue of contractors from
     the sale of apartments is recognized when the apartments are handed over to the buyers.



                                                   173
             Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



Note 30 - Disclosure Regarding the Adoption of International Financial Reporting
          Standards (IFRS) (cont’d)

8.    Classification of deferred taxes as a separate long-term item – In accordance with Israeli
      GAAP, deferred tax assets and deferred tax liabilities were classified as current or non-current
      assets or liabilities based on the classification of the assets and liabilities for which they were
      created. In accordance with IFRS, deferred tax assets and deferred tax liabilities are classified as
      non-current assets or non-current liabilities even if they are anticipated to be realized in the
      short-term.

9.    Reclassification of land leased from the Israel Lands Administration to deferred expenses
      and their amortization – In accordance with Israeli GAAP, land leased from the Israel Lands
      Administration (hereinafter – the Administration) was usually classified as a financing lease and
      therefore was not depreciated. In accordance with IFRS, land leased from the Administration
      that is not investment property or inventory is classified as an operating lease. Therefore, lease
      fees paid in advance to the Administration are classified as deferred expenses and amortized
      over the lease period (including the optional period to extend the lease if on the date of the lease
      agreement it was reasonably probable that the option would be exercised).

10.   Reclassification of the minority interest as a separate item of the Company’s shareholders’
      equity – In accordance with Israeli GAAP, the minority interest is classified as a separate item
      between the long-term liabilities and the shareholders’ equity. In accordance with IFRS, the
      minority interest in subsidiaries is classified as a separate item of the Company’s shareholders’
      equity.

11.   Put option to the minority shareholders of subsidiaries – In accordance with Israeli GAAP, a
      put option that was issued by the Group to the minority shareholders is not reflected in the
      financial statements, and the increase in the rate of holding following purchase of the minority
      interest is recognized upon the actual exercise of the put option. In accordance with IFRS, a
      liability was recorded in respect of the put option in accordance with the fair value of the
      payment, which is accounted for as a contingent purchase cost of the minority interest.
      Revaluation of the liability in respect of the time component is reflected in financing expenses,
      and the Company includes in its income the entire amount of the subsidiary’s income, whereas
      the valuation of liabilities in respect of other changes is recorded against goodwill.

12.   Inclusion in retained earnings of the balance on the transition date of capital reserves
      from translation differences and other capital reserves – As stated in Paragraph B2 of this
      note, in accordance with the exception in IFRS 1, the Company has chosen the alternative of
      including in the retained earnings the balance of the reserves, positive and negative, from the
      translation of financial statements of investee companies as at the transition date. Furthermore,
      on the transition date, capital reserves from transactions with controlling shareholders that are
      presented at fair value in accordance with IFRS (other than reserves created in business
      combinations) and other capital reserves that are not required in accordance with IFRS, were
      included in retained earnings.

13.   Commitment to the Chief Scientist in respect of Government grants – In accordance with
      Israeli GAAP, grants from the Chief Scientist in respect of research and development projects
      were recognized upon their receipt as income and are presented as a deduction from the related
      research and development expenses. The likelihood of refunding the grant is not examined on a



                                                   174
             Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



Note 30 - Disclosure Regarding the Adoption of International Financial Reporting
          Standards (IFRS) (cont’d)

      current basis and when a grant is refunded the expense is included in the cost of sales under the
      payment of royalties to the Chief Scientist. In accordance with IFRS, such grants are accounted
      for as forgivable loans according to the provisions of IAS 20. Accordingly, grants received from
      the Chief Scientist are recognized as a liability according to their fair value on the date of their
      receipt, measured according to the present value of the anticipated cash flows, unless on that
      date it is reasonably certain that the amount received will not be refunded. The amount of the
      liability is reexamined each period, and any changes in the fair value of the grant are recognized
      as income or expense.

14.   Discontinuance of consolidation of investee company following transition from control to
      effective control – On the date of the transition to IFRS, the Company has chosen to present
      investee companies in which it has effective control on the equity basis, since the consolidation
      of financial statements under circumstances of effective control, which is not legal control, does
      not contribute to the relevancy of the financial statements of a holding company. Furthermore,
      in the opinion of the Company this alternative is more consistent with the language of IFRS.
      Following completion of the second phase of selling shares of the Company in Super-Sol as
      described in Paragraph 2(d) of Note 2B, the Company is left with effective control over Super-
      Sol. In accordance with Israeli GAAP, the financial statements of Super-Sol were consolidated
      with the financial statements of the Company also after completing the second stage of the
      aforementioned sale. Upon the transition to reporting according to IFRS and in light of the
      Company’s decision to not consolidate companies in which it has effective control as
      aforementioned, the Company discontinued the consolidation of the financial statements of
      Super-Sol in its financial statements for reporting periods after September 25, 2007 and as from
      this date the investment in the shares of Super-Sol is presented on the equity basis.

15.   Presentation of financing income and expenses on a gross basis – In accordance with Israeli
      GAAP the financing expenses were presented on a net basis. In accordance with IFRS,
      financing income and financing expenses are to be presented separately (on a gross basis).

16.   Reclassification of dividend declared subsequent to balance sheet date in the statement of
      changes in shareholders’ equity – In accordance with Israeli GAAP, a dividend declared
      subsequent to balance sheet date and before the approval date the financial statements was
      presented under shareholders’ equity as a separate item “Dividend declared subsequent to
      balance sheet date” against a decrease in retained earnings. In accordance with IFRS, such a
      dividend only requires disclosure and does not require any equity classification.

17.   Accounting for business combinations under common control at fair value as from the
      transition date – In accordance with the decision of the Securities Authority from April 2007
      regarding the accounting treatment of transactions regarding business combinations under
      common control, the transaction in which Barak and Globecall were sold to Netvision was
      accounted for under the “As Pooling” method. According to this method, Netvision reported the
      assets and liabilities of Barak and Globecall in its financial statements according to their book
      value on the financial statements of CII and the Company, as from the dates CII and the
      Company obtained control over Barak and Globecall, respectively. The difference between the




                                                   175
             Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



Note 30 - Disclosure Regarding the Adoption of International Financial Reporting
          Standards (IFRS) (cont’d)

      share of the Company in the new shareholders’ equity of Netvision and the Company’s
      investment in Globecall and in Netvision before the transaction was included in the financial
      statements of the Company under a capital reserve. In accordance with IFRS the Company has
      chosen to account for business combinations under common control at their fair values as from
      the transition date. Accordingly, the assets and liabilities of Barak and Globecall were recorded
      in the financial statements of Netvision according to their fair values on the date of the
      transaction. The difference between the share of the Company in the new shareholders’ equity
      of Netvision and the Company’s investment in Globecall and in Netvision before the
      transaction, less the unrealized gain from the sale of Globecall, was included in the financial
      statements of the Company as a capital gain
      The Company has chosen the alternative of presenting business combinations under common
      control at fair value, since in a holding company, recording these investments at fair value more
      appropriately reflects its financial position and results of operations. Furthermore, when public
      companies are involved in business combinations, the fair value of the investments in the
      investee companies can be reliably determined.

18.   Proportionate consolidation in jointly controlled companies – In accordance with Israeli
      GAAP, entities in which the Company has joint control are presented according to the
      proportionate consolidation method. In accordance with IFRS, the investment in such entities
      may be presented according to the proportionate consolidation method or on the equity basis.
      The Company has chosen to present its investments in jointly controlled entities according to
      the proportionate consolidation method, since it has joint legal control, and therefore the
      proportionate consolidation of these companies more appropriately reflects the Company’s
      financial position and results of operations. Furthermore, the Company has chosen the
      alternative that is consistent with the method of accounting it applied under Israeli GAAP. In
      accordance with Israeli GAAP, the investment in a company in which the Company has joint
      control with an interested party was accounted for on the equity basis. In accordance with IFRS,
      such investments can be presented according to the proportionate consolidation method or on
      the equity basis. According to the Company’s choice, the said investment was accounted for by
      the proportionate consolidation method.

Other accounting effects that for materiality reasons were included in the item of other changes in
tables A-E above
19.   Inclusion of costs of dismantling and removing fixed assets items and of site restoration in
      the cost of fixed asset items – In accordance with Israeli GAAP, until December 31, 2006 the
      costs of dismantling and removing fixed asset items and of restoring the site on which they were
      located were not included in the cost of fixed asset items upon their initial recognition,. The
      Company has chosen the relief provided in IFRS 1, by which it capitalized the anticipated costs
      of dismantling and removing sites according to historical capitalization rates as at the date of the
      transition. The effect of this item was reflected upon the adoption of Israeli Accounting
      Standard No. 27, “Fixed Assets”, as from January 1, 2007.

20.   Reinstatement of costs in respect of research and development projects that were acquired
      in business combinations – In accordance with Israeli GAAP, until December 31, 2006 the
      Company recognized as an expense the costs of research and development projects that were
      acquired in business combinations. In accordance with IFRS, these projects meet the definition


                                                   176
               Discount Investment Corporation Ltd.

           Notes to the Financial Statements for the Year Ended December 31, 2007



Note 30 - Disclosure Regarding the Adoption of International Financial Reporting
          Standards (IFRS) (cont’d)

      of an intangible asset and are amortized over their useful life. The effect of this item was
      reflected upon the adoption of Israeli Accounting Standard No. 30, “Intangible Assets”, as from
      January 1, 2007.

21.   Adjustment in respect of share-based payment transactions – In accordance with Israeli
      GAAP, as from January 1, 2006 the Company recognized share-based payment transactions
      with respect to grants awarded after March 15, 2005 that had not yet vested as at January 1,
      2006. In accordance with the relief in IFRS 1, share-based payments awarded after November 7,
      2002 that had not yet vested as at January 1, 2007 are retroactively accounted for in accordance
      with IFRS 2. Furthermore, in the absence of a specific instruction, the Company has chosen to
      present the benefit in accordance with IFRS under retained earnings instead of under a capital
      reserve.

22.   Contingent liabilities and provisions for legal claims – In accordance with Israeli GAAP, the
      Company recognized provisions for legal claims if it was probable that economic resources of
      the Company would be required in order to settle the obligation. Furthermore, the provision was
      measured on the basis of the full amount expected to be required in order to settle the claim. In
      accordance with the instructions of IAS 37, “Provisions, Contingent Liabilities and Contingent
      Assets”, the Company recognized a provision in respect of these claims, when it was more
      likely than not that the Company would require the use of its economic resources in order to
      settle the obligation. Furthermore, when the effect of the time value is material, the provision
      was measured according to its present value.

23.   Additional classifications in accordance with IFRS
      a.      Provisions in respect of legal or constructive liabilities were presented separately in the
              balance sheet and not under other payables, trade payables or the liability for employee
              severance benefits.
      b.      Current tax assets and current tax liabilities were presented separately in the balance sheet
              and not under other receivables or other payables.
      c.      Amortization of excess cost attributed to customer relations – In accordance with Israeli
              GAAP, the amortization of excess cost attributed to customer relations in a subsidiary
              was included in the consolidated statement of income in the item of general and
              administrative expenses. In accordance with IFRS this amortization is included in the cost
              of sales and services.

Additional accounting alternatives chosen by the Company under IFRS
1.    Fixed assets – IFRS allows choosing the accounting policy of measuring fixed asset items
      according to the cost method or according to the revaluation method. Consistently with the
      Company’s choice of the cost method as its accounting policy for measuring fixed assets in
      accordance with Israeli GAAP in the framework of implementing Standard 27, the Company
      has chosen the same method for reporting according to IFRS.




                                                    177
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 30 - Disclosure Regarding the Adoption of International Financial Reporting
          Standards (IFRS) (cont’d)

2.   Accounting for the acquisition of additional rights from the minority after a business
     combination – In accordance with Israeli GAAP, the Company allocated to tangible and
     intangible assets the excess cost that was created upon the acquisition of additional rights from
     the minority of a subsidiary if their fair value is higher than their book value. The unallocated
     balance was recorded as goodwill. In the absence of specific instructions in IFRS regarding the
     purchase of shares of the minority in subsidiaries, the Company allocated the entire excess
     purchase price created upon the acquisition of the minority’s shares in subsidiaries to goodwill
     and did not make a specific allocation to identified assets since this is not an initial purchase of
     control and since, according to IFRS, upon the initial purchase of control, all the identified
     assets and identified liabilities are already measured at their fair value as at that date.

3.   Accounting for the sale of shares to the minority while maintaining control – In accordance
     with Israeli GAAP, the Company recognized a gain on the sale in the amount of the difference
     between the consideration it received and the book value of the investment realized. In the
     absence of any IFRS specific instructions regarding such transactions, the Company accounted
     for the transaction in a manner consistent with its accounting treatment of acquisitions of
     minority interests (increase in rate of holding while maintaining control). Furthermore, this
     accounting treatment more appropriately reflects the nature of the Company’s current operations
     which involves the acquisition of holdings in various companies and their sale.

4.   Accounting for capital reserve created upon rise to control in existing holding - In
     accordance with Israeli GAAP, goodwill and fair value adjustments (excess cost) are calculated
     separately upon each acquisition in respect of the additional part acquired. In accordance with
     IFRS, when a business combination is executed in parts, the fair value of the identified assets,
     liabilities and contingent liabilities of the acquired company may be different on each date of
     acquisition. Therefore, when control is acquired, all the assets, liabilities and contingent
     liabilities of the acquired company are revalued according to their fair value as at that date. The
     difference created as a result of the revaluation of the previous acquisitions on the date control
     was acquired, is included in a capital reserve. In the absence of any IFRS specific instructions
     regarding the treatment of such a capital reserve, the Company has chosen an accounting policy
     by which it shall recognize the capital reserve in earnings over the depreciation and amortization
     period of the fixed assets and intangible assets, as permitted in the relevant standards, since in
     the opinion of the Company it is not appropriate that such depreciation or amortization should
     lower the retained earnings.

5.   Issues under further examination
     a.      The accounting treatment of CPI-linked financial instruments – The Company has
             balances of CPI-linked financial instruments. In the opinion of management of the
             Company, based on the position paper that was published by the Israel Accounting
             Standards Board, there are a number of possible methods for accounting for CPI-linked
             financial instruments. For purposes of this note, the Company has adopted the accounting
             treatment by which the carrying value of the instrument and the payments derived
             accordingly are remeasured every period in accordance with the change in the index, and
             therefore there is no need to reconcile the value of the instruments according to Israeli
             GAAP to their value according to IFRS. The measurement of CPI-linked financial
             instruments according to IFRS is currently under examination and in this framework the


                                                  178
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



Note 30 - Disclosure Regarding the Adoption of International Financial Reporting
          Standards (IFRS) (cont’d)

             professional committee of the Israel Accounting Standards Board plans to request from
             the International Financial Reporting Interpretations Committee (IFRIC) its position
             regarding the accounting treatment of CPI-linked liabilities and assets according to IFRS.
             In light of the above, it is possible that the aforementioned accounting treatment is not
             possible under IFRS and that a different accounting policy that takes into consideration
             expected inflation rates when measuring the financial instrument is more appropriate (on
             this matter see instructions 7AG and 8AG of IAS 39). If a decision is made to this effect,
             the Company will be required to examine the significance of such a decision, including
             transitional provisions, if and to the extent any are provided, on its financial statements
             and accompanying notes that were and will be published until the date of the decision
             according to IFRS.

     b.      To the best of the Company’s knowledge, the matter of the capitalization interest for
             purposes of actuarial calculations is under examination and it may ultimately be decided
             that in Israel the appropriate capitalization interest is one based on corporate debentures.
             In this case, the data included in this note will change, the actuarial liability will decrease
             and the current financing expenses in respect of the liability will increase.




                                                    179
             Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



ANNEX TO THE FINANCIAL STATEMENTS OF DISCOUNT INVESTMENT
CORPORATION LTD. as at December 31, 2007

A.    Details relating to major investments in the consolidated balance sheet as at
      December 31, 2007
                                       Carrying
                             Equity     value of                       Market value of the
                              and         the                         marketable shares as at
                             voting   investment    Adjustments       December March 20,
                             rights       (1)            *      Total 31, 2007       2008
                               %                   N I S     m i l l i o n s

 Communications
 G.V.T (Holding) N.V.           16      144              (13)        131
 Netvision Ltd.                 33      377                          377        417        360
 Cellcom Israel Ltd.
  (voting 61%) (See also
  Note 29A1)                    56    2,536              21        2,557      6,758      6,196

 Technology
 Elron Electronic
  Industries Ltd.               49      420             112          532        588        407
 Expand Networks Ltd.           31       17                           17
 Given Imaging Ltd.             16      159              16          175        432        248
 Galil Medical Ltd.             13        9               1           10
 Scailex Vision (Tel Aviv)
  Ltd.                           7        5                            5
 Cosmocom Inc.                  10       10                           10
*     Mainly Adjustments from the translation of financial statements of investee companies will be
      included in the statement of income if the investment is realized.




                                               180
                 Discount Investment Corporation Ltd.

            Notes to the Financial Statements for the Year Ended December 31, 2007



ANNEX TO THE FINANCIAL STATEMENTS OF DISCOUNT INVESTMENT
CORPORATION LTD. as at December 31, 2007 (cont'd)

A.       Details relating to major investments in the consolidated balance sheet as at December 31,
         2007 (cont’d)
                                   Equity     Carrying                            Market value of the
                                    and      value of the                       marketable shares as at
                                   voting    investment                         December     March 20,
                                   rights        (1)         Adjustments* Total 31, 2007       2008
                                     %                      N I S      m i l l i o n s

    Retail and Services
    Bartan Holdings &
      Investments Ltd.               56             17                       17
    Brink’s (Israel) Ltd.            10              -                        -
    Isrotel Ltd.                      3              6                        6         18        17
    Super-Sol Ltd. ** (voting
      – 42%)                         40           648                       648      1,382      1,238

    Real Estate
    Property and Building
     Corporation Ltd. (see
     also note 29.A.8)               65         1,832             73       1,905     2,029      1,167

    Industry
    Ham-Let (Israel-Canada)
     Ltd.                            45           112             17        129        270       204
    Koor Industries Ltd. (see
     also note 29.A.5)               47         1,816            254       2,070     2,491      1,733
    Makhteshim Agan
     Industries Ltd.                   0.2          27                       27         37        27
    American Israeli Paper
     Mills Ltd.                      21           155             57        212        271       221
    Maxima Air-Separation
     Center Ltd. ** (see also
     paragraph 1e in note 2B         24             25                       25         33        32
    Other companies                                 36
    Total                                        8,351
    Less - investments in subsidiaries          (5,169)
    Add provision for losses of investee
     companies                                      14
    Add investments and loans of
     subsidiaries                               1,487
                                                4,683
*       Mainly adjustments from the translation of financial statements of investee companies will be
        included in the statement of income if the investment is realized.
**      Including a proportionate part of the investee company's shares that are held by wholly owned
        subsidiaries.




                                                          181
              Discount Investment Corporation Ltd.

          Notes to the Financial Statements for the Year Ended December 31, 2007



 ANNEX TO THE FINANCIAL STATEMENTS OF DISCOUNT INVESTMENT
 CORPORATION LTD. as at December 31, 2007 (cont'd)

A.   Details relating to major investments in the consolidated balance sheet as at December 31,
     2007 (cont’d)
     1.      The carrying value of the shares, including loans granted.

     2.      The Company and some of its investee companies are subject to restrictions under law
             with respect to the execution of new investments and the increase of existing investments
             in investee companies under certain circumstances. In addition, the provisions of certain
             laws and the terms of the licenses and concessions in the communications area, which
             were granted to a number of the Company's investee companies, include prohibitions
             against cross ownership which may limit the Company's ability to take advantage of
             business opportunities for new investments or to increase existing investments in this
             area.

     3.      The Company’s investments in investee companies include, inter alia, shares of
             companies the sale of which is subject to certain restrictions. In particular, the Company’s
             ability to sell its shares in Cellcom to non-Israeli parties is limited.


B.   Details of the main investments in affiliated and other companies (not including
     subsidiaries) held by:
                                                                             Equity and voting rights
                                                                                       %

      Property and Building Corporation Ltd.
        Science Based Industries Campus Ltd.                                           50.00
        Mehadrin Ltd.                                                                  45.41
        K.B.A Town Builders Group Ltd.                                                 23.13
        IDB Group Investment Inc.                                                      50.00
        GTC Investments B.V.                                                           48.75

      Super-Sol Ltd.
        Bay Heart Ltd.                                                                 37.00

      Bartan Holdings & Investment Ltd.
        Maagan Eden Limited Partnership                                                24.50
        Ein Gedi Tourism – Limited Partnership                                         33.30
        Ein Gedi G.K. Tourism Ltd. (General partner in Limited
           Partnership)                                                                50.00
        Maagan Bar Hotel Management Ltd. (General partner in
           Limited Partnership)                                                        50.00




                                                  182
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



 ANNEX TO THE FINANCIAL STATEMENTS OF DISCOUNT INVESTMENT
 CORPORATION LTD. as at December 31, 2007 (cont'd)

C.   Data relating to convertible securities of investee and other companies
     Certain investee companies have issued option warrants in previous years to the Company
     and/or third parties. The following table details the possible effect of the conversion of these
     securities on the holdings of the Company in such companies as at December 31, 2007:
                                                                         Company's holding
                                                                Before exercise       After exercise
                                                  Exercise     Equity and voting    Equity and voting
                                                   period              %                    %
      Elron Electronic Industries Ltd.           2008-2012              48.57                48.00
      Expand Networks Ltd.                       2008-2014              30.67                39.59
      Given Imaging Ltd.                         2008-2014              16.14                13.81
      Galil Medical Ltd.                         2008-2014              12.76                11.80
      Ham-let (Israel-Canada) Ltd.               2008-2013              44.84                41.58
      Property and Building Corporation Ltd.     2008-2011              65.31                64.62
      Koor Industries Ltd.                       2008-2010              46.83                44.66
      Netvision Ltd.                             2008-2016              32.80                29.50
      Cellcom Israel Ltd. (61% voting)           2008-2012              55.98                54.70
      Cosmocom Inc.                              2008-2013               9.63                 6.05
      Super-Sol Ltd.                             2008-2012              39.62                38.89


D.   Subsidiaries consolidated by the Company
                                                        Equity and voting rights
                                                             December 31
                                                       2 0 0 7        2 0 0 6
                                                                  %
      Consolidated subsidiaries:
      Bartan Holdings and Investments Ltd. (2)            56           56
      Globcall Communication Ltd. (6)                       -         100
      General Engineers Ltd. (1) (7)                        -          50
      DIC Energy Holdings Ltd.                           100          100
      DIC Loans Ltd.                                     100          100
      DIC Communication and Technologies Ltd.            100          100
      Ham-Let (Israel-Canada) Ltd. (3)                    45           45
      Property and Building Corporation Ltd.              65           61
      Cellcom Israel Ltd. (61% voting) (5)                56           78.5
      Pilot Ltd.                                         100          100
      PEC Israel Economic Corp.                          100          100
      Super-Sol Ltd. * (4)                                40           59
      Tevel Telecom Ltd.                                    -         100
     * Including a holding through a subsidiary.
     (1) Proportionately consolidated;(2) Including a holding through Property and Building Ltd.;
     (3) See note1.F.3; (4) The company continued to consolidate Super-Sol for the reason that it
     was consolidated in the past and the Company continued to have effective control over it after
     the sale; (5) See paragraph 2b in Note 2B; (6) See paragraph 2f in Note 2B; (7) see paragraph
     2a in note 2B.


                                                183
             Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



 ANNEX TO THE FINANCIAL STATEMENTS OF DISCOUNT INVESTMENT
 CORPORATION LTD. as at December 31, 2007 (cont'd)

E.    Formerly consolidated companies that are not consolidated in the current period
                                                                  2007           2006
                                                                  N I S m i l l i o n s

 Balance sheet
  Cash                                                               4                   -
  Working capital (excluding cash and cash equivalents)            (28)                 (4)
  Fixed and other assets                                           124                  30

 Statement of income
  Revenues                                                         123                  15
  Net earning (loss)                                               (30)                  2


F.    Financial data of consolidated companies for the first time, included in the company
      reports
                                                                  As at December 31, 2006
                                                                        NIS millions

 Cash and cash equivalents                                                    2
 Working capital (excluding cash and cash equivalents)                     (765)
 Fixed and other assets                                                     230
 Goodwill                                                                   620
 Long term liabilities                                                        -

                                                                For the 3 months ended
                                For the period 15.2.06-31.12.06  December 31, 2005
                                                      NIS millions

 Income                                        107                             1,270
 Earning for the period                         20                                65


G.    Data on jointly controlled investee companies, consolidated by the proportionate
      consolidation method, as included in the consolidated financial statements of the Company
                                       D e c e m b e r 3 1
                                       2007           2006
                                       N I S m i l l i o n s

 Current assets                           20                 27
 Fixed and other assets                  362                249
 Current liabilities                     125                 78
 Long term liabilities                   392                 78




                                                184
            Discount Investment Corporation Ltd.

       Notes to the Financial Statements for the Year Ended December 31, 2007



ANNEX TO THE FINANCIAL STATEMENTS OF DISCOUNT INVESTMENT
CORPORATION LTD. as at December 31, 2007 (cont'd)

G.   Data on jointly controlled investee companies, consolidated by the proportionate
     consolidation method, as included in the consolidated financial statements of the Company
     (cont'd)
                                                           Year ended December 31,
                                                          2007      2006      2005
                                                          N I S    m i l l i o n s

Income                                                           73      83              92
Cost of sales and services                                       19      47              63
Selling expenses                                                  -       7               7
General and administrative expenses                               7       9               8
Financial Expenses, net                                          20       3               6
Income tax                                                        7       4               1
                                                                 53      70              85
Net income for the year                                          20      13                7


H.   Companies consolidated by subsidiaries of the Company
                                                                      Equity and voting rights
                                                                        as at December 31
                                                                       2007           2006
                                                                                %

By Property and Building Corporation Ltd.
   Em Hamoshavot – Hatzafon Hachdase Ltd.                                72.2             72.2
   Gilat Buildings Ltd.                                                 100              100
   Hon Investment and Trust Company Ltd.                                100              100
   Bayside Land Corporation Limited (voting – 76%)                       67.4             67
   “ISPRO” The Israeli Properties Rental Corp. Ltd.                     100              100
   Merkaz Herzliya “A” Ltd. (voting – 100%)                             100               85.01
   Merkaz Herzliya “B” Ltd.                                             100              100
   Property and Building (Finance 1996) Ltd.                            100              100
   Hadarim Properties Ltd.                                              100              100
   Nichssey Nachalat Beit Hashoeva B.M.                                 100              100
   Shadar Building Company Ltd.                                         100              100
   Matam – Haifa Science Industries Center                               50.1             50.1
   Naveh-Gad Building and Development Ltd.                              100              100
   Beit Hasocharim Ltd.                                                 100              100
   Property and Building International Investments (2005) Ltd.          100              100
   PBC USA Investment Inc.                                              100              100
   Property and Building (Commercial Centers) Ltd.                      100              100
   Zotilef Enterprises Ltd.                                              66.7             66.7
   Proportionately consolidated company
      PBC Real Estate S.R.L.                                              50             50


                                               185
              Discount Investment Corporation Ltd.

         Notes to the Financial Statements for the Year Ended December 31, 2007



ANNEX TO THE FINANCIAL STATEMENTS OF DISCOUNT INVESTMENT
CORPORATION LTD. as at December 31, 2007 (cont'd)

H.    Companies consolidated by subsidiaries of the Company (cont'd)
                                                                             Equity and voting rights
                                                                               as at December 31
                                                                              2007           2006
                                                                                       %

 By Super-Sol Ltd.
    Katif Ltd.                                                                 100              100
    Hanets – Exporters And Importers Ltd.                                      100              100
    Hyper-Kol Ltd.                                                             100              100
    Hevrat Hanechasim Shel Supersol Ltd.                                       100              100
    Ovrani Hevra Lehashkaot Ltd.                                               100              100
    Gidron Taassiot Ltd.                                                       100              100
    Hyper Reshet Hagal Hayarok Ltd.                                            100              100
    Super-Sol Bailsol Hashkaot Ltd. (voting – 51%)                              50               50
    Clubmarket Retail Chains Ltd.                                              100              100
    Super-Sol Finance Limited Partnership                                       64               64
    B.I. Kim'Onaut partnership                                                  50.01            50.01

     Proportionately consolidated companies
        Israel Kanyonim Ltd.                                                    50               50
        Merkaz Hakirya (Ashdod 1995) Ltd.                                       50               50

 By Bartan Holdings & Investments Ltd.
    Haifa Squash Management (1984) Ltd.                                        100              100
    Shoresh Hotel Ltd. (proportionately consolidated)                            -               50
    Partnerships:
    Hod Hasharon Sport Center (1992) Limited Partnership
       (proportionately consolidated)                                           49               49
    Maagan Eden Limited Partnership (proportionately consolidated)               *                *
    Ein Gedi Tourism – Limited Partnership (proportionately
       consolidated)                                                              *               *
    Maagan Bar Hotel Management Ltd.                                              *               *
    Ein Gedi G.K. Tourism Ltd.                                                    *               *
    Hod Hasharon Sport Center Ltd. (General partner in Limited
       Partnership)                                                             50               50

 By General Engineers Ltd.
    General Engineers Lighting (1990) Ltd.                                        -             100
    General Engineers Lighting and Power Control Ltd.                             -             100
* In the current year these investments are presented on the equity basis.




                                                   186
            Discount Investment Corporation Ltd.

        Notes to the Financial Statements for the Year Ended December 31, 2007



ANNEX TO THE FINANCIAL STATEMENTS OF DISCOUNT INVESTMENT
CORPORATION LTD. as at December 31, 2007 (cont'd)

H.   Companies consolidated by subsidiaries of the Company (cont'd)
                                                                      Equity and voting rights
                                                                        as at December 31
                                                                       2007           2006
                                                                                %

 By Cellcom Israel Ltd.
    Cellcom Real Estate (2001) Ltd.                                     100              100
    Cellcom Holdings (2001) Ltd.                                        100              100
    Cellcom Fixed Line Communications L.P.                              100              100

 By Ham-Let (Israel-Canada) Ltd.
    H.T.C Ltd.                                                          100              100
    Ham-Let U.S.A.,Inc.                                                 100              100
    Ham-Let (U.K) Fittings &Valves Ltd.                                 100              100
    Ham-Let Fittings & Valves Europe B.V *                              100              100
    Ham-Let GmbH                                                        100              100
    Ham-Let Motoyoma (Japan) Ltd.                                       100              100
* The company is inactive.




                                             187

								
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