מסמך רישום

BATM Advanced Communications Ltd.

באטמ תקשורת מתקדמת בע"מ

(להלן: "החברה")

רישום למסחר של: 402,915,820 מניות רגילות רשומות על שם בנות 0.01 ש"ח. כל אחת (להלן: "המניות הרגילות"), ועד 16,081,556 מניות רגילות שינבעו מימושן של אופציות (options) שאינן רשומות למסחר.

ניירות ערך של החברה רשומים למסחר בבורסה הראשית בלונדון:

List of the London Stock Exchange’s Main Market (Official U.K. Listing Authority), Primary Listing.

סימון ניירות ערך של החברה בבורסה לניירות ערך בתל אביב: באטמ

סימון ניירות ערך של החברה בלונדון: .BVC

ניירות הערך של החברה ירשמו למסחר לפי הוראות פרק 3ה לחוק ניירות ערך, התשכ"ח-1968. לפיכך, דיווחי החברה יהיו בשפה האנגלית ותוכנם יהא בהתאם למתכונת הדיווח באנגליה.

תאריך: 2 בספטמבר, 2012

תוכן עניינים

חלק ראשון - כללי

נושא

שם החברה
מקום התאגדות החברה
תאריך התאגדות החברה
סוגי ניירות הערך שהנפיקה החברה
מקום רישום ניירות הערך למסחר
כמות ניירות הערך הרשומה למסחר
התאריך שבו נרשמו ניירות הערך לראשונה למסחר בבורסת בלונדון
פרטים אודות החברה
סימון ניירות הערך
אנשי הקשר של החברה
תיאור המניות
עיקרי הזכויות הנלוות למניות החברה
מיסוי הכנסות ממניות החברה
מרשם ניירות הערך של החברה ותיאור הליך העברת ניירות ערך בין הבורסה בלונדון לבורסה בישראל ולהיפך
אישור הבורסה לניירות ערך בתל אביב בע"מ

חלק שני - מסמכים נוספים

אישור הבורסה לניירות ערך בתל אביב בע"מ לרישום למסחר של המניות.
דו"ח תקופתי של החברה לשנת 2011 מיום 30 באפריל, 2012, לרבות הספחים לדו"ח זה אשר צורפו על דרך ההפניה:

2.1 דיווח של החברה מיום 21.04.2011;

2.2 דיווח של החברה מיום 5.05.2011;

2.3 דיווח של החברה מיום 4.10.2011;

2.4 הסכם העסקת מנכ"ל החברה מיום 6.1.2011; (עמי 100)

2.5 דיווח של החברה מיום 26.10.2011;

2.6 הודעה של החברה מיום 26.10.2011 על חתימת הסכם הפצה מהותי עם חב' מוטורולה מוביליטי;

2.7 דיווח של החברה מיום 12.12.2011;

2.8 דיווח של החברה מיום 23.03.2012;

2.9 דיווח של החברה מיום 11.04.2012;

תקנון ותזכיר ההתאגדות של החברה.
תשקיף החברה להנפקת מניות החברה מיום 3.7.1996.
דוחות והודעות שפירסם או הגיש התאגיד לפי הדין הזר בתקופה שלאחר פרסום הדוח התקופתי:

5.1 דיווח של החברה מיום 30.04.2012;

5.2 דיווח של החברה מיום 2.05.2012;

5.3 דיווח של החברה מיום 6.06.2012 על כינוס אסיפה כללית שנתית של החברה;

5.4 נוסח ההודעה וחומר נלווה לכינוס האסיפה הכללית השנתית שהופך לבעלי המניות.

חלק ראשון

שם החברה: באטמ תקשורת מתקדמת בע"מ; ובאנגלית: BATM Advanced Communications Ltd.
מקום התאגדות החברה: ישראל.
תאריך התאגדות החברה: 26 בינואר 1992.
סוגי ניירות הערך שהנפיקה החברה: 4.1 מניות רגילות הרשומות למסחר בבורסה הראשית בלונדון. 4.2 מניות רגילות שינבעו ממימושן של אופציות (option) שהוקצו לעובדים, יועצים, נותני שירותים, דירקטורים ונושאי משרה של החברה והחברות הבנות.
מקום רישום ניירות הערך למסחר: List of the London Stock Exchange’s Main Market (Official U.K. Listing Authority), Primary Listing
כמות ניירות הערך הרשומה למסחר: 6.1 402,915,820 מניות רגילות. כל המניות חופשיות מחסימה בהתאם לדינים הרלוונטיים באנגליה. 6.2 16,081,556 מניות שינבעו ממימוש אופציות (options) תחת תוכנית האופציות של החברה, אשר מיועדות להענקה לעובדים, יועצים, נותני שירותים, דירקטורים ונושאי משרה של החברה וחברות בנות בארץ ובחו"ל. המניות שינבעו מימוש האופציות תרשומה למסחר ועם רישומן למסחר לא תהיינה מוגבלות או חסומות, על מנת שתעמודנה בהוראות סעיף 2.2.4 ל-Listing rules. נכון למועד מסמך הרישום מתוך 16,081,556 מניות שינבעו ממימוש כתבי אופציה, הוקצו ע"י החברה 8,457,545 כתבי אופציה ואילו 7,624,011 אופציות טרם הוקצו. לא ניתן לבצע המרה של האופציות למניות החברה ביום הקובע לחלוקת מניות הטבה, להצעה בדרך של זכויות, לחלוקת דיבידנד, לאיחוד הון, לפיצול הון או להפחתת הון (להלן: "אירוע חברה"). בנוסף, אם חל יום האקס של אירוע חברה לפני היום הקובע של אירוע חברה, לא תבוצע המרה ביום האקס כאמור.
התאריך שבו נרשמו ניירות הערך לראשונה למסחר בבורסה הראשית בלונדון: 12 באוגוסט 1996.
פרטים אודות החברה: 8.1 מען רשם: אזור התעשייה נווה נאמן, רחוב החרש 4, הוד השרון 45240. 8.2 מספר טלפון ומספר פקסימיליה בישראל: 09-8662500; 09-8662525.

8.3 מספר טלפון ומספר פקסימיליה באנגליה: 7500 3205 20 (0) 44+ ; 5005 3205 20 (0) +44

8.4 שם החברה לרישומים: החברה לרישומים של בנק הפועלים בע"מ.

סימון ניירות הערך:

9.1 בבורסה בחו"ל: BVC

9.2 בבורסה לניירות ערך בתל אביב: באטמ

אנשי הקשר של החברה:

10.1 אנשי הקשר עם גופי הפיקוח והאכיפה של הדין הזר: עפר ברנר, סמנכ"ל כספים ויועציה המשפטיים של החברה באנגליה לממשל תאגידי.

10.2 כתובתם של אנשי הקשר:

10.2.1 סמנכ"ל הכספים - אזור התעשייה נווה נאמן, רחוב החרש 4, הוד השרון 45240.

10.2.2 היועצים המשפטיים - Fladgate LLP, 16 Great Queen Street | London - WC2B 5DG Attention: Avram Kelman, Solicitor

10.3 מס' טלפון ומספר פקסימיליה:

10.3.1 סמנכ"ל הכספים - 09-8662506 ; 09-8662525

10.3.2 היועצים המשפטיים - 7352 3036 20 20 3036 7852 ; +44 (0) 20 3036 7852

10.4 איש הקשר עם הרשות לניירות ערך: עפר ברנר, סמנכ"ל כספים.

10.5 כתובתו של איש הקשר בישראל: אזור התעשייה נווה נאמן, רחוב החרש 4, הוד השרון 45240.

10.6 מספר הטלפון ומספר הפקסימיליה בישראל: 09-8662506 ; 09-8662525

10.7 חברה לרישומים באנגליה: CAPITA REGISTRARS (JERSEY) LIMITED.

תיאור המניות:

11.1 הון המניות הרשום של החברה הינו 10,000,000 ש"ח מחולק ל-1,000,000,000 מניות רגילות בנות 0.01 ש"ח ערך נקוב כל אחת.

11.2 הון המניות המונפק של החברה מורכב מ-402,915,820 מניות רגילות בנות 0.01 ש"ח ערך נקוב כל אחת.

11.3 בהתאם לתקנה 5 לתקנון החברה, החברה רשאית, בהחלטה מיוחדת של בעלי מניות החברה, להקצות מניות בכורה, מניות בזכויות מוקדמות או בזכויות מאוחרות או

להוציא מניות בזכויות מוגבלות מיוחדות אחרות או בהגבלות בקשר עם חלוקת דיבידנדים, זכויות הצבעה, סילוק ההון, או בקשר עם עניינים אחרים כפי שתקבע החברה מדי פעם בפעם. למועד מסמך רישום זה החברה אין מניות בכורה או מניות מסוג מיוחד בהון הרשום והמונפק. החברה מתחייבת כי כל עוד מניותיה רשומות למסחר בבורסה בתל אביב היא לא תוציא, לא תקצה ולא תנפיק מניות מסוג שונה מזה הרשום למסחר בבורסה בתל אביב, למעט בהקצאה המקיימת את הוראות סעיף 46ב(א) לחוק ניירות ערך, התשכ"ח-1968.

11.4 המניות הרגילות זכאיות להשתתף בחלוקת מלוא דיבידנד או מניות הטבה שיוכרז עליהם לאחר תאריך מסמך רישום זה.

12. עיקרי הזכויות הנלוות למניות החברה

החברה התאגדה על פי חוק מדינת ישראל וכפופה לחוק החברות, השתנ"ט-1999 (להלן: "חוק החברות").

להלן תיאור עיקרי הזכויות הנלוות למניות הרגילות של החברה על פי תקנון החברה ותזכיר ההתאגדות שלה (להלן ביחד: "מסמכי ההתאגדות").

האמור להלן הינו תאור כללי, שאינו מתיימר להיות תיאור ממצה או פרשנות מוסמכת של הדין ואינו מהווה תחליף לעיון במסמכי ההתאגדות. בנוסף, תקציר זה אינו מתיימר לתאר את הוראות ה-2000; Companies Act 2006; Financial Services and Markets Act 2000; את "הכולל The FSA Handbook published by the Financial Services Authority (The Disclosure Rules and Transparency Rules) או את מקורות נורמטיביים אחרים החלים על החברה ו/או על בעלי מניותיה.

12.1 אסיפות בעלי המניות

12.1.1 זכויות הצבעה - כל בעל מניה זכאי בכל אסיפת בעלי מניות לקול אחד עבור כל מניה הרשומה על שמו במרשם בעלי המניות.

12.1.2 זימון לאסיפות - אסיפה כללית שנתית תתקיים לפחות אחת לכל שנה קלנדרית, בתוך תקופה שלא תעלה על חמישה עשר (15) חודשים לאחר קיום האסיפה הכללית האחרונה, במועד ובמקום שיקבע על ידי דירקטוריון החברה בישראל או מחוץ לישראל. באסיפה זו יבחרו דירקטורים, ימונו רואי החשבון המבקרים של החברה ויתקבלו החלטות נוספות הנדרשות על פי חוק החברות. דירקטוריון החברה רשאי, כל אימת שימצא לנכון, לכנס אסיפה כללית מיוחדת, בזמן ובמקום, בין אם בתוך ישראל או מחוצה לה, כפי שיקבע על ידי הדירקטוריון, ויהא מחויב לעשות כן על פי דרישה בכתב בהתאם לסעיף 63 לחוק החברות.

12.1.3 הודעה על זימון אסיפה - לכל בעל מניה הזכאי להשתתף ולהצביע באסיפה תינתן הודעה בכתב על כל אסיפה כללית ובה פרטי, מועד ומיקום האסיפה. ההודעה תימסר לא פחות מ-21 ימים טרם מועד האסיפה. על אף האמור לעיל, בהסכמה של כל בעלי המניות הזכאים להשתתף באסיפה, החברה תהא רשאית להודיע לערוך אסיפה אף אם ההזמנה ניתנה לפני המועד הקבוע הנ"ל.

12.1.4 מניין חוקי - המניין החוקי לכינוס אסיפה יתהווה בנוכחות שני בעלי מניות או יותר, נוכחים בעצמם או באמצעות שלוח. בהעדר מניין חוקי, תדחה האסיפה לאותן מקום ולאותה שעה בשבוע שלאחר מכן, או למקום ומועד אחר כפי שיקבע על ידי יו"ר הדירקטוריון בהסכמת רוב הנוכחים בישיבה. המניין החוקי באסיפה נדחית יהיה אותו מניין חוקי.

12.1.5 החלטה ללא אסיפה - החלטה בכתב אשר נושאת את חתימותיהם של כל בעלי המניות אשר זכאים באותו מועד להשתתף ולהצביע באסיפה הכללית, או שכל בעלי מניות אלה נתנו את הסכמתם בכתב (במכתב, פקסימיליה טלקס, דוא"ל או כל דרך אלקטרונית אחרת) או בעל פה (בתנאי שיו"ר דירקטוריון החברה חתם על החלטה בכתב) תחשב כהחלטה אשר התקבלה פה אחד על ידי אסיפה כללית אשר כנוסה וקוימה כדין.

12.1.6 הרוב הנדרש לקבלת החלטות - החלטה רגילה של בעלי מניות תחשב כהחלטה שהתקבלה אם אושרה על ידי רוב בעלי זכויות ההצבעה, אשר נוכחים באסיפה בעצמם או באמצעות שלוח, ומשתתפים בהצבעה. החלטה מיוחדת של בעלי המניות תחשב כהחלטה שהתקבלה אם אושרה על ידי 75% מבעלי זכויות ההצבעה, אשר נוכחים באסיפה בעצמם או באמצעות שלוח, ומשתתפים בהצבעה.

12.1.7 זכותה של החברה לדרוש גילוי נאות מאדם הרשום כבעל מניות בחברה בנוגע ל"הנהנה" של המניות - במקרה בו מתעורר חשד כי אדם או תאגיד מחזיק מניות בחברה עבור נהנה סמוי, החברה רשאית לשלוח הודעה לבעל המניות הרשום במרשם בעלי מניות החברה כבעלים של מניות אלו ולדרוש ממנו לאשר כי הוא הנהנה האמיתית של מניות החברה המוחזקות על ידו, ובמידה והוא מחזיק במניות עבור נהנה אחר, שיתן לחברה פרטים בדבר שמו ופרטיו של הנהנה (להלן - "דרישת הגילוי"). ככל שהאדם אליו נשלחה דרישת הגילוי לא ישיב לדרישת הגילוי תוך 14 יום ממועד מסירת דרישת הגילוי לידיו, דירקטוריון החברה רשאי להטיל על אותו בעל מניות "מגבלות" בגין ההחזקה במניות אלו, וזאת בו יענה לדרישת הגילוי. המגבלות כוללות, בין היתר, הגבלה על בעל המניות הרשום כבעל מניות בחברה להשתתף באסיפות הכלוליות של החברה; במידה והמניות רשומות על שם - לסרב לאשר את העברת המניות לאחר; להגביל את זכותו של אותו אדם לקבל דיבידנדים או מניות הטבה במקום דיבידנד אם הוחלט ע"י

החברה להעניק מניות הטבה במקום דיבידנד וכיו"ב. הוראות סעיפים אלו מאמצות את הוראות סעיף 793 ל- Companies Act 2006.

12.2 הדירקטוריון

12.2.1 מבנה הדירקטוריון - מספר הדירקטורים בחברה לא יעלה על 12 דירקטורים

ולא יפחת מ-4 דירקטורים.

12.2.2 מינוי והפסקת כהונה - דירקטורים (למעט דירקטורים חיצוניים) נבחרים

וכהונתם מופסקת על ידי בעלי המניות באסיפה הכללית השנתית של בעלי המניות. תקופת הכהונה של דירקטור תפקע במועד האסיפה הכללית השנתית הבאה לאחר האסיפה הכללית בה מונה. כהונתו של דירקטור תופסק טרם פקיעתה כאמור במקרים הבאים: (א) מוות או אי כשירות משפטית של הדירקטור; (ב) הדירקטור הוכרז כפושט רגל; (ג) הדירקטור מנוע מלכהן כדירקטור בשל דרישות כל חוק קיים; (ד) הדירקטור הפסיק את כהונתו של הדירקטור בהתאם לסעיף 231 לחוק החברות; או (ה) ניתן צו בית המשפט בהתאם לסעיף 233 לחוק החברות; או (ו) הדירקטור הודיע לחברה על סיום כהונתו.

12.2.3 הזכויות להשתתף בחלוקת דיבידנד - בעלי המניות זכאים להשתתף בחלוקת

דיבידנד על ידי החברה באופן יחסי להחזקותיהם במניות החברה שבגינן משולם הדיבידנד.

12.2.4 פירוק - במקרה שהחברה תפורק, אזי בכפוף לדין החל ולזכויות בעלים של

מניות שצמודות להן זכויות מיוחדות במקרה של פירוק, נכסיה של החברה יחולקו בין בעלי המניות באופן יחסי להחזקותיהם במניות החברה.

12.2.5 התנאים לשינוי הזכויות הנלוות למניות - בהתאם למסמכי ההתאגדות

החברה רשאית לשנות את תקנונה בהחלטה מיוחדת שהתקבלה באסיפה הכללית של החברה.

13. מיסוי הכנסות ממניות החברה

כמקובל בעת קבלת החלטות על השקעות כספים, יש לשקול את השלכות המס הקשורות בהשקעה במניות החברה. האמור בדוח זה בדבר מיסוי מניות החברה אינו מתיימר להוות פרשנות מוסמכת של הוראות החוק הנזכרות בדוח זה, ואינו בא במקום ייעוץ מקצועי, בהתאם לנתונים המיוחדים ולנסיבות הייחודיות של כל משקיע. כמו כן, האמור בדוח זה משקף את הוראות הדין כפי שהן במועד דוח זה והן עשויות להשתנות בעתיד. מומלץ כי כל משקיע יתייעץ עם יועציו המקצועיים בכל הקשור לשיקולי מס בביצוע ההשקעה.

החברה מנכה מבעלי מניותיה (הישראלים ותושבי החוץ) מס כדלקמן:

13.1 בגין סכומי דיבידנד הנובעים מרווחים שנצברו בחברה עד שנת 2010 (כולל) יחולו

ההוראות המפורטות להלן:

13.1.1 מחלק הדיבידנד הנובע מרוויח מפעל מאושר מנוכה מס בשיעור של 15% מכל בעלי המניות של החברה.

13.1.2 מחלק הדיבידנד הנובע מרוויחים אחרים מנוכה מס בשיעור של 20% מכל בעלי המניות בחברה למעט מבעלי שליטה מהם מנוכה מס בסך 25%.

שיעורי המס המפורטים לעיל זהים הן במידה ומניות החברה נסחרות בבורסה בלונדון והן במידה ומניות החברה נסחרות בבורסה לני"ע בת"א, למעט ביחס לחובת הניכוי החלה על החברה בגין דיבידנד המגיע לבעלי השליטה בחברה, אשר ביחס אליהם חל ההסדר המפורט להלן:

13.1.3 ככל שמניות החברה נסחרות בבורסה בלונדון החברה רשאית לנכות מסכומי הדיבידנד המחולקים לבעלי השליטה מרוויחים שאינם רוויחי מפעל מאושר מס בשיעור של 20% ואילו תשלום יתרת המס מבוצע באופן פרטי על ידי בעלי השליטה.

13.1.4 כאשר מניות החברה נסחרות בבורסה בתל אביב חלה חובה על החברה לנכות מבעלי השליטה מס בשיעור של 25% מכל סכומי הדיבידנד המחולקים לבעלי השליטה מרוויחים שאינם רוויחי מפעל מאושר.

13.2 בגין סכומי הדיבידנד הנובעים מרוויחים שנצברו בחברה החל משנת 2011 חלות הוראות התיקון לחוק לעידוד השקעות הון, התש"ט-1959 (להלן – "החוק") לפיו החברה תנכה מס בשיעור של 15% מכל סכומי הדיבידנד שתחלק לכל בעלי מניותיה.

מרשם ניירות הערך של החברה:

14.1 חברת Capita Registrars המשמשת עבור החברה באנגליה כ- Transfer Agent, מנהלת את מרשם ניירות הערך של החברה באנגליה (באי ג'רסי) והיא האחראית על עדכונו בגין כל שינוי שחל בו (להלן -"TA").

14.2 עם הרישום למסחר של ניירות הערך של החברה בבורסה בתל אביב, ירשמו ניירות הערך שייסחרו בבורסה בתל אביב, אצל חברה לרישומים מורשה עפ"י דין בישראל אשר החברה תמנה לצורך כך (להלן - "החברה לרישומים").

14.3 החברה לרישומים תנהל את רישום ניירות הערך הרשומים על שמה בארץ בתיאום עם ניהול מרשם ניירות הערך באנגליה על ידי ה- TA (על בסיס עדכונים שיתקבלו, מעת לעת, מנציג החברה).

10 -

העברת ניירות ערך מלונדון לישראל: 14.4

14.4.1

כל המחזיק בניירות ערך של החברה באנגליה שיהיה מעוניין לרשום אותם או לסחור בהם בבורסה בתל אביב, ימסור בקשה ל- TA בעצמו או באמצעות הברוקר המחזיק עבורו בניירות ערך של החברה לפי טופס רלבנטי על מספר ניירות הערך המבוקש אשר ברצונו להעביר מהחברה אל הבורסה בתל אביב ("הבקשה"; "ניירות הערך המועברים").

14.4.2

על מנת לפשט את תהליך ההעברה, תכלול הבקשה, בין היתר, את מספרי הזיהוי של ניירות הערך של החברה במערכת האלקטרונית בה הם מוחזקים ואת שמה של החברה לרישומים בישראל אשר לידיה יועברו ניירות הערך ושאלה תשלחנה פקודות המסחר בהם.

14.4.3

ה- TA תשלח את הבקשה ושאר המסמכים לנציג החברה, אשר ימונה על ידי החברה לצורך העברת הבקשות כאמור וימלא את תפקיד המתווך בין החברה והחברה לרישומים בארץ לבין ה- TA באנגליה ("נציג החברה"). בקשת ה- TA תכלול את כל ההוראות הנדרשות לביצוע ההעברה ונציג החברה יעביר את האישור האמור לחברה לרישומים בצירוף המסמכים החתומים, תעודת רלוונטית בגין ניירות הערך ונספחים ה- ו-ח1 לחוקי עזר של המסלקה בבורסה בת"א. עם שליחת ההודעה והבקשה ע"י ה- TA, ה- TA תיגרענה ניירות ערך אלו מניירות הערך הנסחרות בבורסה בלונדון ותרשמנה במרשם ה"חשבון מבוקר" (Controlled Account) שתנהל בקשר לניירות ערך הנסחרים בבורסה בתל-אביב.

14.4.4

בהתבסס על ההוראות שבהודעת ה- TA כאמור בסעיף 13.4.3 לעיל, יפנה נציג החברה לחברה לרישומים, על מנת שזו תבצע את השינוי הנדרש ברישומיה.

14.4.5

עם ביצוע כל העברה של ניירות ערך מהמרשם באנגליה לישראל, ימציא ה- TA לנציג החברה מכתב חתום על ידי המכונה "BATM Removal Letter Confirmation" ובו יאשר את כמות ניירות הערך שהוצאו מהמרשם הכללי לצורך העברתן לישראל ורישום הכמות הנ"ל בתוך "החשבון המבוקר". כ"כ ה- TA ימציא לנציג החברה דו"ח חודשי של כל ההעברות של ניירות ערך שהנפיקה החברה בין השווקים. הדוח יועבר לחברה לרישומים לצורך בדיקה ובקרה.

העברת ניירות ערך מישראל לאנגליה: 14.5

14.5.1

כל המחזיק בניירות ערך של החברה בבורסה בתל אביב המעוניין לרשום אותן או לסחור בהן בבורסה בלונדון, ימסור הודעה על כך לחבר הבורסה לזכותו מופקדים ניירות הערך, בדבר בקשתו כאמור. בנוסף, המבקש להעביר

11 -

את ניירות הערך המוחזקים על ידו למסחר בבורסה בלונדון יחתום על שני טפסים רלבנטיים וימציא אותם לחברה.

14.5.2 חבר הבורסה באמצעות מוחזקים ניירות הערך יעביר למסלקה הוראת משיכה בצירוף בקשת המחזיק. המסלקה תעביר הבקשה האמורה לחברה לרישומים (עפ"י הנוסח הנהוג במסלקה), אשר תבצע השינויים אצלה ותעביר הודעה על כך לחברה.

14.5.3 לאחר קבלת הבקשה כאמור על ידי החברה, החברה תחתום על מכתב הוראות המופנה ל- TA בנוסח הרלבנטי ותשלח את המסמכים ל-TA באנגליה. כ"כ החברה תמציא לחברה לרישומים את המסמכים החתומים, תעודת ונספחים 3' ו-1' לחוקי עזר של המסלקה בבורסה בת"א. החברה לרישומים בת"א תדאג לבצע את השינוי ברישומיה. לאחר קבלת המסמכים אצל ה- TA באנגליה, ה-TA תדאג להוצאת המניות בגינן ניתנה ההוראה כאמור מ"החשבון המבוקר" ולהעברתן לברוקר או בעל מניות לשם רישומן במרשם באי גירסי.

14.5.4 עם ביצוע כל העברה של מניות מהמרשם בישראל לאנגליה, ימציא ה- TA לנציג החברה מכתב חתום על יד המכונה "BATM Removal Letter Confirmation" ובו יאשר את כמות ניירות הערך שהוצאו מ- "החשבון המבוקר" בגין ניירות הערך שהועברו מישראל לרישום במרשם באי גירסי ונכללו במרשם הכללי שם. כ"כ ה-TA ימציא לנציג החברה דו"ח חודשי של כל ההעברות של ניירות ערך שהנפיקה החברה בין השווקים. הדוח יועבר לחברה לרישומים לצורך בדיקה ובקרה.

אישור הבורסה לניירות ערך בתל אביב בע"מ

הבורסה לניירות ערך בתל אביב בע"מ נתנה את אישורה לרישום למסחר של המניות והמניות שתנבענה ממימוש האופציות (כמפורט בסעיף 6 לעיל) הנרשמות על פי מסמך רישום זה, כאמור לעיל.

אין לראות באישור כאמור של הבורסה אישור לפרטים המובאים במסמך רישום זה או לשלמותם, ואין בו משום הבעת דעה על החברה או על טיבם של ניירות הערך הנרשמים על פי מסמך רישום זה.

12 -

חלק שני

מצורפים:

אישור הבורסה לניירות ערך בתל אביב בע"מ לרישום למסחר של המניות.
דו"ח תקופתי של החברה לשנת 2011 מיום 30 באפריל, 2012, לרבות הספחים לדו"ח זה אשר צורפו על דרך ההפניה:

2.1 דיווח של החברה מיום 21.04.2011;

2.2 דיווח של החברה מיום 5.05.2011;

2.3 דיווח של החברה מיום 4.10.2011;

2.4 הסכם העסקת מנכ"ל החברה מיום 6.1.2011 (עמי 100);

2.5 דיווח של החברה מיום 26.10.2011;

2.6 הודעה של החברה מיום 26.10.2011 על חתימת הסכם הפצה מהותי עם חבי מוטורולה מוביליטי;

2.7 דיווח של החברה מיום 12.12.2011;

2.8 דיווח של החברה מיום 23.03.2012;

2.9 דיווח של החברה מיום 11.04.2012;

תקנון ותזכיר ההתאגדות של החברה.
תשקיף החברה להנפקת מניות החברה מיום 3.7.1996.
דוחות והודעות שפירסם או הגיש התאגיד לפי הדין הזר בתקופה שלאחר פרסום הדוח התקופתי:

5.1 דיווח של החברה מיום 30.04.2012;

5.2 דיווח של החברה מיום 2.05.2012;

5.3 דיווח של החברה מיום 6.06.2012 על כינוס אסיפה כללית שנתית של החברה;

5.4 נוסח ההודעה וחומר נלווה לכינוס האסיפה הכללית השנתית שהופך לבעלי המניות.

בכבוד רב,

באטמ תקשורת מתקדמת בע"מ

באמצעות צבי מרום (מנכ"ל) ועופר ברנר (סמנכ"ל כספים)

אישור הבורסה לניירות ערך בתל אביב בע"מ

לרישום למסחר של המניות

הבורסה לניירות ערך

2012, אוגוסט 13

177793.docx

09-8662500: פקס

לכבוד

באטמ תקשורת מתקדמת בע"מ

א.ת. נווה נאמן, החרש 4

הוד השרון 45240

א"י,

הנדון: אישור לרישום ניירות ערך למסחר בבורסה

ניתן בזה אישור לרישום בבורסה של ניירות הערך הבאים:

א. 402,915,820 מניות רגילות בנות 0.01 ש"ח ע"י כ"א שבהן חברת באטמ תקשורת מתקדמת בע"מ (להלן ה"חברה").

ב. 8,457,545 מניות רגילות בנות 0.01 ש"ח ע"י כ"א, שתנבענה ממימוש אופציות/זכויות (לא רשומות), שהוקצו במסגרת תוכנית אופציות לעובדים.

ג. 7,624,011 מניות רגילות בנות 0.01 ש"ח ע"י כ"א, שתנבענה ממימוש אופציות/זכויות (לא רשומות), שתוקצינה בעתיד במסגרת תוכנית אופציות לעובדים.

תוקף של אישור זה מותנה בהגשת מסמך הרישום תוך 60 יום מיום 13.8.12. בנוסף תוקף האישור לרישום של המניות שתנבענה ממימוש אופציות (לא רשומות), כמפורט בסעיף 1.ג לעיל, מותנה בהקצאת האופציות תוך 12 חודשים מיום 13.8.12.
אישור זה ניתן על סמך הבקשה, טיוטת מסמך הרישום מיום 18.6.12 והמכתב מיום 12.8.12 שהמצאתם לנו, וכפוף לאישורים הדרושים על פי דין.
אין לראות באישור זה של הבורסה אישור לפרטים המובאים בטיוטת מסמך הרישום או למהימנותם או לשלמותם ואין בו משום הבעת דיעה כלשהי על החברה או על טיבם של ניירות הערך הנרשמים למסחר.
נבקשכם:

א. לבוא עמנו בדברים לשם קביעת המועד בו ירשמו ניירות הערך למסחר בבורסה. מועד הרישום בבורסה לא יקדם מיום המסחר השלישי שלאחר יום הגשת מסמך הרישום ולא יאוחר מחודש ימים לאחר הגשתו.

ב. בעתיד, כל אימת שהדבר יתחייב, הנכם מתבקשים להודיע לנו מהם השינויים ביתרת המניות והאופציות (הלא רשומות) כתוצאה מהוראות מימוש שיתקבלו בחברה.

בכבוד רב,

הבורסה לניירות ערך בתל-אביב בע"מ

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ד"ח תקופתי של החברה לשנת 2011 לרבות

הנספחים לד"ח זה אשר צורפו על דרך ההפניה

Annual Report

2011

Welcome

BATM Advanced Communications leads the market in Metro Area Network Ethernet Telecom solutions.

BATM Medical is a leader in providing niche, cost effective diagnostics and sterilization solutions to SME medical laboratories.

For more information on BATM, please visit: www.BATM.com

BATM has access to over 600 engineers and scientists through BATM's integrated research and development program between all its subsidiary companies.

BATM has offices in North America, Israel, Europe and the Far East.

Overview

06 Financial highlights 07 Chairman's statement 08 Directors' Report 13 Directors

Governance

14 Corporate Governance 20 Statement of Directors' Responsibilities 21 Corporate, Social and Environmental Responsibilities 23 Remuneration Committee and Remuneration Report

Financials

27 Independent Auditors' Report 28 Consolidated Income Statements 28 Consolidated Statements of Comprehensive 29 Consolidated Statements of Financial Position

30 Consolidated Statements of Changes in Equity 31 Consolidated Cash Flow Statements 32 Notes to the Consolidated Financial Statements 79 Directors and Advisors

Telecom Network Solutions

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Telecom Network Solutions

T-Metro 8000 series

T-Metro 7224 Cost effective MPLS Provider Edge (PE)

Surveillance Solutions

The new 5201 platform

The NetStream 5001

Telecom Division

IVD Systems & Automated Clinical Diagnostic Analyzers

PCHEM 3

Eclectica User Interface

Plab Clia

Professional Sterilizers and Medical Waste Solutions

Compact medical hazardous waste solution, the Integrated Sterilizer & Shredder

ISS AC-575

Sting 11 B Bench-Top Steam Sterilizers Azteca AC Series- Medium Steam Sterilizers

Medical Division

OVERVIEW

GOVERNANCE FINANCIALS

Financial Highlights

$127.6 million

2011 Revenue

$5.6 million

2011 Adjusted operating profit

$ 47 million

2011 Liquid Assets

	2011	2010	%
Revenue	$127.6m	$120.6m	5.8%
Gross profit	$43.4m	$42.7m	1.64%
Adjusted operating profit^{1}	$5.6m	$5.6m	-
Other operating expenses	$6.72m	$4.52m	49%
Profit (loss) for the year^{2}	$(5.0)m	$0.2m	-
Earnings (loss) per share	(0.92)c	0.42c	-

Throughout this report:

Excluding other operating expenses and stock write-down related to telecom legacy business of $2.2m in 2011
After write off of legacy business

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Chairman's Statement

Peter Sheldon Chairman

BATM has come through a difficult year given the adverse effects of both ongoing global economic turmoil and a rapidly changing competitive environment, with results that management had hoped to exceed but with positive signs that the strategy we have adopted remains the key to a return to growth and profitability. The board has conducted a thorough review of every segment of our business and stands firmly behind the continued development of our Telecom and Medical divisions.

Peter Sheldon Chairman 30 April 2012

Annual Report 2011

OVERVIEW

GOVERNANCE FINANCIALS

Directors' Report

Business Review

Principal Activities and Review of the Business

BATM's main activities are the research and development, production and marketing of data and telecommunication products in the field of metropolitan area networks, as well as the research and development, production and distribution of medical products, including laboratory diagnostics equipment. BATM has offices in North America, Israel, Europe and the Far East.

Overview of 2011

Despite a weak trading environment in 2011 and adverse currency fluctuations the company encouraged to be able to report increases in both revenues and the gross profits of the business.

The Board has, following the review announced on 12 December 2011, decided to make structural changes to our Telecom division by curtailing certain legacy business lines. The positive results of this re-organisation are already being felt in 2012.

In addition we are introducing a number of new products and services both in the Telecom and Medical divisions that should provide positive ongoing growth prospects.

$127.6 million 2011 Revenue $ 47 million 2011 Liquid Assets

Hod-Hasharon, Israel Yokneam, Israel

Mansfield MA, USA

BATM offices:

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Directors' Report

Financial Performance

Revenues for the year of 2011 increased by $7 million to $127.6 million (2010: $120.6 million). Telecom division revenues increased 2% to $81.3 million (2010: $79.9 million) and Medical division revenues increased 14% to $46.3 million (2010: $40.7 million). Revenues from the telecom legacy business were $16.9 million representing 21% of the total telecom revenues. As a result of the decision to curtail the legacy telecoms business the Company has taken one off charges to the income statement totalling $5.3 million being made up of a stock write down of $2.2 million reflected in cost of sales, severance payments of $0.1 million and a $3.0 million charge relating to amortisation of intangibles reflected within other operating expenses.

Overall gross profit margin for the year of 2011 was 34.0% (2010: 35.4%). The decrease was mostly due to a year end write off of $2.2 million inventory related to the telecom legacy business, which is being discontinued and excluding this one off charge margins increased by 1.7%. The gross profit margin of the Telecom division for the year 2011 was 41.2% (2010: 42.9%). The gross profit margin of the Medical division for the year of 2011 was 21.4% (2010: 20.6%). A gross profit margin of 22% in the Medical division in the second half of 2011 reflected a positive trend and compared with 21% in H1 2011.

Sales and marketing expenses were $16.3 million (2010: $15.3 million), an increase of 6.5% over the previous year. The increase is mostly due to an increase of $2 million in distribution and sales costs in the Medical division offset by a decrease of $1 million in the sales expenses in the Telecom division.

General and administrative expenses were $10.5 million (2010: $9.2 million) an increase of $1.3 million, mostly in the Telecom division. The erosion of the average rate of US dollar to the shekel plus costs associated with strengthening the top management of Telco Systems were the main contributors.

R&D investment in 2011 was $13.2 million (2010: $12.5 million). Actual R&D expenses in 2011 were lower than 2010 by $0.2 million, however, 2010 expenses were offset by $0.9 million participation from the Israeli Chief Scientist compared with nil in 2011. Medical division R&D expenses increased by $0.4 million mostly in the area of Diagnostic products.

Adjusted operating profit for the year was $5.6m (2010: $5.6m) (adjusted for the impact of one off stock depreciation linked to the curtailment of legacy telecoms activities). Operating profit for the year before other operating expenses was $3.4 million (2010: profit of $5.6 million). After other operating expenses of $6.7 million (2010: $4.5 million) including a $3.0 million charge to write off the remaining intangible assets associated with certain legacy products of the Telecom division, the net operating loss was $3.3 million (2010: profit $1.1 million).

Net finance expenses were $0.8 million (2010: expenses $0.1 million), comprised of $0.9 million of interest income, as well as $0.2 million of forward transaction gains, which offset $1.2 million of foreign exchange losses and $0.7 million of finance costs related mostly to bank loans. The finance costs include $0.3 million of interest on a mortgage of our subsidiary in Italy that is expected to be cancelled in 2012. As a result of our lower revenues in Euros, BATM has reverted back to the US dollar as its functional currency, representing the primary economic operating environment of the company.

The majority of Tax expenses of $0.9 million are $0.7 million tax on the dividend paid in 2011 of $5.1 million.

Net loss after tax attributable to equity holders of the parent amounted to $3.7 million (2010: profit $1.7 million), resulting in a basic loss per share of 0.92¢ (2010 earning: 0.42¢).

Our balance sheet remains strong with effective liquidity of $46.9 million, reflecting a decrease of $7.8 million since the end of the first half of the year. The reduction in the cash balances is mainly a result of the dividend payment of $5.8 million and payments on our properties in Israel and in Italy of $2.0 million. These payments resulted in a reduction in both short term and long term debt of $0.5 million and $4.2 million respectively. Period end cash is comprised as follows: cash and deposits up to three months duration of $23.0 million; short term cash deposits up to one year of $23.9 million.

Intangible assets and Goodwill have decreased to $26.2 million (December 2010: $31.1 million). This decrease results from the amortization of intangible assets and the write off of intangible assets relating to certain legacy products in the Telecom division.

Property, plant and equipment at the end of 2011 remained substantially unchanged compared with the end of 2010.

Total inventories increased from $19.5 million at the end of 2010 and decreased from $26.3 million at the end of June 2011 to $24.3 million at the year-end 2011. The majority of the increase relates to the Telecoms division, where stocks have been increased to satisfy the growing demand for our new products. In addition, Medical division inventory has been increased to prepare for the launch of our new medical waste solution (ISS) in 2012.

Trade and other receivables at the end of 2011 decreased to $27.5 million from $30.9 million at the end of 2010. This decrease is largely due to decreased receivables in the Telecom division. Total liabilities decreased to $45.3 million at the end of 2011 from $49.9 million at the end of 2010. The majority of the decrease relates to the cash payments described above.

Annual Report 2011

OVERVIEW

GOVERNANCE FINANCIALS

Directors' Report

Telecom Division

As reported in December, trading in our legacy business in the US has been below our expectations. Following a detailed strategic review, we have decided to separate the legacy products group in the US from the Telecom division and exit this part of our business during 2012.

In April, we announced the acquisition of the major assets of ANDA Networks. Following the acquisition, we began serving ANDA's existing client base and have re-branded the former ANDA products as Telco Systems products. The existing customers' business will stay with the legacy business while the same products under Telco Systems brand will continue to be offered as part of our Carrier Ethernet solutions.

In May, we announced the appointment of Itzik Weinstein as CEO of Telco Systems. Prior to joining us, Itzik served as CEO of ECtel, a provider of revenue management solutions to the telecommunications industry and a NASDAQ traded company. He is responsible for driving the growth in our Carrier Ethernet offering and will be directing a higher focus on our direct business in Europe and the Far-east.

As reported in October and November, our Telecom division secured two important new OEM agreements; one with Motorola Mobility and one with the largest tier 1 telecom vendor. The agreement with Motorola will allow them to help cable operators leverage their HFC infrastructure to provide complete solutions for commercial services. We have already started generating business from this agreement and expect this to grow significantly during 2012. The agreement with the tier 1 telecom vendor is currently focused on the business demarcation product line and is expected to contribute revenues in 2012.

OVERVIEW

GOVERNANCE

FINANCIALS

Directors' Report

Medical Division

Our distribution business continues to grow and perform as expected. We are now looking to expand it further into Bulgaria with the help of one of our major diagnostic vendors. We expect this move to have a positive contribution beginning in the second half of 2012.

Our sterilization business managed to finish strongly in 2011. We expect this trend to continue into 2012. The sales of the Integrated Shredder Sterilizer (ISS) to treat medical waste exceeded our revenue expectations, which were reported in the interim results. We continue to expand our marketing efforts on the success of this new product. In addition, we have recently received certification to sell our sterilizers in the domestic market in Israel. We plan to take advantage of these early successes for increased revenue in 2012.

The diagnostics business continues to require the vast majority of our investment in the Medical division and continued to make significant losses. As reported, the process to complete testing, certification and manufacturing will continue at least until the end of 2012. In the meantime, we remain fully committed to make the necessary investment and are confident that during the course of 2012 we will start seeing the results of these investments. This business has considerable potential and we will continue to monitor its progress closely to ensure that the potential is maximised.

Analytical & Medical Solutions for all Laboratories

OVERVIEW

GOVERNANCE FINANCIALS

Directors' Report

Registration of Shares in Tel-Aviv

Following our last update we received approval to delay our listing on the Tel-Aviv Stock Exchange. The Board has now decided to move ahead and hope to have a dual listing before the end of the first-half of 2012. We believe that this move will improve both visibility of the company and opportunities which may benefit the Company and its shareholders.

Dividends

In light of the results for the year and the Israeli Companies Law that permits distribution of dividends only from net profits during the last 2 years, the Board is not proposing the payment of a dividend for the year. We remain confident that we will be able to return to our progressive dividend policy as the results of our trading strategy produce the anticipated results.

Current Trading and Prospects

Total revenues in the first quarter of 2012 (Q1) were $24.9 million, slightly ahead of our plan, and compared with $27.4 million on a like for like basis for the equivalent period in 2011, which excludes revenues from the discontinued legacy telecom business.

During the first quarter of the year the sales mix was 52% from the Telecoms division and 48% from the Medical division compared to 66% and 34% respectively in the first quarter of 2011. Gross margin was lower during the first quarter of 2012 than over the same period of 2011 as a result of a higher mix of Medical sales but nonetheless met the company's internal targets. Significant improvement in gross margin was achieved in the Medical division over the same period last year despite the fact that we are still in the early stages of production in our diagnostic division.

BATM has achieved its goals for the first quarter and significant progress has been made in the Medical Division.

Despite the challenging commercial macro environment we believe we are on track to achieve our strategic, operating and financial targets for the full year and remain cautiously optimistic regarding the outlook for both of our divisions in the medium term.

Financial Statements

The directors present their report together with the audited financial statements for the year ended 31 December 2011.

Results and Dividends

The results of the year are set out in the consolidated profit and loss account. After providing $6.7 million amortization of intangible assets for the year and one write off inventory of $2.2 million, we recorded a loss of $3.7 million attributable to owners of the company.

The Board is not proposing a dividend this year.

BATM Advanced Communications Ltd.

OVERVIEW

GOVERNANCE FINANCIALS

Directors' Report

Directors

The following served as directors during the year and are currently serving:

Peter Sheldon OBE, JP, FCA, (70), non-executive Chairman, is a Chartered Accountant and International Business Consultant. He is a former finance director of Hambros Bank and has held positions as Chairman and Director of a number of UK publicly quoted and private companies. His quoted company appointments have included UDS Group; World of Leather; Stirling Group and Geo Interactive Media (now Emblaze). He is currently heavily involved in the charitable sector in a voluntary capacity. He has been a member of the Board of BATM since 1998 and became Chairman in October 1999. He was awarded an OBE in Her Majesty the Queen's 2010 New Year Honours.

Dr. Zvi Marom (57), Chief Executive Officer, founded BATM in 1992. He holds degrees in Engineering and Medicine. Prior to establishing BATM, he was the head of the Electronic faculty of the Israeli Open University and senior consultant to several industrial and academic institutions. He graduated in excellence from the naval academy and served in combat command posts. He was awarded the Techmark "Technology Man of the Year" award from the London Stock Exchange in 2000. He is currently a director of Shore Capital, a UK listed company.

Ofer Bar-Ner (47), Chief Financial Officer, joined BATM in 1999. From 1996 he was Chief Financial Officer of Silver Arrow LP, a subsidiary of Elbit Systems and EL-OP, and between 1989 and 1993 he was group manager in the finance department of Elbit. He graduated in Industrial Engineering and Management from the Technion in Haifa and has an MBA and MA in accounting from Northeastern University in Boston, MA.

Dr. Gideon Chitayat (73), non-executive director, is currently Chairman of Delta Galil Industries and Honigman. Dr. Chitayat has served as a director for Teva Pharmaceutical Industries and Bank Hapoalim among others. He has provided consultancy services to the Board and Vice-Presidents of Companies including Teva Pharmaceuticals Industries, Amdocs, Israel and Bank Mizrahi. He holds a Ph.D. in Business & Applied Economics from the University of Pennsylvania and a Masters in Business & Applied Economics from the Hebrew University, Jerusalem and joined the Board of BATM in June 2010.

Amos Shani (63), non-executive external director, is an entrepreneur with 30 years of experience in the Semiconductors sector, with an emphasis on Processors, Networking, Audio/Video compression, Wireless multimedia as well as Systems and Consumer Electronics sectors. He is a former Division Engineering Manager for Intel, Israel. Amos holds a BSEE from Tel Aviv University and joined the Board of BATM in June 2010.

Dr. Zvi Marom Chief Executive Officer

Ofer Bar-Ner Chief Financial Officer

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Corporate Governance

The company is committed to high standards of corporate governance and the Board is accountable to the company's shareholders for such governance. The Board reviews carefully all new regulations relating to the principles of good corporate governance and practice and endeavours to apply them where applicable. It also reviews carefully any comments received from independent reviewing agencies and shareholders and communicates with them directly. The company believes that the combination of the experience of its Chairman, Peter Sheldon, in the UK markets and its senior independent Director, Gideon Chitayat, in the Israeli market provides the company with the relevant leadership to address its position as an Israeli company that is traded on the UK exchange.

This statement describes how the principles of corporate governance are applied and the company's compliance with the 2006 FRC Combined Code for Corporate Governance (the "Code") appended to the Listing Rules of the UK Listing Authority.

Compliance with the 2006 FRC Combined Code

Throughout the year ended 31 December 2011, and through to the date of approval of the financial statements, the Board considers that the company has complied with Section 1 of the Code. The company has applied the Principles of Good Governance set out in Section 1 of the Code by complying with the Code of Best Practice as set forth below and in the Remuneration Report below. Further explanation of how the principles and supporting principles have been applied is set out below and in the directors' remuneration report.

In addition, as outlined below, the Company's responsibilities under Israeli company legislation is such that it is obliged to appoint two independent non-executive directors (defined as "external directors" within Israeli law), who must be appointed for a minimum of one three year term, and who cannot serve for more than two three year terms each. With the exception of the "external" non-executive directors who serve for a period of three years in accordance with Israeli company law, all directors have to be re-elected by the shareholders at an AGM, if proposed for re-election.

The new independent non-executive directors defined as external directors was Mr. Amos Shani and Dr. Amiram Mel. Shani was appointed in July 2010 and Dr. Mel in March 2011. On February 27, 2012, Dr. Mel informed the Board that as a result of an appointment with a key customer of the Company, he no longer considered it appropriate to continue as a Director of the Company. Accordingly, he has resigned with effect from February 2012. The Board is currently seeking a replacement for this vacancy.

The Company believes that as a result of the Israeli corporate law that limits the term of the external directors, it is essential to maintain a number of long serving directors who may serve for more than the ten year period recommended under the Code, in order to provide continuous experience and knowledge. During the last two years the company retained two senior Executives from large US Corporations to serve on its board of Directors, Roger Lacey and Dr. Amiram Mel. However, as a result of the regulatory environment in the USA it became impossible for them to continue to serve on the company's board. Therefore, we believe that the leadership of our Chairman at this time and his experience in the UK regulatory environment is extremely valuable to the board.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Corporate Governance

The Board

In compliance with Israeli company legislation the Board meets at least four times a year in formal session. Prior to each meeting, the Board is furnished with information in a form and quality appropriate for it to discharge its duties concerning the state of the business and performance. Board and committee activities in 2011 were as follows:

	Meetings	Written Consent	Attendance
Board of Directors	5	-	Note 1
Audit Committee	5	-	Note 2
Remuneration Committee	2	-
Nominations Committee	1	-

Note 1) All directors attended 100% of the Board meetings, other than Amos Shani and Amiram Mel who were absent from one meeting during 2011 for personal reasons and Peter Sheldon who was absent from one meeting because of illness.

Note 2) All Audit Committee members attended 100% of meetings other than Amos Shani and Amiram Mel who were absent from one meeting during 2011 for personal reasons.

There is not a formal schedule of matters specifically reserved to the Board for decision, as set out in A.1.1 of the Code, however, provisions in the Israeli company legislation set out the responsibilities and duties of and areas of decision for the Board which includes approval of financial statements, dividends, Board appointments and removals, long term objectives and commercial strategy, changes in capital structure, appointment, removal and compensation of senior management, major investments including mergers and acquisitions, risk management, corporate governance, engagement of professional advisors, political donations and internal control arrangements. The ultimate responsibility for reviewing and approving the annual report and financial statements, and for ensuring that they present a balanced assessment of the company's position, lies with the Board. These provisions have been fully complied with.

The Board comprises six directors, four of whom are non-executive directors, under the chairmanship of Peter Sheldon. The Chief Executive is Dr. Zvi Marom. The senior non-executive director is Dr. Gideon Chitayat. The Board's members have a wide breadth of experience in areas relating to the company's activities and the non-executive directors in particular bring additional expertise to matters affecting the company. All of the directors are of a high calibre and standing. The biographies of all the members of the Board are set out on page 13. The interest of the Directors in the Company and their share holdings are set out on page 26. All the non-executive directors are independent of management and not involved in any business or other relationship, which could materially interfere with the exercise of their independent judgment.

The induction of newly elected directors into office is the responsibility of the senior independent director (presently Dr. Gideon Chitayat). The new directors receive a memorandum on the responsibilities and liabilities of directors as well as presentations of all activities of the company by senior members of management and a guided tour of the company's premises. All directors are invited to visit the company premises and its manufacturing facilities.

Each month every director receives a detailed operating report on the performance of the Company in the relevant period, including a Balance Sheet. A fuller report on the trading and quarterly results of the company is provided at every board meeting. Once per year a budget is discussed and approved by the Board for the following year. All directors are properly briefed on issues arising at Board meetings and any further information requested by a director is always made available.

Under Israeli law it is not a mandatory requirement for a company to have a secretary and the company does not therefore have a formally appointed secretary. However, Mr. Arthur Moher, who is also one of the company's legal advisers, provides the company with all the functions of company secretary and all the directors have access to Mr. Moher's services. The directors are therefore of the opinion that the spirit of A.1.4 of the Code has been complied with.

The directors may take independent professional advice at the Company's expense in furtherance of their duties. Independent outside counsel is present at every Board meeting and Board committee meetings.

Annual Report 2011 15

OVERVIEW

GOVERNANCE

FINANCIALS

Corporate Governance

Relations with Shareholders

Communication with shareholders is given high priority. The half-yearly and annual results are intended to give a detailed review of the business and developments. A full Annual Report is made available on the Company's website to all shareholders and printed copies made available on request. The Company's website (www.batm.com) contains up to date information on the company's activities and published financial results. The company solicits regular dialogue with institutional shareholders (other than during closed periods) to understand shareholders views. The Board also uses the Annual General Meeting to communicate with all shareholders and welcomes their participation. Directors are available to meet with shareholders at appropriate times.

Committees

The Board has established an Audit Committee, a Remuneration Committee and a Nominations Committee to deal with specific aspects of the company's affairs.

Audit Committee

The members of the audit committee are Dr. Chitayat, Mr. Shani and until 27 February 2012, Dr. Mel, who retired recently. Each of them has significant financial expertise. The committee's terms of reference include, among other things, monitoring the scope and results of the external audit, the review of interim and annual results, the involvement of the external auditors in those processes, review of whistle blowing procedures, considering compliance with legal requirements, accounting standards and the Listing Rules of the Financial Services Authority, and for advising the Board on the requirement to maintain an effective system of internal controls. The committee also keeps under review the independence and objectivity of the group's external auditors, value for money of the audit and the nature, extent and cost-effectiveness of the non-audit services provided by the auditors.

The committee has discussed with the external auditors their independence, and has received and reviewed written disclosures from the external auditors regarding independence. During 2009 the external auditors replaced the partner in charge of the audit to comply with their internal independence regulations. Non-audit work is generally put out to tender. In cases which are significant, the company engages another independent firm of accountants to consulting work to avoid the possibility that the auditors' objectivity and independence could be compromised; work is only carried out by the auditors in cases where they are best suited to perform the work, for example, tax compliance. However, from time to time, the company will engage the auditors on matters relating to acquisition accounting and due diligence.

The committee meets at least twice a year, and always prior to the announcement of interim or annual results. The external auditors and Chief Financial Officer are invited to attend all meetings in order to ensure that all the information required by the committee is available for it to operate effectively. The external auditor communicates with the members of the audit committee during the year, without Executive officers present.

The Audit Committee adheres to the functions and requirements prescribed to it by the Israeli Companies Law and Israeli Regulations. The Chairman of the Audit Committee maintains close contact with the company on a regular basis.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Corporate Governance

Nominations Committee

The Board has a nominations committee which is chaired by Peter Sheldon. The other member of the committee are: Dr. Marom and Dr. Chitayat. Individuals nominated as directors are elected by the shareholders in general meeting. Executive and non-executive directors are elected by the shareholder's General Meeting for a term of one year. Non-executive public "external" directors, as defined by Israeli Company Law, are appointed and elected for a mandatory term of three years, which is renewable for a further term of three years. The re-appointment of a director must be approved by the shareholders in general meeting.

One nomination of a director was made during the year under review which was discussed and recommended by the committee in the year. Notwithstanding this the members of the nominations committee met both independently and together with a number of potential appointees to the Board during 2011 to evaluate potential nominees.

Directors' Remuneration

The Board has a Remuneration Committee, which is currently chaired by Dr. Gideon Chitayat. The other current member of the committee is Mr. Amos Shani. Information of the Company's policy regarding the setting of directors' remuneration together with details of the service contracts of the executive directors and the remuneration of directors is set out in the Remuneration Report on page 23 - 26.

Accountability and Audit

Auditors

Brightman Almagor Zohar & Co., a member firm of Deloitte Touche Tohmatsu, has expressed its willingness to continue in office and a resolution to re-appoint the firm will be proposed at the annual general meeting.

Significant Risks and Uncertainty

The Group has recently entered the Medical and Surveillance sectors. These are new markets in which the Group has relatively little experience. The success of the Group's investments in these sectors is thus uncertain with consequent risk to the amounts invested.

The Group has made acquisitions which do not attain one hundred per cent ownership of the target Companies. As a result certain companies in the group have minority interests, which are usually the local management of the subsidiaries. Relationships with these minority interests are important and carry certain risks.

The Group has several significant indirect sales channels. The loss, or significant scale down, of any one or more of these channels would have a negative impact on the performance of the Group.

The Company has an ongoing process for identifying, evaluating and managing the significant risks faced by the Company that has been in place for 2011 and up to the date of approval of the annual report and financial statements. Principal controls are managed by the executive directors and key employees, including regular review by management and the Board of the operations and the financial statements of the Company.

Annual Report 2011 17

OVERVIEW

GOVERNANCE

FINANCIALS

Corporate Governance

Key Performance Indicators

The company has several key performance measures used internally to monitor and challenge performance and to assist investment decisions. The most important performance indicators in the current and prior years are summarized as follows:

	2011	2010	Change %
Revenue	$127.6m	$120.6m	+ 5.8
Gross profit margin	34.0%	35.4%	- 3.95
R&D spend, net	$13.2m	$12.5m	+ 5.6
Liquid balances	$46.9m	$60.2m	- 22
Profit (loss) per share	(0.92)€	0.42€	- 319

Revenues have increased due to the expansion of the Medical business.

The gross profit margin has decreased primarily due to write off of $2.2 million inventory related to the telecom legacy business, which is being discontinued.

Corporate Strategy

BATM strategy is based on building two strong technology divisions - the Telecom division and the Medical division - into leading entities, supplying the highest quality and cost effective innovative products in their respective fields.

BATM is growing its networking division to be an important provider of access solutions. In the medium term the division is focused on providing groundbreaking technologies in a cellular centric video rich world. This includes expanding the offering to a full access service oriented solution and technological breakthroughs in delivering large scale streams of secured video and data at speeds of 10Gbps and up.

The division is now working closely with customers to define needs in LTE based applications, as well as applications for cloud based networks. Some of these applications are envisaged to reach the markets during 2012.

The Medical division is focused on becoming an important provider of diagnostics and sterilization laboratory equipment. The division is built on high reliability, fast and easy to operate equipment for small diagnostic laboratories with an emphasis on emerging markets. In addition, the division launched an innovative product to treat medical waste in laboratories and hospitals.

The division's products are highly sophisticated, environmental friendly and very cost effective. BATM Medical has partnerships with reagent manufacturers and academic institutions to guarantee an innovative, "one stop shop", flexible offering to its customers. The Medical division plans to announce some unique produce offerings during 2012.

Future Developments

Management intends to continue to invest significantly in R&D and sales and marketing activities in order to further the organic growth of the business. In addition, Management intends to make niche acquisitions to strengthen the Group's position in the Telecom and Medical markets.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Corporate Governance

Internal Control

The Board of directors has overall responsibility for ensuring that the Company maintains adequate systems of internal control. To this end, in accordance with Israeli Company Law, the company has appointed and retains the services of an independent qualified internal auditor. Each year, the audit committee reviews with the internal auditors potential risks and proposed plan for their scope of work. The audit committee usually selects at least two areas of focus for each year. Following a completion of the report they send it to all directors and present their findings to the audit committee. The audit committee then reports back to the board on any major findings.

Risk management is currently reviewed on an ongoing basis by the Board as a whole.

The key features of the financial controls of the company include a comprehensive system of financial reporting, budgeting and forecasting, and clearly laid down accounting policies and procedures. The Board of the Company is furnished with detailed financial information on a monthly basis.

The main elements of internal control currently includes:

Operating Controls: The identification and mitigation of major business risks on a daily basis is the responsibility of the executive directors and senior management. Each business function within the Company maintains controls and procedures, as directed by senior management, appropriate to its own business environment while conforming to the company's standards and guidelines. These include procedures and guidelines to identify, evaluate the likelihood of and mitigate all types of risks on an ongoing basis.
Information and Communication: The Company's operating procedures include a comprehensive system for reporting financial and non-financial information to the directors. Financial projections, including revenue and profit forecasts, are reported on a regular basis to senior management against corresponding figures for previous periods. The central process for evaluating and managing non-financial risks is monthly meetings of business functions, each involving at least one director, together with periodic meetings of executive directors and senior management.
Finance Management: The finance department operates within policies approved by the directors and the Chief Financial Officer. Expenditures are tightly controlled with stringent approvals required based on amount. Duties such as legal, finance, sales and operations are also strictly segregated to minimize risk.
Insurance: Insurance cover is provided externally and depends on the scale of the risk in question and the availability of cover in the external market.

Conflicts

Throughout 2011 the Company has complied with procedures in place for ensuring that the Board's powers to authorize conflict situations have been operated effectively. During 2011 no conflicts arose which would require the board to exercise authority or discretion in relation to such conflicts.

Annual Report 2011 19

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FINANCIALS

Statement of Directors' Responsibilities

The directors are responsible for preparing the Annual Report, the Remuneration Report and the financial statements in accordance with applicable laws and regulations. The directors are required to prepare financial statements for the Group in accordance with International Financial Reporting Standards (IFRS). Company law requires the directors to prepare such financial statements.

International Accounting Standard 1 requires that financial statements present fairly for each financial year the company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's 'Framework for the Preparation and Presentation of Financial Statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable International Financial Reporting Standards.

Directors are also required to:

properly select and apply accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a directors' report and directors' remuneration report which comply with the Listing Rules and the Disclosure and Transparency rules.

Legislation in Israel governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm to the best of our knowledge:

the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit of the company and the undertakings included in the consolidation taken as a whole;
the management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Corporate, Social and Environmental Responsibilities

The Company endeavours to be honest and fair in its relationships with customers and suppliers, and to be a good corporate citizen respecting the laws of the countries in which it operates. The Company is accountable to its shareholders but also endeavours to consider the interests of all of its stakeholders, including its employees, customers and suppliers, as well as the local communities and environments in which the Company operates. In this context the company takes regular account of the significance of social, environmental and ethical matters to its operations as part of its regular risk assessment procedures, with such matters regularly considered by the executive directors.

The Board is committed to monitoring the Company's corporate social responsibility policies in key areas. Management monitors the Company's day-to-day activities in order to assess risks in these areas and identify actions that may be taken to address those risks. At present, the Board does not consider it appropriate to link the management of these risks to remuneration incentives, given the difficulties in measuring the changes to those risks objectively. Given the Company's relatively low social and environmental impact, the Company believes that there are few risks to its short and long term value proposition arising from these matters, although it considers the potential to deliver greater value by responding to these issues appropriately. The Board believes the Company has adequate information to assess these matters, and effective systems for managing any risks. The Company's website includes a section dedicated to corporate ethical, employment and environmental issues.

Whilst the Board considers that material risks arising from social, ethical, employment and environmental issues are limited, given the nature of the Company's business, policies have been adopted in key areas to ensure that such risks are limited. Examples of policies and practices in these areas are given below.

Employment Policies

BATM employs approximately 750 people and in order to continue to grow as a business, the Company needs to continue to recruit and retain only the best talent. Therefore it is the Company's policy to pursue practices that are sensitive to the needs of its people. The Company strives for equal opportunities for all of its employees, including disabled employees, and does not tolerate harassment of, or discrimination against, its staff. The Company's priorities are:

Providing a safe workplace with equality of opportunity and diversity through our employment policies.
Encouraging our people to reach their full potential through career development and promotion from within where possible.
Communicating openly and transparently within the bounds of commercial confidentiality, whilst listening to our people and taking into account their feedback.
Recognizing and rewarding our people for their contribution and encouraging share ownership at all levels.

The Company respects the rule of law within all jurisdictions in which it operates and supports appropriate internationally accepted standards including those on human rights. The Company's equal opportunities policies prohibit discrimination on grounds such as race, gender, religion, sexual orientation or disability. This policy includes, where practicable, the continued employment of those who may become disabled during their employment. The Company's policies strive to ensure that all decisions about the appointment, treatment and promotion of employees are based entirely on merit, and continued development of the Company is made with the maximum involvement and input from employees practicable.

Employees with Disabilities

The Company's policy is to give full and fair consideration to suitable applications from people with disabilities for employment. If existing employees become disabled they will continue to be employed, wherever practicable, in the same job or, if this is not practicable, every effort will be made to find suitable alternative employment and to provide appropriate training.

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Corporate, Social and Environmental Responsibilities

Environmental Policies

The Directors recognize the importance of the Group adhering to clear environmental objectives. Its environmental policy is to:

Meet the statutory requirements placed on it;
Adopt good environmental practice in respect of premises, product development and manufacturing, and consumption of resources;
Aim to recycle as much of its waste products as it is economically practicable to do.

The Company has programs to reduce its electricity and fuel consumption.

In addition the Company designs certain product lines that are designed to reduce energy consumption and waste production. Recently the company launched a new product, in the medical division, to treat medical waste and convert it into normal waste. The successful launch of the product into dialysis centers, laboratory and hospitals and the relevant environmental certifications will position the company as a leader in this field.

The Company has implemented the recommendations of ROHS (The Restriction of Hazardous Substances) in Electrical and Electronic Equipment (ROHS) Directive (2002/95/EC), and as of the year 2008, all of its products are fully ROHS certified.

The company is ISO 14000 certified.

Ethical Business Practices

BATM is a development and sales company based in Israel with overseas sales, manufacture and development operations. All employees are expected to behave ethically when working for the Company and this is reflected in our policies which are disseminated to all of our employees.

Charitable Policies

BATM maintains a number of small charitable giving policies.

The Company actively encourages every employee to work to further charitable goals.

Community Involvement

BATM is involved with a number of community projects. These include involvement with local charitable organizations and hospitals that are designed to help bridge socio-economic divides and help the sick.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Remuneration Committee and Remuneration Report

Introduction

This report sets out BATM Advanced Communication's Executive remuneration policy and details Directors' remuneration and benefits for the financial year under review. The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes how the Board has applied the Principles of Good Governance relating to Directors' remuneration. As required by the Regulations, a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the financial statements will be approved. In accordance with Israeli company law, the Board recommends and the general meeting of the Company is asked to approve, the remuneration of the executive and non-executive directors of the company, after it has been first approved by the company's Remuneration Committee.

The regulations also require the auditors to report to the Company's members on certain information within this report and to state whether in their opinion that part of the report has been properly prepared with IFRS. The report is therefore divided into separate sections for audited and unaudited information.

Unaudited information

Remuneration Committee

The Company has a Remuneration Committee (the 'Committee') which is constituted in accordance with the recommendations of the Combined Code. The committee consists of three out of the four non-executive directors and excludes the chairman as is required under Israeli Company Law. Since June 2010 the Committee has been chaired by Dr. Gideon Chitayat and its other members were Mr. Amos Shani and since March 2011 Dr. Amiram Mel. None of the Committee members has any personal financial interests (other than as a shareholder), conflicts of interests arising from cross-directorships or day-to-day involvement in running the business.

None of the Directors plays a part in any determination of his own remuneration.

The Committee met twice during the financial year. It has responsibility for making recommendations to the Board on the Company's policy on staff remuneration and for the determination, within agreed terms of reference, of specific remuneration packages for the Chairman of the Company and each of the Executive Directors (including pension rights and any compensation payments).

The primary responsibilities of the Committee are to ensure:

That individual pay levels for executive directors should generally be in line with levels of pay for executives in similar companies with similar performance achievement and responsibilities.
That share option and bonus schemes should be set at a level that provides sufficient incentive to the executive to produce results that will reflect and exceed the board's expectations.
That total pay and long term remuneration will be sufficient to retain executives who perform.
That aggregate pay for all executive directors is reasonable in light of the company's size and performance.

Annual Report 2011 23

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FINANCIALS

Remuneration Committee and Remuneration Report

Remuneration policy

Executive remuneration packages are:

designed to attract, motivate and retain Directors of the calibre needed to maintain the Company's position as a market leader within the Telecoms and Medical industry;
designed to align the interests of Executives with shareholders;
constructed with a substantial performance-related element set against appropriately demanding targets.

The performance measurement of the Executive Directors and the determination of their annual remuneration packages, are undertaken by the Committee.

The remuneration of the Non-Executive Directors is determined by the Board. In determining the Directors' remuneration for the year the Committee consulted the Executive Directors and other senior management, about its proposals.

There are currently four main elements of the remuneration package for Executive Directors:

(a) basic salary; (b) social benefits (including pension arrangements); (c) annual bonus payments and (d) share options incentives.

The Company's policy is that an appropriate proportion of the potential remuneration of the Executive Directors should be performance related, whilst ensuring that basic pay and other benefits are sufficient to recognise the contribution of the director and his/her responsibilities.

Basic salary

An Executive Director's basic salary is normally reviewed at the end of the term of the Executive's service contract, and paid as a fixed cash sum monthly. In some cases, due to social cost implications, part of the basic salary is paid annually in the form of a seniority payment. The Committee, in determining salary adjustments, considers increased responsibilities such as the size of the Group, individual performance and contribution, and market pressures.

At the Extraordinary General Meeting ("EGM") held on March 9, 2011 the shareholders approved a new service contract and a salary increase of $20,000 per year for the Chief Executive Officer Dr. Zvi Marom.

Social benefits (including pension arrangements)

BATM rewards Executive Directors with social benefits that are common in the local employment environment, and can confer tax benefits. These can include Pension Contributions, Education Fund contributions and availability of a Company car.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Remuneration Committee and Remuneration Report

Annual bonus payments

The Directors believe that retaining a workforce which is motivated to achieve the Group's objectives is fundamental to its continued prosperity. Accordingly, Executive Directors are eligible to participate in a performance related annual bonus scheme. The maximum potential bonus for any individual, together with the associated performance measures and targets, is set by the Committee. The bonus for the two executive directors is based on the company's profit only. The board believes that this target aligns correctly their targets with the interests of the company's shareholders.

In accordance with his service contract which expired at the end of 2010 Dr. Marom was entitled to a bonus based on a percentage of Net Profit before amortization and bonus ("Relevant Profit") on the following basis:

If profit increases by between 50% and 100% over the preceding year, 2.75% of Relevant Profit.
If profit increases by over 100% over the preceding year, 3.75% of Relevant Profit.
If neither paragraph 1 nor 2 apply, 1.75% of relevant profit.

At the Extraordinary General Meeting held on March 9, 2011 the shareholders approved a new service contract for Dr. Marom, which retains the same bonus arrangements as his previous contract but introduces a cap on the bonus of four times basic salary.

In accordance with his existing service contract which expires 11 March 2013. Mr. Bar-Ner is entitled to a bonus on Net Profit targets calculated as follows:

If profit increased by up to 50% on the preceding year, one sixth of annual salary
If profit increased by between 50% and 100% on the preceding year, 25% of annual salary
If profit increased by over 100% on the preceding year, 50% of annual salary

Bonus Cap

The aggregate bonus of Dr. Zvi Marom shall in no event exceed four times his annual salary.

The aggregate bonus of Mr. Ofer Bar Ner shall in no event exceed 50% of his annual salary.

Share options incentives

The Group operates the BATM Share Option Scheme ('Company Scheme') which is constituted by rules, and includes a section which has been approved by the Israeli tax authorities ('Approved Scheme').

As a result of the board decision to grant options to the Chief Executive Officer only when the EBITDA margin is at least 12%, no options were granted to him during the year.

Directors have options under grants from previous years that vest over the course of three years.

Annual Report 2011 25

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Remuneration Committee and Remuneration Report

Audited information

The table of Directors' remuneration is set out below and is consistent with note 36 to the financial statements.

Remuneration policy

Table A – Emoluments of the Directors with comparatives

	Basic Salary $000	Social benefits $000	Pension benefits $000	Performance bonus $000	2011 Total $000	2010 Total $000
Zvi Marom	300	24	7	47	378	340
Ofer Bar Ner	170	24	8	-	202	177
Peter Sheldon	44	-	-	-	44	43
Gideon Chitayat	44	-	-	-	44	22
Amos Shani	20	-	-	-	20	10
Amiram Mel	30	-	-	-	30	-
Dan Kaznelson	-	-	-	-	-	15
Ariella Zochovitzky	-	-	-	-	-	25
Koti Gavish	-	-	-	-	-	25

Table B – Interests of the Directors

The interests of the Directors and their immediate families, both beneficial and non-beneficial, in the ordinary shares of the Company at 31 December 2011 were as follows:

	2011 Ordinary shares	2010 Ordinary shares
Zvi Marom	93,494,500	92,044,500
Ofer Bar Ner	150,000	-
Peter Sheldon	750,000	750,000
Gideon Chitayat	-	-
Amos Shani	-	-

Table C – Share Options

Options to subscribe for or acquire ordinary shares of the Company were held by the following Directors during the year.

	As at 01 Jan 11	Granted	Exercised	Lapsed	As at 31 Dec 11	Exercise price	Expiry date
Ofer Bar Ner	330,000	-	-	330,000	-	0.279	31/12/2011
Ofer Bar Ner	250,000	-	-	250,000	-	0.407	31/12/2011
Ofer Bar Ner	250,000	-	-	-	250,000	0.407	31/12/2012
Ofer Bar Ner	250,000	-	-	-	250,000	0.407	31/12/2013
Ofer Bar Ner	333,333	-	-	-	333,333	0.270	07/06/2012

At the AGM, held on 22 June 2010 the shareholders approved that a loan be granted to the CFO totalling $200,000, repayable without interest in four annual instalments. As of 31 December 2011 the loan balance is $100,000.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Auditors' Report

Deloitte.

Brightman Almagor Zohar

Independent Auditors' Report To the Shareholders of BATM Advanced Communications Ltd.

We have audited the accompanying consolidated statements of financial position of BATM Advanced Communications Ltd. ("the Company") as of December 31, 2011 and 2010 and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years ended December 31, 2011 and 2010. These financial statements are the responsibility of the Company's management and Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audits.

We did not audit the financial statements of certain subsidiaries, whose assets included in consolidation constitute approximately 4% and 2% of total consolidated assets as of December 31, 2011 and 2010, respectively, and whose revenues included in consolidation constitute approximately 6% and 4% of total consolidated revenues for the years ended December 31, 2011 and 2010 respectively. The financial statements of those companies were audited by other auditors, whose reports thereon were furnished to us. Our opinion, insofar as it relates to amounts emanating from the financial statements of such companies, is based on the reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing standards in Israel including those prescribed by the Auditors' Regulations (Auditor's Mode of Performance) (Israel), 1973. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management and Board of Directors, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and on the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of the company and its subsidiaries as of December 31, 2011 and 2010, and the results of operations, changes in equity and the cash flows of the Company and its subsidiaries for the years ended December 31, 2011 and 2010 in accordance with International Financial Reporting Standards (IFRS).

Brightman Almagor Zohar & Co. Certified Public Accountants A member firm of Deloitte Touche Tohmatsu 30 April 2012

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Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Consolidated Income Statements

	Note	Year ended 31 December
		2011	2010
		US$ in thousands
Revenues	5,6	127,634	120,578
Cost of revenues	7b	84,226	77,905
Gross profit		43,408	42,673
Operating expenses
Sales and marketing expenses		16,284	15,332
General and administrative expenses		10,495	9,241
Research and development expenses	7a	13,194	12,450
Other operating expenses		6,715	4,517
Total operating expenses		46,688	41,540
Operating profit (loss)		(3,280)	1,133
Finance income	9	1,126	1,549
Finance expenses	10	(1,928)	(1,652)
Profit (loss) before tax		(4,082)	1,030
Income tax expenses	11	(885)	(836)
Profit (loss) for the year		(4,967)	194
Attributable to:
Owners of the Company		(3,720)	1,699
Non-controlling interests		(1,247)	(1,505)
Profit (loss) for the year		(4,967)	194
Earnings (loss) per share (in cents) basic and diluted	13	(0.92)	0.42

Consolidated Statements Of Comprehensive

	Year ended 31 December
	2011	2010
	US$ in thousands
Profit (loss) for the year	(4,967)	194
Exchange differences on translating foreign operations	(1,621)	(4,911)
Total Comprehensive of the year	(6,588)	(4,717)
Attributable to:
Owners of the Company	(6,287)	(4,312)
Non-controlling interests	(301)	(405)
	(6,588)	(4,717)

The accompanying notes are an integral part of these financial statements.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Consolidated Statements Of Financial Position

	Note	31 December
		2011	2010
		US$ in thousands
Non-current assets
Goodwill	14	11,616	11,300
Other intangible assets	15	14,539	19,798
Property, plant and equipment	16	25,153	25,943
Deferred tax assets	22	5,525	5,122
		56,833	62,163
Current assets
Inventories	19	24,297	19,470
Financial assets	18,21	23,883	38,079
Trade and other receivables	20	27,529	30,900
Cash and cash equivalents	18	23,012	22,087
		98,721	110,536
Total assets		155,554	172,699
Current liabilities
Short-term bank credit		6,770	6,135
Trade and other payables	23	27,441	27,900
Provisions	24	2,507	3,190
		36,718	37,225
Net current assets		62,003	73,311
Non-current liabilities
Long-term liabilities	23	(*) 6,019	(*) 9,937
Deferred tax liabilities		(*) 1,538	(*) 1,903
Retirement benefit obligation	35	1,001	884
		8,558	12,724
Total liabilities		45,276	49,949
Net assets		110,278	122,750
Equity
Share capital	25	1,215	1,215
Share premium account	26	406,892	406,504
Foreign currency translation reserve and other reserves	27	(13,073)	(8,798)
Accumulated Deficit	28	(286,088)	(277,236)
Equity attributable to:
Owners of the Company		108,946	121,685
Non-controlling interests		1,332	1,065
Total equity		110,278	122,750

(*) Reclassified The accompanying notes are an integral part of these financial statements.

The financial statements were approved by the board of directors and authorised for issue on 30 April 2012. They were signed on its behalf by:

Dr. Z. Marom CEO

O. Bar-Ner CFO

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Consolidated Statements Of Change In Equity

	Share capital	Share Premium account	Translation reserve	Other reserves	Accumulated Deficit	Attributable to owners of the parent	Non-controlling interest	Total equity
US $ in thousands
Balance as at 1 January 2010	1,214	405,961	(4,015)	786	(270,808)	133,138	1,912	135,050
Exercise of share based options by employees	1	117	-	-	-	118	-	118
Recognition of share-based payments	-	426	-	-	-	426	-	426
Non-controlling interest acquired	-	-	-	442	-	442	(442)	-
Dividend	-	-	-	-	(8,127)	(8,127)	-	(8,127)
Comprehensive loss for the year	-	-	(6,011)	-	1,699	(4,312)	(405)	(4,717)
Balance as at 31 December 2010	1,215	406,504	(10,026)	1,228	(277,236)	121,685	1,065	122,750
Exercise of share based options by employees	-	62	-	-	-	62	-	62
Recognition of share-based payments	-	326	-	-	-	326	-	326
Non-controlling interest acquired	-	-	(889)	(819)	-	(1,708)	568	(1,140)
Dividend	-	-	-	-	(5,132)	(5,132)	-	(5,132)
Comprehensive loss for the year	-	-	(2,567)	-	(3,720)	(6,287)	(301)	(6,588)
Balance as at 31 December 2011	1,215	406,892	(13,482)	409	(286,088)	108,946	1,332	110,278

The accompanying notes are an integral part of these financial statements.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Consolidated Cash Flow Statements

	Note	Year ended 31 December
		2011	2010
		US$ in thousands
Net cash from operating activities	31	3,138	12,481
Investing activities
Interest received		887	612
Proceeds on forward transactions		-	1,154
Proceeds on disposal of held to maturity investments		-	4,316
Proceeds on disposal of financial assets carried at fair value through profit and loss		6,515	13,108
Proceeds on disposal of deposits		46,150	38,427
Purchases of property, plant and equipment		(1,672)	(6,392)
Proceeds on disposal of property, plant and equipment		134	-
Purchase of forward transaction		-	(1,099)
Purchases of financial assets carried at fair value through profit and loss		-	(20,221)
Purchases of deposits		(41,647)	(39,727)
Purchases of other business combinations	29	(3,418)	(171)
Net cash from (used in) investing activities		6,949	(9,993)
Financing activities
Dividends paid to owners of the Company		(5,132)	(8,127)
Tax on dividend		(694)	(637)
Increase (decrease) in short-term bank credit		366	(1,761)
Bank loan received		-	1,500
Bank loan repayment		(2,717)	(1,032)
Non-controlling interest acquired	30	(767)	-
Proceeds on issue of shares		62	118
Net cash used in financing activities		(8,882)	(9,939)
Increase (decrease) in cash and cash equivalents		1,205	(7,451)
Cash and cash equivalents at the beginning of the year		22,087	28,095
Effects of exchange rate changes on the balance of cash held in foreign currencies		(280)	1,443
Cash and cash equivalents at the end of the year		23,012	22,087

The accompanying notes are an integral part of these financial statements.

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Note 1 - General Information

BATM Advanced Communications Ltd. ("the Company") is a company incorporated in Israel under the Israeli Companies law. The address of the registered office is P.O.B. 7318, Nave Ne'eman Ind. Area 4, Ha'harash Street, 45240 Hod Hasharon, Israel. The Company and its subsidiaries ("the Group") are engaged mainly in the research and development, production and marketing of data communication products in the field of Metropolitan area networks. In addition the Group is operating in the medical diagnostics market. The medical diagnostics division of the Group ("BATM Medical") is engaged in the research and development, production, marketing and distribution of medical products, primarily laboratory diagnostics and sterilization equipment.

In the current year, the following new and revised Standards and Interpretations have been adopted and have affected the amounts reported in these financial statements.

Note 2 - Application of new and revised International Financial Reporting Standards (IFRSs)

New and revised IFRSs applied with no material effect on the consolidated financial statements.

The following new and revised IFRSs have also been adopted in these consolidated financial statements. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

IAS 24 Related Party Disclosures (as revised in 2009)	The IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) IAS 24 (as revised in 2009) has changed the definition of a related party and (b) IAS 24 (as revised in 2009) introduces a partial exemption from the disclosure requirements for government-related entities. The Company and its subsidiaries are not government-related entities. The application of the revised definition of related party set out in IAS 24 (as revised in 2009) in the current year has resulted in the identification of related parties that were not identified as related parties under the previous Standard. Specifically, associates of the ultimate holding company of the Company are treated as related parties of the Group under the revised Standard whilst such entities were not treated as related parties of the Group under the previous Standard. The related party disclosures set out in note 36 to the consolidated financial statements have been changed to reflect the application of the revised Standard. Changes have been applied retrospectively.
Improvements to IFRSs issued in 2010	The application of Improvements to IFRSs issued in 2010 has not had any material effect on amounts reported in the consolidated financial statements.

IAS 24 Related Party Disclosures (as revised in 2009)

The IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) IAS 24 (as revised in 2009) has changed the definition of a related party and (b) IAS 24 (as revised in 2009) introduces a partial exemption from the disclosure requirements for government-related entities. The Company and its subsidiaries are not government-related entities. The application of the revised definition of related party set out in IAS 24 (as revised in 2009) in the current year has resulted in the identification of related parties that were not identified as related parties under the previous Standard. Specifically, associates of the ultimate holding company of the Company are treated as related parties of the Group under the revised Standard whilst such entities were not treated as related parties of the Group under the previous Standard. The related party disclosures set out in note 36 to the consolidated financial statements have been changed to reflect the application of the revised Standard. Changes have been applied retrospectively.

Improvements to IFRSs issued in 2010

The application of Improvements to IFRSs issued in 2010 has not had any material effect on amounts reported in the consolidated financial statements.

New and revised IFRSs in issue but not yet effective

The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:

Amendments to IFRS 7	Disclosures – Transfers of Financial Assets
IFRS 9	Financial Instruments
IFRS 10	Consolidated Financial Statements
IFRS 11	Joint Arrangements
IFRS 12	Disclosure of Interests in Other Entities
IFRS 13	Fair Value Measurement
Amendments to IAS 1	Presentation of Items of Other Comprehensive Income
IAS 19 (as revised in 2011)	Employee Benefits
IAS 27 (as revised in 2011)	Separate Financial Statements

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period.

The directors do not anticipate that these amendments to IFRS 7 will have a significant effect on the Group's disclosures regarding transfers of trade receivables previously affected. However, if the Group enters into other types of transfers of financial assets in the future, disclosures regarding those transfers may be affected.

IFRS 9 issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 amended in October 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of IFRS 9 are described as follows:

IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods.

The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

On 16 December 2011, the international accounting standards Board ("IASB" or the "Board") issued mandatory effective date of IFRS 9 and Transition Disclosures ("the amendments"), deferring the mandatory effective date of both the 2009 and 2010 versions of IFRS 9 Financial Instruments to annual periods beginning on or after 1 January 2015. Prior to the amendments, application of IFRS 9 was mandatory for annual periods beginning on or after first January 2013. The amendments continue to permit early application.

In May 2011, a package of five Standards on consolidation, joint arrangements, associates and disclosures was issued, including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011).

Key requirements of these five Standards are described below.

In addition, joint ventures under IFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under IAS 31 can be accounted for using the equity method of accounting or proportionate accounting.

IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than those in the current standards.

These five standards are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted provided that all of these five standards are applied early at the same time.

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

The directors anticipate that these five standards will be adopted in the Group's consolidated financial statements for the annual period beginning 1 January 2013. The application of these five standards may have significant impact on amounts reported in the consolidated financial statements. The application of IFRS 10 may result in the Group no longer consolidating some of its investees, and consolidating investees that were not previously consolidated (e.g. the Group's investment in C Plus Limited that is currently classified as the Group's associate may become the Group's subsidiary based on the new definition of control and the related guidance in IFRS 10). In addition, the application of IFRS 11 may result in changes in the accounting of the Group's jointly controlled entity that is currently accounted for using proportionate consolidation. Under IFRS 11, a jointly controlled entity may be classified as a joint operation or joint venture, depending on the rights and obligations of the parties to the joint arrangement. However, the directors have not yet performed a detailed analysis of the impact of the application of these Standards and hence have not yet quantified the extent of the impact.

The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

The amendments to IAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the 'corridor approach' permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus.

The amendments to IAS 19 are effective for annual periods beginning on or after 1 January 2013 and require retrospective application with certain exceptions. The directors anticipate that the amendments to IAS 19 will be adopted in the Group's consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the amendments to IAS 19 may have impact on amounts reported in respect of the Groups' defined benefit plans. However, the directors have not yet performed a detailed analysis of the impact of the application of the amendments and hence have not yet quantified the extent of the impact.

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group except for additional disclosures when the relevant standards come into effect for periods commencing on or after 1 January 2012.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Note 3 - Significant Accounting Policies

Basis of accounting

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).

The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments, liabilities for employee benefits and forgivable loans, and inventory. The principal accounting policies adopted are set out below.

The going concern basis has been adopted in preparing the financial statements.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in subsidiaries are identified separately from the Group's equity therein. The interests of non-controlling shareholders may be initially measured either at fair value or at the non-controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group's ownership interests in existing subsidiaries

Changes in the Group's ownership interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Group had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

Annual Report 2011 35

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values which is calculated as the sum of the acquisition-date fair value (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the 'measurement period' (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss.

When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see above) less accumulated impairment losses, if any.

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated income statements. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

Sale of goods

Revenue from the sale of goods is recognised when all the following conditions are satisfied:

the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the entity; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Rendering of services

Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. The stage of completion of the contract is determined as follows:

installation fees are recognised by reference to the stage of completion of the installation, determined as the proportion of the total time expected to install that has elapsed at the end of the reporting period;
servicing fees included in the price of products sold are recognised by reference to the proportion of the total cost of providing the servicing for the product sold; and
revenue from time and material contracts is recognised at the contractual rates as labour hours and direct expenses are incurred.
revenue from long-term contracts is recognised in accordance with the Group's accounting policy on long-term contracts (see below).

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Dividend and interest income

Dividend income from investments is recognised when the shareholder's right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably).

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Long-Term contracts

Where the outcome of a long-term contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. This is normally measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer.

Where the outcome of a long-term contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of the leases.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

The Group as lessee

Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Foreign currencies

The individual financial statements of each Group company are prepared in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in the US dollar, which is the presentation currency for the consolidated financial statements.

In preparing the financial statement of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations (operations in foreign currencies) are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation reserves are recognised as income or as expense in the period in which the operation is disposed.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Government grants

Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity.

Forgivable loans are loans which the lender undertakes to waive repayment under certain prescribed conditions. In a case where Government grants takes the form of a forgivable loan, a liability is recognized in regards to this loan at fair value, based on estimations of future cash flows arising from the relevant grant. It is the Group's policy to designate all such loans as financial instruments measured at fair value through profit and loss under IAS 39, as such all changes in the fair value of such a liability are recognized in the income statement.

Government grants towards research and development costs are netted against related expenses over the periods necessary to match them with the related costs.

Operating profit

Operating profit is stated before investment revenues, other gains, finance cost and impairment of financial instruments.

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group's obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur.

Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.

Share-based payment arrangements

Share-based payment transactions of the Company

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 34.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.

For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the year

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Property, plant and equipment

Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet on a historical cost basis, being the historical cost at the date of acquisition, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Properties in the course of construction for production, administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is charged so as to write off the cost or valuation of assets, other than land and properties under construction, over their estimated useful lives, using the straight-line method, on the following bases:

Buildings	2-4%
Fixtures and equipment	10%
Motor Vehicles	15%
Computers and Manufacturing equipment	10-33%

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income.

Judgement is needed to determine whether a property qualifies as investment property. An entity is required to develop criteria so that it can exercise that judgement consistently in accordance with the definition of investment property in IAS 40. Where such a classification is unclear, the Group gives primary weighting to the intention of management. Therefore if an asset is designated for future operational use it is not designated as investment property.

Intangible assets – research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;
the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Acquired intangible assets

Acquired intangible assets are measured initially at purchase cost and are amortised on a straight-line basis over their estimated useful lives.

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

Impairment of tangible and intangible assets excluding goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is determined on the "first-in-first-out" basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Financial assets

Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL), 'held-to-maturity' investments and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

At subsequent reporting dates, debt securities that the Group has the expressed intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investment's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investment's recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.

Investments are classified as held-for-trading, and are measured at subsequent reporting dates at fair value. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in net profit or loss for the period.

All the Group investments are classified as FVTPL.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts, interest rate swaps and cross currency swaps. Further details of derivative financial instruments are disclosed in note 21.

Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Bank borrowings

Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in profit or loss account using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Trade and other payables

Other financial liabilities are subsequently measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the relevant products, at the directors' best estimate of the expenditure required to settle the Group's obligation.

Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Note 4 - Critical Accounting Judgments and Key Sources of Estimation Uncertainty

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, which are described in Note 3, management has made the following judgments that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below):

Judgments with respect to the classification of the functional currency of entities in the Group.
Judgments with respect to the non-capitalization of development expenses.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Impairment of Intangible Assets and goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units (CGU) to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows of the CGU and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the balance sheet date was $11.6 million. (2010: $11.3 million), see notes 14 and 15.

Judgments with respect to the calculation of tax provision

The Group operates a number of companies in varying tax jurisdictions. Each jurisdiction has its own tax regime, and the differences are often complex. In assessing the tax liability in each Company management are required to exercise judgement as to the liabilities that may arise in these differing regimes.

Judgments with respect to actuarial assumptions

The assessment of actuarial assets and liabilities requires management to exercise judgement in regards to a number of underlying assumptions including the rate of future pay rises, the rate of leavers and other actuarial assumptions in regards to mortality rates.

Judgments with respect to a liability to the chief scientist

The assessment of the liabilities to the chief scientist requires management to exercise judgement in regards to future royalty-bearing revenues, the total liability at the year-end is $4.8 million. (2010: $4.8 million)

Judgments with respect to deferred tax assets

The company has in 2011 $4.3 million (2010: $4.3 million) deferred tax assets related to tax loss carry-forwards in the US, based on management assumptions on future profits.

Note 5 - Revenues

An analysis of the Group's revenues is as follows:

	Year ended 31 December
	2011
$'000s	2010
$'000s
Sales of goods	112,650	106,652
Services	14,984	13,926
	127,634	120,578

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Notes To The Consolidated Financial Statements

Note 6 - Business and Geographical Segments

Business segments

For management purposes, the Group is organised into two major operating divisions – Telecommunications and BATM Medical. These divisions are the basis on which the Group reports its primary segment information. The principal products and services of each of these divisions are as follows:

Telecommunications – mostly includes the research and development, production and marketing of data communication products in the field of local and wide area networks and premises management systems. Sales for this segment are global.

BATM Medical – engaged in the research and development, production, marketing and distribution of medical products, primarily laboratory diagnostic and sterilization equipment. Sales for this segment are primarily in Europe.

Segment revenues and segment results

Year ended 31 December 2011

	Telecommunications $'000s	BATM Medical $'000s	Total $'000s
Revenues	81,320	46,314	127,634
Operating profit (loss) (*)	6,857	(3,422)	3,435
Other operating expenses	(4,925)	(1,790)	(6,715)
Segment results profit (loss)	1,932	(5,212)	(3,280)
Unallocated			(802)
Loss before tax			(4,082)
Taxation			(885)
Loss for the year			(4,967)

Year ended 31 December 2010

	Telecommunications $'000s	BATM Medical $'000s	Total $'000s
Revenues	79,877	40,701	120,578
Operating profit (loss) (*)	7,834	(2,184)	5,650
Other operating expenses	(3,063)	(1,454)	(4,517)
Segment results profit (loss)	4,771	(3,638)	1,133
Unallocated			(103)
Profit before tax			1,030
Taxation			(836)
Profit for the year			194

(*) Excluding other operating expenses.

Revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the year.

During the financial period sales to significant customers were as follows:

Customer A from the Telecom division: $12.6 million (2010: $19.4 million).

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Notes To The Consolidated Financial Statements

Segment assets, liabilities and other information

As at 31 December 2011

| | Telecommunications $'000s | BATM Medical $'000s | Total $'000s | | --- | --- | --- | --- | | Assets | 109,188 | 46,366 | 155,554 | | Liabilities | 26,764 | 18,512 | 45,276 | | Depreciation and amortizations | 6,790 | 1,980 | 8,770 | | Additions to non-current assets | 3,019 | 951 | 3,970 |

As at 31 December 2010

| | Telecommunications $'000s | BATM Medical $'000s | Total $'000s | | --- | --- | --- | --- | | Assets | 128,804 | 43,895 | 172,699 | | Liabilities | 34,448 | 15,501 | 49,949 | | Depreciation and amortizations | 4,432 | 1,788 | 6,220 | | Additions to non-current assets | 2,311 | 4,893 | 7,204 |

Revenue from major products and services

The following is an analysis of the Group's revenue from operations from its major products and services.

	Year ended 31 December
	2011
$'000	2010
$'000
Telecommunication products	70,425	70,291
Software services	10,895	9,586
Distribution of medical products	29,234	23,383
Clinical Chemistry Diagnostic	8,989	10,735
Sterilization products	8,091	6,583
	127,634	120,578

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Geographical segments

The Group operates in three principal geographical areas – North America, Israel and Europe.

The Group's revenue from external customers and information about its segment assets by geographical location are presented by the location of operations and are detailed below:

	Revenue from external customers		Segment assets		Acquisition of segment assets
	2011
$'000s	2010
$'000s	2011
$'000s	2010
$'000s	2011
$'000s	2010
$'000s
North America	38,564	35,424	28,018	33,931	1,546	718
Israel	41,002	43,937	84,702	98,916	1,616	5,761
Europe	48,068	41,217	42,834	39,852	808	725
Total	127,634	120,578	155,554	172,699	3,970	7,204

Note 7 - Profit for the year

Profit for the year has been arrived at after charging (crediting):

		Year ended 31 December
		2011
$'000s	2010
$'000s
Net foreign exchange gains (losses)		(1,134)	767
Research and development costs - Gross	(a)	13,194	13,398
Government grants		-	(948)
Depreciation of property, plant and equipment		2,055	2,482
Amortisation of intangible assets included in operating expenses		3,743	3,738
Impairment of intangible assets and goodwill		2,972	-
Cost of inventories recognised as expense (*)	(b)	77,515	70,399
Staff costs (see Note 8)		32,905	31,532
Auditors' remuneration for audit services (see below)		259	257

(*) Most of the cost of revenues comprised by cost of inventories.

Amounts payable to Deloitte by the Company and its subsidiaries' undertakings in respect of non-audit services in 2011 were $25,000 (2010: $18,000). In addition, payables in respect of non-audit services to others than the Company's auditors, for tax and internal audit services in 2011, were $184,000 and $35,000, respectively (2010: $88,000 and $26,000, respectively).

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Notes To The Consolidated Financial Statements

Note 8 - Staff costs

The average monthly number of employees in 2011 (including executive directors) was 744 (2010: 706).

	Year ended 31 December
	2011
$'000s	2010
$'000s
Their aggregate remuneration comprised:
Wages and salaries	27,270	25,234
Social security costs	4,196	4,949
Other pension costs (see Note 35)	1,439	1,349
	32,905	31,532
Executive Directors' emoluments	580	517

Note 9 - Finance income

	Year ended 31 December
	2011
$'000s	2010
$'000s
Gain on sale of investment	-	126
Interest on bonds	129	65
Interest on bank deposits	628	455
Foreign exchange differences	-	767
Profit on forward contracts	215	-
Other	154	136
	1,126	1,549

Note 10 - Finance expenses

	Year ended 31 December
	2011
$'000s	2010
$'000s
Loss on forward contracts	-	(784)
Foreign exchange differences	(1,134)	-
Loss on CALL options	-	(225)
Interest on loans	(794)	(643)
	(1,928)	(1,652)

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Note 11 - Income tax expense

	Year ended 31 December
	2011
$'000s	2010
$'000s
Current tax	(*) (1,653)	(*) (1,191)
Deferred tax (Note 22)	768	355
	(885)	(836)

(*) Including corporate tax on Dividend in 2011 of $694 thousands (2010: $637 thousands) in respect of profits derived from approved enterprise.

Taxation under various laws:

Israel

The Company and its Israeli subsidiaries are assessed under the provisions of the Income Tax Law (Inflationary Adjustments), 1985, pursuant to which the results for tax purposes are measured in Israeli currency in real terms in accordance with changes in the Israeli CPI. On February 26, 2008 the Israeli Parliament approved an act for the amendment of the Income Tax Ordinance (Adjustments Due to Inflation) – 1985, under which the law was terminated on December 31, 2007.

The Company and its subsidiaries are assessed for tax purposes on an unconsolidated basis.

The Company is an "industrial company" as defined in the Israeli Law for the Encouragement of Industry (Taxes) 1969, and, as such, is entitled to certain tax benefits, mainly increased depreciation rates, the right to claim public issuance expenses and the amortization of patents and other intangible property rights as a deduction for tax purposes.

The production facilities of the Company have been granted "approved enterprise" (see below) status for several separate programs under the Law for the Encouragement of Capital Investments, 1959, as amended. Under this law, income attributable to each of these programs (in a manner prescribed in such law and its regulations) is fully exempt from tax for eight to ten years.

Such period of benefits commences on the first year in which the enterprise generates taxable income (The expiry date of the period of benefits is limited to the earlier of twelve years from commencement of production or fourteen years from the date of the approval.) The period of benefits of the first program commenced in 1992 and ended in 2000. The period of benefits of the second program commenced in 1998 and ended in 2007.

One of the Israeli subsidiaries has also been granted an Approved Enterprise status for the construction of the Company's plant at Yokneam, on terms similar to the above mentioned. In addition another of the Israeli subsidiaries has also been granted an Approved Enterprise status with a shorter period of tax benefit. This subsidiary has not yet utilized this tax exemption.

In the event of a distribution of a cash dividend out of tax-exempt income, as mentioned above, the Company (or the subsidiary who has also been granted with an Approved Enterprise status) will be liable to corporate tax at a rate of 10%-25% (depending on the percentage of foreign shareholders in the Company's equity), in respect of the amount distributed. In 2010 the Company and the subsidiary distributed dividends from tax-exempt income.

The above tax benefits are conditioned upon fulfilment of the requirements stipulated by the aforementioned law and the regulations promulgated there under, as well as the criteria set forth in the certificates of approval. In the event of failure by the Company or the subsidiary to comply with these conditions, the tax benefits could be cancelled, in whole or in part, and the Company or the subsidiary would be required to refund the amount of the cancelled benefits, plus interest and certain inflation adjustments.

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

On 29 December 2010 an amendment to the Israeli Law for the Encouragement of Capital Investments, 1959 was approved by the Israeli Parliament which cancelled the previous tax calculation method and a fixed tax rate was determined on all the productive turnover of the company. The fixed tax rates are as follows: 15% in 2011-2012 (Development area 10%), 12.5% in 2013-2014 (Development area 7%), 12% in 2015 and thereafter (Development area 6%). This amendment takes effect from January 1, 2011 and the company has the right to choose to implement the amendment or use the benefits of the previous ruling. The company decided to amend the new amendment.

The company has tax loss carry-forwards of $82.4 million in Israeli subsidiaries which the company didn't create deferred tax in respect of such losses. According to the Israeli law there is no expiry date to use such losses.

On July 25, 2009 an amendment to the Israeli tax law was approved by the Israeli Parliament which reduces the tax rates imposed on Israeli companies of 26% for 2009 and 25% in 2010; this amendment states that the corporate tax rate will be further reduced in subsequent tax years in an incremental fashion such that in 2011 the rate will be 24%, which will reduce to 18% in 2016.

On September 26, 2011 the Israeli social-economic reform committee headed by Professor Manuel Trachtenberg published its recommendations. On December 6, 2011, following the tax reform recommendations of the Trachtenberg Committee, the Knesset passed several changes to the Income Tax Ordinance regarding the reduction of tax burden (Legislative Amendments).

The main features of the new law regarding corporate income tax are as follows:

The planned gradual reduction of personal income tax rates and corporate income tax rates from 2012 is abolished.
The corporate income tax rate is increased to 25% in 2012.
The capital gains tax rates and betterment tax rate are increased to 25% in 2012.

The Company has received final tax assessments for the years up to and including the 2005 tax year. The subsidiaries have not been assessed for tax since their incorporation.

The United States of America

Since acquisition, Telco Systems has incurred losses for tax purposes. In addition, in accordance with U.S. tax law, Telco Systems made an election to amortize a substantial part of the excess cost paid by the Company in its acquisition over a period of 15 years. This has resulted in tax loss carry-forwards which may be expire before having been utilized. Accordingly the future use of these benefits is uncertain. Other US subsidiaries are assessed for tax purposes on a consolidated basis with Telco Systems. Deferred tax assets of $4.3 million have been recognised in respect of such losses. The total amount remaining to amortise for tax purposes is $75 Million and the amount of brought forward losses is $259.3 Million. According to US law, losses can be carried forward for 20 years. Accordingly, the first portion of the tax losses in the US subsidiary will expire in 2012.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Other jurisdictions

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The company has tax loss carry-forwards of $15.8 million in Europe subsidiaries which the company didn't create deferred tax in respect of such losses.

The charge for the year can be reconciled to the profit per the income statement as follows:

	Year ended 31 December
	2011	2010
	$'000s	$'000s
Profit (loss) before tax:	(4,082)	1,030
Tax expense (income) at the Israeli corporation tax rate of 24% (2010: 25%)	(980)	258
Tax exempt income	(390)	(1,947)
Expenses with unrecognized deferred tax on income or losses	1,678	1,660
Utilization of tax loss carry forward	-	(38)
Tax on dividend in respect of profits derived from approved enterprise	694	637
Different tax rates in foreign regimes and other differences	(117)	266
Tax expense for the year	885	836

Note 12 - Dividends

The Board of the Company does not recommend to pay a dividend this year in light of the results.

On 15 June 2011 a dividend of 0.80 British pence per share totalling $5.1 million was approved by shareholders at the Company's Annual General Meeting from the accumulated profit of the years 2009-2010, the dividend was paid on 18 July 2011.

On 22 June 2010 a dividend of 1.35 British pence per share totalling $8 million was approved by shareholders at the Company's Annual General Meeting from the profit of the year 2009, the dividend was paid on 26 July 2010.

Note 13 - Earnings (loss) per share

The calculation of the basic and diluted earnings per share is based on the following data:

	Year ended 31 December
	2011	2010
Earnings( loss) for the purposes of basic and diluted earnings per share ($'000s)	(3,720)	1,699
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share	402,872,861	402,494,652
Effect of dilutive potential ordinary shares:
Share options	-	728,180
Weighted average number of ordinary shares for the purposes of diluted earnings per share	402,872,861	403,222,832
Weighted average number of non-dilutive potential ordinary shares	651,283	82,515

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Notes To The Consolidated Financial Statements

Note 14 - Goodwill

The Group tests annually for impairment, or more frequently if there are indications that goodwill might be impaired. The Group has two reportable business segments and goodwill is associated with CGUs within the BATM Medical segment or CGUs within the Telecoms segment. The CGU of BATM Medical at the amount of $ 4,601 thousands (2010: $ 4,721 thousands) has been divided to 3 CGUs: Sterilization, Diagnostic and Distribution. The CGUs within the Telecoms segment remain unchanged.

Sterilization: $2,550 thousands (2010: $2,550 thousands)

Diagnostic: $1,235 thousands (2010: $1,276 thousands)

Distribution: $816 thousands (2010: $895 thousands)

Telco: $1,984 thousands (2010: $1,984 thousands)

Telecoms outsourcing: $4,923 thousands (2010: $4,383 thousands)

Telecoms Hardware: $108 thousands (2010: $212)

The recoverable amounts of the CGU are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Discount rates of between 10% - 18% have been used which is consistent with the rate used for determining the value of purchased intangibles. Changes in selling prices and direct costs are based on recent history and expectations of future changes in the market.

The Group prepares cash flow forecasts derived from the most recent financial budget approved by management and extrapolates indefinite cash flows based on estimated growth rates. For the purposes of this calculation management have used a revenue growth rates of 3% for years 2-5 and then 0% thereafter, for the Telco CGU and 5%, 5%, 10% and 10% for years 2-5, and then 0% thereafter, for the Telecoms Outsourcing CGU and 10% for years 2-5 respectively, and then have been assumed to remain constant thereafter for the Sterilization and 9%, 10%, 25% and 30% for years 2-5 respectively, and then have been assumed to remain constant thereafter for the Diagnostic and 3%, 3%, 3% and 3% for years 2-5 respectively, and then have been assumed to remain constant thereafter for the Distribution.

Fixed expenses have been assumed to grow at 2% for years 2-5 in the Telecoms Outsourcing CGU and 3.5% for years 2-5, and then have been assumed to remain constant thereafter for BATM Medical. Variable expenses (directly linked to sales) have been assumed to decrease as a constant percentage of sales throughout the forecast period in the BATM Medical CGU's decreasing by 7%, 1%, 1%, 1% and 2% in years 1-5 respectively and have assumed to remain constant thereafter, and to remain constant in the Telecoms Outsourcing CGU. The rates used above reflect historical rates achieved and expected levels for 2011 but then are prudently adjusted for subsequent years.

For details of completion of PPA see note 29.

| | 2011 $'000s | 2010 $'000s | | --- | --- | --- | | Balance at 01 January | 11,300 | 11,345 | | Additions in the year | (1) 2,298 | - | | Impairment | (2) (1,450) | - | | Foreign Exchange difference | (532) | (45) | | Balance at 31 December | 11,616 | 11,300 |

(1) PPA with respect to the additions had not been completed. (2) Related to the telecom legacy business.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Notes To The Consolidated Financial Statements

Note 15 - Other intangible assets

	Customer Relationships and Backlog	Technology	Other (*)	Total
	$'000s	$'000s	$'000s	$'000s
Cost
At 1 January 2010	19,272	10,752	2,106	32,130
Effect of translation adjustments	(381)	(266)	(246)	(893)
Acquired on acquisition of subsidiaries	311	-	501	812
At 31 December 2010	19,202	10,486	2,361	32,049
Effect of translation adjustments	(200)	(113)	34	(279)
At 31 December 2011	19,002	10,373	2,395	31,770
Accumulated amortization
At 1 January 2010	6,229	1,951	627	8,807
Effect of translation adjustments	(158)	(15)	(121)	(294)
Amortization expense	1,908	1,216	614	3,738
At 31 December 2010	7,979	3,152	1,120	12,251
Effect of translation adjustments	(178)	(46)	(61)	(285)
Impairment	771	-	751	1,522
Amortization expense	2,100	1,226	417	3,743
At 31 December 2011	10,672	4,332	2,227	17,231
Carrying amount
At 31 December 2011	8,330	6,041	168	14,539
At 31 December 2010	11,223	7,334	1,241	19,798

(*) include R&D in process, Brand name and Non-competition.

Other intangible assets are amortised on a straight-line basis over their estimated useful lives, which range from 1 to 10 years.

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Notes To The Consolidated Financial Statements

Note 16 – Property, plant and equipment

	Land and buildings $'000s	Plant and equipment $'000s	Motor Vehicles $'000s	Furniture and fittings $'000s	Leasehold Improvements $'000s	Total $'000s
Cost
At 01 January 2010	20,294	10,647	2,928	2,788	1,487	38,144
Additions	5,394	469	171	352	6	6,392
Disposals	-	(432)	(27)	(65)	(601)	(1,125)
Effect of translation adjustment	34	18	5	5	4	66
At 31 December 2010	25,722	10,702	3,077	3,080	896	43,477
Additions	456	716	187	294	19	1,672
Disposals	-	(988)	(258)	(41)	(16)	(1,303)
Effect of translation adjustment	(304)	(71)	(20)	(20)	(6)	(421)
At 31 December 2011	25,874	10,359	2,986	3,313	896	43,425
Accumulated depreciation
At 01 January 2010	3,636	8,549	587	2,189	1,272	16,233
Depreciation expense	474	985	513	382	128	2,482
Disposals	-	(432)	(27)	(65)	(601)	(1,125)
Effect of translation adjustment	(12)	(29)	(2)	(7)	(6)	(56)
At 31 December 2010	4,098	9,073	1,071	2,499	793	17,534
Depreciation expense	519	671	572	252	41	2,055
Disposals	-	(988)	(154)	(41)	(16)	(1,199)
Effect of translation adjustment	(28)	(61)	(7)	(17)	(5)	(118)
At 31 December 2011	4,589	8,695	1,482	2,693	813	18,272
Carrying amount
At 31 December 2011	21,285	1,664	1,504	620	80	25,153
At 31 December 2010	21,624	1,629	2,006	581	103	25,943

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Notes To The Consolidated Financial Statements

Note 17 - Subsidiaries

A list of the significant direct and indirect investments in subsidiaries, including the name, country of incorporation, and percent of ownership interest as at 31 December 2011 is presented below.

Name of subsidiary	Country of incorporation	Ownership interest (b)	Date of acquisition
Telco Systems Inc.	United States of America	100%	April 2000
Integral Access Inc.	United States of America	100%	July 2005
Critical Telecom Inc.	Canada	100%	September 2006
Metrobility Optical Systems Inc.	United States of America	100%	June 2006
A.M.S. 2000 (d)	Romania	100%	June 2007
NGSoft Ltd (formerly: NSIcom Ltd)	Israel	100%	October 2007
Sunstring (d)	Cyprus	100%	June 2007
Becor (d)	Moldova	51%	July 2008
ISE (c) (d)	Italy	59.8%	February 2009
Adaltis (a)	Italy	100%	November 2009
Adaltis Global limited (a)	Hong Kong	50%	July 2011
CAT Technologies	Israel	75%	February 2008
Celitron	Hungary	75%	February 2008
Vigilant Technologies Ltd	Israel	100%	November 2008
Vigilant Technologies (UK) Ltd	United Kingdom	100%	November 2008
Vigilant Technologies Inc	United States of America	100%	November 2008
Telco Asia Pacific Limited (a)	Singapore	100%	March 2006
B.T.T. (a)	Israel	100%	March 1999
B.A.T.M. France (a)	France	100%	May 2000
B.A.T.M. land (a)	Israel	100%	December 1994
YAD (d)	Cyprus	100%	June 2007
B.A.T.M. Eshbolot (a)	Israel	100%	November 2009
Eshbolot KFT (a)	Hungary	100%	November 2010
Einaudi 7 (a)	Italy	100%	November 2010

(a) Incorporated by the Company (b) This represents the indirect economic interest of BATM in the subsidiary. All subsidiaries are controlled by BATM. (c) During September 2010, Sunstring increased its holding in ISE from 55.6% to 59.8%. (d) During January 2011 BATM increased its holding in Sunstring from 75% to 100% see note 30. (Sunstring hold in AMS and YAD-100%, in Becor- 51% and in ISE- 59.8%)

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Notes To The Consolidated Financial Statements

Note 18 – Financial assets, cash and cash equivalents

Financial assets totalling $23.9 million (2010: $38.1 million) presented as current assets include interest-bearing deposits of $20.6 million at 31 December 2011 (2010: $27.1 million) and $3.3 million (2010: $11.0 million) include held for trading bonds, structure deposit and forward transactions.

At 31 December 2011, a total of $1.5 million of cash deposits was designated as security for short term bank credit and presented in financial assets.

Cash and cash equivalents totalling $23.0 million (2010: $22.1 million) consist of cash deposits less than 3 months.

Note 19 - Inventories

	31 December
	2011
$'000s	2010
$'000s
Raw materials	7,395	5,752
Work-in-progress	1,479	791
Finished goods	15,423	12,927
	24,297	19,470

During the financial year 2011, $3,353 thousand of Inventory was impaired, and expensed to the Profit and Loss account (2010: $997 thousand). Inventory write down of 2011 including $2,150 thousands one off stock depreciation linked to the curtailment of legacy telecoms activities.

See note 7 for cost of inventories recognised as an expense during the year.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Note 20 - Other financial assets

Trade and other receivables

	31 December
	2011
$'000s	2010
$'000s
Trade receivable for the sale of goods	22,729	25,434
Participation in research and development: Government of Israel	-	985
VAT	366	231
Tax authorities	320	286
Prepaid expenses and other debtors	4,114	3,964
	27,529	30,900

The average credit period taken on sales of goods is 45 days (2010: 43 days). No interest is charged on the receivables. An allowance has been made at 31 December 2011 for estimated irrecoverable amounts from the sale of goods of $1,838,000 (2010: $1,532,000). This allowance has been determined by reference to past default experience.

The directors consider that the carrying amount of trade and other receivables approximates their fair value. There are no material receivables over their usual credit period.

Credit risk

The Group's principal financial assets are bank balances and cash, trade and other receivables and investments. The Group's credit risk is primarily attributable to its trade and receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Note 21 - Derivative financial instruments

As of 31 December 2011 no foreign exchange forward contracts is open, as of 31 December 2010 the company had foreign exchange forward contracts in the current liabilities totalling $730 thousands.

During February- May 2011 the company wrote six call options to sell total amount of 10 million Euro at exercise rate between 1.340 to 1.396. The expiry date was December 30, 2011. The rate on December 30 2011 was below the exercise rates of the options, therefore the options were not exercised.

During March 2011 the company wrote call option to sell 5 million Euro at exercise rate of 1.450. The expiry date was December 15, 2011. The rate on December 15, 2011 was below the exercise rate of the option, therefore the option was not exercised. The Company received for this option $140 thousands premium which was recorded as finance income.

During March 2011 the company bought call option of $6.5 million at exercise rate of 1.3. The expiry date was June 15, 2011. The rate on December 15, 2011 was above the exercise rate of the option, therefore the option was not exercised. The Company pay for this option $50 thousands premium which was recorded as finance expenses.

During May 2011 the Company invested in two structured instrument, total amount of 2,500 thousands Euro and 2,495 thousands Euro. The structured investments matured on 30 December 2011. Interest of 1.68% p.a. and 1.65% p.a. respectively was receivable on these products; where should the USD / EURO spot on 30 December 2011 have been below 1.3505 and 1.3595 respectively, the instruments would be redeemed in Euro at a conversion rate of 1.3505 and 1.3595 respectively. Should the USD / Euro spot of 30 December 2011 have been above 1.3505 and 1.3595 respectively, the instruments would be redeemed in USD.

As at 31 December 2010 $6.7 million was invested in a structured instrument. This balance is measured at fair value. The structured product matures on 30 June 2011. Interest of 1.15% p.a. was receivable on this product; where should the USD / EURO spot on 28 June 2011 have been below 1.335, the instrument would be redeemed in Euro at a conversion rate of 1.335. Should the USD / Euro spot of 28 June 2011 have been above 1.335 the instrument would be redeemed in USD.

Note 22 - Deferred tax assets

The following are the major deferred tax assets recognised by the Group and movements thereon during the current and prior reporting period (see also Note 11).

	Deferred development costs $'000s	Depreciation differences $'000s	Retirement benefit obligations $'000s	Losses carried forward $'000s	Other $'000s	Total $'000s
At 1 January 2010	66	136	179	4,467	-	4,848
Credit (charge) to income	164	(7)	51	(186)	252	274
At 31 December 2010	230	129	230	4,281	252	5,122
Credit (charge) to income	385	6	(25)	-	37	403
At 31 December 2011	615	135	205	4,281	289	5,525

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Notes To The Consolidated Financial Statements

Note 23 - Financial liabilities and other

Trade and other payables

	31 December
	2011
$'000s	2010
$'000s
Trade creditors	13,414	12,626
Salary accruals	5,328	5,044
VAT and other tax	727	163
Other creditors and accruals	7,972	10,067
	27,441	27,900

Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 40 days (2010: 41 days). The directors consider that the carrying amount of trade payables approximates to their fair value.

Long-term payables

	31 December
	2011	2010
	$'000s	$'000s
Bank Loans (1)	2,650	5,424
Less- Current maturities	(1,200)	(1,154)
Forgivable debt to the office of the chief scientist (2)	3,772	4,167
Government institutions	655	1,278
Liability in regard to acquisitions (3)	119	-
Other long term Liability	23	222
	6,019	9,937

(1) In 2009 the company received $4.5 million loan drawn for the purchase of the building in Hod Hasharon, Israel, secured by a mortgage on the said asset. The loan is for 4 years and the repayment on a monthly basis, bears annual interest of libor + 1.5% with a maturity date of November 2013. The company has already returned $2.2 million for this loan during 2010 and 2011. (2) In 2011 there was no participation of the chief scientist in R&D projects. (3) The maturity date of the liability is in April 2013.

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Notes To The Consolidated Financial Statements

Note 24 - Provisions

	Warranty provision	Onerous Lease provision	Other provision	Total
	$'000s	$'000s	$'000s	$'000s
At 01 January 2011	954	220	2,016	3,190
Utilisation of provision	(212)	-	(121)	(333)
Payment during the year	-	(100)	(250)	(350)
At 31 December 2011	742	120	1,645	2,507
Included in current liabilities				2,507
Included in non-current liabilities				-
				2,507

The warranty provision represents management's best estimate of the Group's liability under warranties granted on the Group's products, based mainly on past experience.

The onerous lease provision represents the committed lease payments on rental properties that have been abandoned, and whose operations have been relocated to real estate purchased by the Group during 2009.

Note 25 - Share capital

Ordinary shares of NIS 0.01 each (number of shares)

	2011	2010
Authorised:	1,000,000,000	1,000,000,000
Issued and fully paid:	402,915,820	402,830,820

The Company has one class of ordinary shares which carry no right to fixed income.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Note 26 - Share premium account

| | Share premium $'000s | | --- | --- | | Balance at 1 January 2010 | 405,961 | | Premium arising on issue of equity shares | 117 | | Stock options granted to employees | 426 | | Balance at 31 December 2010 | 406,504 | | Premium arising on issue of equity shares | 62 | | Stock options granted to employees | 326 | | Balance at 31 December 2011 | 406,892 |

Note 27 - Translation reserve

| | Translation reserve $'000s | | --- | --- | | Balance at 1 January 2010 | (4,015) | | Exchange differences arising on translating the foreign operations and presentation currency | (6,011) | | Balance at 31 December 2010 | (10,026) | | Exchange differences arising on purchase of non-controlling interest | (889) | | Exchange differences arising on translating the foreign operations | (2,567) | | Balance at 31 December 2011 | (13,482) |

Note 28 - Accumulated deficit

| | Accumulated deficit $'000s | | --- | --- | | Balance at 1 January 2010 | (270,808) | | Dividend | (8,127) | | Net profit for the year | 1,699 | | Balance at 31 December 2010 | (277,236) | | Dividend | (5,132) | | Net loss for the year | (3,720) | | Balance at 31 December 2011 | (286,088) |

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Note 29 - Business Combinations

During April 2011 the Company acquired the major assets and intellectual property of ANDA Networks, Inc. ("Anda Networks" or "Anda") for a consideration of $2 million. ANDA is a leader in carrier-class access platforms for wireline networks and mobile data backhaul applications.

During April 2011 the Group acquired the trade and assets of an Israeli Telecoms software services provider called Mantis Ltd ("Mantis") for a consideration of $784 thousands. Mantis is a leader in designing and developing interactive platforms and experiences for industry leading brands known and acknowledged world wide. As at 31 December 2011 the PPA with respect to the acquisition had not been completed and the transaction was accounted for on the basis of management's best estimates. As at 31 December 2011, $306 thousands of the consideration had not yet been paid (non-cash transaction). This balance will be paid during 2012 and 2013 (see note 38).

During April 2010 the Group acquired the trade and assets of an Israeli Telecoms software services provider for a consideration of $784 thousands. Of this balance $357 has been classified as brand and $427 as customer relationships. This transaction has been accounted for by the purchase method of accounting. The balance of $502 thousands of the consideration. As at 31 December 2010, was paid during 2011.

Note 30 - Non controlling interest acquired

On January 23, 2011 the Company signed an agreement with the minority shareholders in Sunstring to purchase their holding in Sunstring for a consideration as follow:

A: Within 30 days from the date of signing this agreement sum of $1,159 thousands

B: The company will pay on all proceeds which the BATM group will receive from any majority held companies held by BATM from the medical line of business which BATM has invested in up until the date of this agreement as well as future investments in the current medical line of business during a period of 10 years from the date of this agreement 10% of all proceeds up to a total of $1,591 thousands and 3% on all proceeds in excess of $15,910 thousands up to a total of $4,341 thousands (which is $5.5m minus all payments above).

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Note 31 - Note to the cash flow statements

	Year ended 31 December
	2011
$’000s	2010
$’000s
Operating profit (loss) from continuing operations	(3,280)	1,133
Adjustments for:
Amortization of intangible assets	3,743	3,738
Impairment of intangible assets and goodwill	2,972	-
Depreciation of property, plant and equipment	2,055	2,482
Stock options granted to employees	326	426
Increase in retirement benefit obligation	117	41
Decrease in provisions	(312)	(898)
Operating cash flows before movements in working capital	5,621	6,922
Decrease (increase) in inventory	(4,337)	1,959
Decrease (increase) in receivables	3,720	(480)
Increase (decrease) in payables	(723)	4,466
Cash generated by operations	4,281	12,867
Income taxes paid	(626)	(338)
Income taxes received	-	378
Interest paid	(517)	(426)
Net cash from operating activities	3,138	12,481

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.

Note 32 - Contingent liabilities

There is a potential exposure totalling approximately $2,000,000, relating to stamp duties connected with some placements made by the Company in the past. According to the advice of the Company's legal advisors, and in contrast to the position of the Companies' Registrar, an obligation to pay stamp duties arises only when a stamped document exists, and since the placements were not accompanied by a stamped issuance report, such obligation does not exist. The Company has not provided for such an amount in its financial statements.

During December 2010 the Company received a letter from the Israeli Chief Scientist Officer regarding royalties' audit findings for the years 1999-2003 ("the audit"), without demanding specific payment amount. The Company's management estimates the maximum exposure of the audit in amount of $800 thousands. Based on the stage of the process between the parties and management's estimation of the audit outcome, the Company has not provided for such an amount in its financial statements.

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Notes To The Consolidated Financial Statements

Note 33 - Operating lease arrangements

The Group as lessee

	Year ended 31 December
	2011 $'000s	2010 $'000s
Minimum lease payments under operating leases
Recognised in income for the year	1,452	1,769

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

	31 December
	2011 $'000s	2010 $'000s
Within one year	479	563
In the second to fifth years inclusive	589	391
	1,068	954

Operating lease payments represent rentals payable by the Group for certain of its office properties. Leases are fixed for an average of 3 years.

The Group as lessor

Property rental income earned during 2011 was $151,000 (2010: $197,000). The properties under lease agreements to third parties by the Group have committed tenants for most of the property for the next two years.

At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:

	31 December
	2011 $'000s	2010 $'000s
Within one year	85	96
In the second to fifth years inclusive	246	67
	331	163

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Notes To The Consolidated Financial Statements

Note 34 - Share-based payments

Equity-settled share option scheme

The Company has a share option scheme for all employees of the Group. Options are usually exercisable at a price equal to the average quoted market price of the Company's shares on the date of grant. The vesting period is between three to five years. Unexercised options expire ten years from the date of grant. Options are forfeited when the employee leaves the Group.

Options to certain management employees are exercisable at a price equal to the average quoted market price of the Company's shares less 10% on the date of grant.

Details of the share options outstanding during the year are as follows:

	2011		2010
	Number of share options	Weighted average exercise price	Number of share options	Weighted average exercise price
		(in GBP)		(in GBP)
Outstanding at beginning of year	7,612,291	0.3454	8,315,867	0.9143
Granted during the year	2,937,815	0.2330	1,391,219	0.2483
Forfeited during the year	(1,491,561)	0.4222	(1,553,365)	3.2957
Exercise during the year	(85,000)	0.2159	(541,430)	0.1850
Outstanding at the end of the year	8,973,545	0.2971	7,612,291	0.3454
Exercisable at the end of the year	4,645,828	0.3431	4,369,419	0.3695

The weighted average share price at the date of exercise for share options exercised during 2011 was 0.2317 Great British Pounds ("GBP"). The options outstanding at 31 December 2011 had a weighted average exercise price of 0.2971 GBP, and a weighted average remaining contractual life of 6.88 years. In 2011, options were granted on January 5, May 1 and August 11. The aggregate of the estimated fair values of the options granted on those dates is $1,102,000. In 2010, options were granted on May 5, August 3 and October 14. The aggregate of the estimated fair values of the options granted on those dates is $592,000.

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Notes To The Consolidated Financial Statements

The inputs into the Black-Scholes model are as follows:

| | 2011 $'000s | 2010 $'000s | | --- | --- | --- | | Weighted average share price (GPB) | 0.23 | 0.30 | | Weighted average exercise price (GPB) | 0.22 | 0.19 | | Expected volatility | 36-61 | 36-61 | | Expected life | 7 | 7 | | Risk-free rate | 1.5%-3% | 1.5%-4.5% | | Expected dividends | 2.5% | 2.5% |

The inputs into the Black-Scholes model for the options granted in 2011 are as follows:

| | 2011 $'000s | | --- | --- | | Weighted average share price | 0.2339 | | Weighted average exercise price | 0.2330 | | Expected volatility | 40-61 | | Expected life | 7 | | Risk-free rate | 2% - 2.2% | | Expected dividends | 2.5% |

Expected volatility was determined by calculating the historical volatility of the Company's share price over the previous 1 year. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The Group recognised total expenses of $326,000 and $426,000 related to equity-settled share-based payment transactions in 2011 and 2010, respectively.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Notes To The Consolidated Financial Statements

Note 35 - Retirement benefit obligation

Defined contribution schemes

The Group operates defined contribution retirement benefit schemes for all qualifying employees in Israel. The assets of the schemes are held separately from those of the Group in funds under the control of trustees. Where there are employees who leave the schemes prior to vesting fully in the contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions.

The employees of the Group's subsidiaries in the United States are members of a state-managed retirement benefit scheme operated by the government of the United States. The subsidiary contributes a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions.

Defined benefit schemes

The Group operates defined benefit schemes for qualifying employees of the Company and its subsidiaries in Israel and in Italy.

In Israel this scheme provides severance pay provision as required by Israeli law. Under the plans, the employees are entitled to post employment benefits equivalent to years of service multiplied by 8.33% of final salary on either attainment of a retirement age of 67 (men) and 64 (women) or redundancy. No other post-retirement benefits are provided to these employees.

In Italy each employee is entitled to have a severance payment as soon as he ends the employment under one of the conditions specified below as except those who decide to choose private insurance during the employment. Principal conditions to release the liability are: 1. Full retirement age 2. Accumulation of minimal working years 3. Termination of employment by the employer 4. Death of employee 5. occurrence of employee's disability.

The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 18 January 2012 by Elior Weissberg, FILAA on behalf of Elior Weissberg Ltd., a member of the Institute of Actuaries. The present value of the defined benefit, obligation, the related current service cost and past service cost were measured using the projected unit credit method.

The principal assumptions used for the purposes of the actuarial valuations were as follows:

	2011	2010
Discount rate(s)	4.6%, 6.7%	3.4%, 4.9%
Expected return on plan assets	4.7%	5.0%
Expected rates of salary increase	1-5%	1-5%
Expected inflation rate	2.5%	2.8%

Annual Report 2011

OVERVIEW

GOVERNANCE

FINANCIALS

Notes To The Consolidated Financial Statements

Amounts recognised in profit or loss in respect of these defined benefit plans are as follows:

| | 2011 $'000s | 2010 $'000s | | --- | --- | --- | | Current service cost | 630 | 617 | | Interest on obligation | 256 | 240 | | Expected return on plan assets | (217) | (212) | | Adjustments for restrictions on the defined benefit asset | 62 | 56 | | Actuarial gains recognised in the year | (80) | (126) | | Total | 651 | 575 |

The amount included in the balance sheet arising from the entity's obligation in respect of its defined benefit plans is as follows:

	31 December
	2011
$'000s	2010
$'000s
Present value of funded defined benefit obligation	5,618	5,646
Fair value of plan assets	(4,617)	(4,762)
Net liability	1,001	884

Movements in the present value of the defined benefit obligation in the current period were as follows:

| | 2011 $'000s | 2010 $'000s | | --- | --- | --- | | Opening defined benefit obligation | 5,646 | 5,146 | | Current service cost | 630 | 617 | | Interest cost | 256 | 240 | | Actuarial gains | (28) | (100) | | Benefits paid | (483) | (517) | | Exchange rate differences | (403) | 260 | | Closing defined benefit obligation | 5,618 | 5,646 |

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Movements in the present value of the plan assets in the current period were as follows:

| | 2011 $'000s | 2010 $'000s | | --- | --- | --- | | Opening fair value of plan assets | 4,762 | 4,271 | | Expected return on plan assets | 148 | 156 | | Actuarial gains | 51 | 27 | | Contributions from the employer | 438 | 524 | | Benefits paid | (440) | (498) | | Exchange rate differences | (342) | 282 | | Closing fair value of plan assets | 4,617 | 4,762 |

The history of experience adjustments is as follows:

| | 2011 $000 | 2010 $000 | | --- | --- | --- | | Present value of defined benefit obligation | 5,618 | 5,646 | | Fair value of plan assets | (4,617) | (4,762) | | Deficit | 1,001 | 884 | | Experience adjustments on plan liabilities | (68) | (59) | | Experience adjustments on plan assets | (54) | (35) |

The Liability recognised in the balance sheet at 31 December 2011 was $1,001,000 (2010: $884,000).

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS Notes To The Consolidated Financial Statements

Note 36 - Related party transactions

Remuneration of key management personnel

The remuneration of the directors, who are the key management personnel of the group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

Table A – Emoluments of the Directors with comparatives

	Basic Salary $000	Social benefits $000	Pension benefits $000	Performance Bonus $000	2011 Total $000	2010 Total $000
Zvi Marom	300	24	7	47	378	340
Ofer Bar Ner	170	24	8	-	202	177
Peter Sheldon	44	-	-	-	44	43
Gideon Chitayat	44	-	-	-	44	22
Amos Shani	20	-	-	-	20	10
Amiram Mel	30	-	-	-	30	-
Dan Kaznelson	-	-	-	-	-	15
Ariella Zochovitzky	-	-	-	-	-	25
Koti Gavish	-	-	-	-	-	25

The total liability for the Directors in the year-end 2011 was $72 thousand (2010: $372 thousands) related to December 2011 and 2010 wages paid in January 2012 and 2011 respectively and Bonus for 2011 not paid yet and bonus for 2010 paid in July 2011.

Table B – Interests of the Directors

The interests of the Directors and their immediate families, both beneficial and non-beneficial, in the ordinary shares of the Company at 31 December 2011 were as follows:

Ordinary shares	2011	2010
Zvi Marom	93,494,500	92,044,500
Ofer Bar Ner	150,000	-
Peter Sheldon	750,000	750,000
Gideon Chitayat	-	-
Amos Shani	-	-

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Table C – Share Options

Options to subscribe for or acquire ordinary shares of the Company were held by the following Directors during the year.

	As at 01 Jan 2011	Granted	Exercised	Lapsed	As at 31 Dec 2011	Exercise price	Expiry date
Ofer Bar Ner	330,000	-	-	330,000	-	0.279	31/12/2011
Ofer Bar Ner	250,000	-	-	250,000	-	0.407	31/12/2011
Ofer Bar Ner	250,000	-	-	-	250,000	0.407	31/12/2012
Ofer Bar Ner	250,000	-	-	-	250,000	0.407	31/12/2013
Ofer Bar Ner	333,333	-	-	-	333,333	0.270	07/06/2012

Table D – remuneration of key management personelle

The remuneration of the directors, who are the key management personnel of the group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

	2011 $'000s	2010 $'000s
Short-term employee benefits	516	462
Post-employment benefits	15	14
Other long-term benefits	16	14
Termination benefits	33	27
Share-based payment	-	108
	580	625

Table E – transactions with related parties

During the year the company had the following balances and transactions with Shore Capital, of which Dr. Zvi Marom is a Director.

Transactions during the year: $ Nil

Balance as at 31 December 2011: $ Nil

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Note 37 – Financial Instruments

(a) Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of profits.

The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 25 to 28 respectively.

The Group's management reviews the capital structure on a periodic basis. As a part of this review the management considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the management, the Group will balance its overall capital structure through the payment of dividends. The Group's overall strategy remains unchanged from 2006.

(b) Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the financial statements.

(c) Categories of financial instruments

| | 2011 $'000s | 2010 $'000s | | --- | --- | --- | | Financial assets | | | | Cash and cash equivalents | 23,012 | 22,087 | | Fair value through profit or loss | 3,338 | 11,022 | | Deposits and receivables | 47,388 | 57,597 | | Financial liabilities | | | | At amortized cost | 34,027 | 38,850 | | Fair value through profit or loss | 4,821 | 5,122 |

All fair value through profit or loss assets measurements are level 1 fair value measurements, defined as those derived from quoted prices (unadjusted) in active markets for identical assets.

All fair value through profit or loss liabilities measurements are level 3 fair value measurements, derived from net present value of royalties liability based on estimated future revenues.

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Notes To The Consolidated Financial Statements

(d) Financial risk management objectives

The Group's Finance function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyses exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

The Group seeks to minimise the effects of these risks, by using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group's policies approved by the board of directors, which provide principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis.

(e) Market risk

The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates (refer to section f) and interest rates (refer to section g). The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including: Structure deposits, call options and forward foreign exchange contracts to hedge the exchange rate risk arising on the export of telecommunications equipment to the United States;

There has been no change to the Group's exposure to market risks or the manner in which it manages and measures the risk.

(f) Foreign currency risk management

The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.

The carrying amount of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:

	Liabilities		Assets
	2011
$'000s	2010
$'000s	2011
$'000s	2010
$'000s
New Israeli Shekel	8,478	8,311	7,440	11,419
Euro	13,856	11,961	33,323	37,818
Other	1,983	2,540	9,813	7,145

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Foreign currency sensitivity

The Group is mainly exposed to Euro, NIS and GBP, in 2010 the Group was mainly exposed to US Dollar, NIS and GBP.

The following table details the Group's sensitivity to a 5 percent change in US$ against the respective foreign currencies. The 5 percent is the rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the possible change in foreign exchange rates. The sensitivity analyses of the Group's exposure to foreign currency risk at the reporting date has been determined based on the change taking place at the beginning of the financial year and held constant throughout the reporting period. A positive number indicates an increase in profit or loss and other equity where US$ strengthens against the respective currency.

Profit or loss

| | 2011 $'000 | | --- | --- | | NIS Impact | (152) | | Euro Impact | 1,361 | | GBP Impact | 75 | | | 2010 $'000 | | --- | --- | | NIS Impact | 94 | | US Dollar Impact | 1,525 | | GBP Impact | 59 |

Comprehensive

| | 2011 $'000 | | --- | --- | | NIS Impact | 316 | | Euro Impact | (172) | | MDL Impact | 321 | | Other currencies Impact | 96 |

BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Notes To The Consolidated Financial Statements

(g) Interest risk management

The company has non-material exposure to interest risk.

(h) Liquidity risk management

The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

Finance liabilities

	Weighted average effective interest rate	0-3 months	3 months to 1 year	1-5 years	Total
	%	$'000s	$'000s	$'000s	$'000s
31 December 2011
Non-interest bearing	-	25,478	1,393	6,503	33,374
Bank loans interest bearing	3.90	4,344	2,426	1,450	8,220
		29,822	3,819	7,953	41,594
31 December 2010
Non-interest bearing	-	26,253	692	9,510	36,455
Bank loans interest bearing	3.90	3,631	2,504	4,270	10,405
		29,884	3,196	13,780	46,860

(i) Finance liabilities

Loans from banks are measured according to depreciated cost, the different between the fair value of the loans and their book value is not significant.

Annual Report 2011

OVERVIEW GOVERNANCE FINANCIALS

Notes To The Consolidated Financial Statements

Note 38 - Non-cash transactions

During the current year, the Group entered into the following non-cash investing and financing activities which are not reflected in the consolidated statement of cash flows:

Investment of the Group in Mantis had not been paid in cash at the end of the reporting period. (See note 29).

Note 39 - Events after the reporting period

During March 2012, following discussion with one of the banks of our subsidiary-ISE in Italy we transferred 1 million Euro to the bank as a mortgage return and reduced the mortgage to 0.9 million Euro, we expect to record a financial gain of 0.5 million Euro from this transaction.

78 BATM Advanced Communications Ltd.

OVERVIEW GOVERNANCE FINANCIALS Directors and Advisors

Directors

P. Sheldon Chairman, Non-executive Dr. Z. Marom CEO O. Bar-Ner CFO G. Chitayat Non-executive A. Shani Non-executive

Registered Office

P.O.B. 7318 Nave Ne'eman Ind. Area 4, Ha'harash Street, 45240 Hod Hasharon, Israel

Company Number

520042813 – Registered in Israel

Auditors

Brightman Almagor Zohar & Co. a member firm of Deloitte Touche Tohmatsu 1 Azriely Center, Tel-Aviv 67021 Israel

Financial Advisors & Stock Brokers

finnCap Limited 60 New Broad st. London EC2M 1JJ UK

Shore Capital Bond Street House 14, Clifford Street London W1X 1RE UK

Legal Counsel in Israel

Lipa Meir & Co. 4, Itamar Ben-Avi Street Tel-Aviv 64736 Israel

Legal Counsel in the UK

Fladgate Fielder 25 North Row London W1R 1DJ UK

Bankers

Bank Hapoalim 45 Hamelacha Street Netanya Israel

Bank Leumi 25 Habarzel Street Tel-Aviv Israel

Registrars

Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU UK

Annual Report 2011

www.BATM.com

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COMPANY	INVESTORS	OUR BUSINESS	RESOURCES	NEWS CENTER	CONTACT US
REGULATORY NEWS
PRESS COVERAGE	Press Coverage
Acquisition of ANDA Networks, Inc.
Apr 21, 2011
BATM is pleased to announce that its wholly owned subsidiary, Telco Systems Inc., has acquired the major assets and intellectual property of ANDA Networks, Inc. ("Anda Networks" or "Anda") the leader in carrier-class access platforms for wireline networks and mobile data backhaul applications. The acquisition will be satisfied in cash for a maximum consideration of $2.5 million (subject to certain conditions on inventory).

ANDA Networks provides carrier-grade Ethernet access platforms capable of meeting stringent business Ethernet and mobile backhaul service requirements for service providers, mobile operators and cable multiple system operators ("MSOs").

ANDA currently has an installed base of over 30,000 system platforms, primarily in North America. The combination of ANDA's Ethernet access products and BATM's existing edge switching and mobile backhaul aggregation solutions, means that the Company can offer a fully integrated range of carrier class Ethernet equipment.

Dr Zvi Marom, Chief Executive, of BATM stated: "ANDA has built an excellent reputation in a short space of time. Their product suite complements our existing technology and the combination will offer a unique set of carrier class products to our global customer base."

BATM Advanced Communications Ltd Dr Zvi Marom, Chief Executive Ofer Bar-Ner

+972 9866 2525 Threadneedle Communications Josh Royston / Graham Herring

020 7653 9850 Singer Capital Markets Ltd Shaun Dobson / Matthew Thomas

020 3205 7626

http://www.batm.com/index.php?page=press-releases&article=95 29/08/2011

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Regulatory News

Interim Management Statement

May 05, 2011

BATM Advanced Communications Limited ("BATM" or the "Company") (LSE: BVC), a leading designer and producer of telecom systems and medical laboratory diagnostic systems, is today issuing its Interim Management Statement for the period from 1 January 2011 to 31 March 2011.

Current trading update

Total revenues in the first three months of 2011 (Q1) were $31.4 million, compared with $27.2 million in the equivalent period in 2010. This 15% increase in turnover over the equivalent period in 2010 exceeded management's expectations.

During the first three months of the year the sales mix was 66% from the Telecoms division and 34% from the Medical division compared to 63% and 37% respectively in the first three months of 2010. Gross margin slightly increased during the first three months of 2011 over the same period of 2010.

Financial position

The Company's balance sheet remains strong and at the end of March the effective cash balance stood at $57.3 million, a decrease of $2.9 million compared to the position at 1 January 2011, mainly as a result of payments to our manufacturing subcontractors.

Management appointment

We are pleased to announce that Itzik Weinstein joined the Company earlier this month as CEO of Telco Systems, our Telecoms division and will report to Dr. Zvi Marom, CEO of BATM. Itzik brings to BATM over 20 years of significant management experience and a strong track record in the hi-tech industry. In his previous position he served as President and CEO of ECtel, a provider of revenue management solutions to the telecommunications industry and a NASDAQ traded company. Previously he was Executive Vice President for Professional Services and Operations at ECtel, and prior to this, Vice President, Customer Services & Product Management at VocalTec, where he was responsible for R&D activities, product management and customer support. He also held various engineering management positions at NetManage, KLA-Tencor Corporation, Scitex Corporation and Intel Corporation. Itzik received his MBA degree from the Kellogg-Recanati Executive MBA Program of Tel Aviv University and a B.Sc. in Computer Engineering from the Technion-Israel Institute of Technology.

Outlook

As noted in our preliminary results statement, trading in the first three months of the year has been encouraging. Therefore, we believe we are on track in achieving our strategic and financial targets for the full year.

Ends -

Enquiries

BATM Advanced Communications +972 9866 2525 Dr Zvi Marom, Chief Executive Ofer Bar-Ner, CFO

Threadneedle Communications 020 7653 9850 Josh Royston / Graham Herring

Singer Capital Markets Ltd 020 3205 7626 Shaun Dobson

http://www.batm.com/index.php?page=news&article=86 29/08/2012

BATM :: Regulatory News Page 2 of 2

Shore Capital 020 7408 4090 Pascal Keane

This information is provided by RNS The company news service from the London Stock Exchange

END

2012 2011

Aug 22, 2012 Price Monitoring Extension Aug 22, 2012 Second Price Monitoring Extension Aug 16, 2012 BATM Interim Results 2012 Aug 08, 2012 Election of Home State Aug 05, 2012 BATM interim results 2012 - Webcast Registration - 16 August 2012 - 9.30am BST Webcast - 16 August 2012 - 9.30am BST Jul 24, 2012 Notice of Results 24-Jul-12 Jul 02, 2012 Result of AGM - 02 Jul-12 Jul 02, 2012 AGM Statement 02-Jul-2012 Jun 26, 2012 Holding(s) in Company Jun 06, 2012 Notice of Annual General Meeting May 16, 2012 Holding(s) in Company May 04, 2012 Holding(s) in Company May 02, 2012 CE certification for HCV (Hepatitis C) screening kit Apr 30, 2012 Annual Financial Report for 2011 Apr 11, 2012 Interim Management Statement Mar 23, 2012 CE certification for HIV screening kit Mar 22, 2012 Holding(s) in Company Mar 15, 2012 Holding(s) in Company Mar 06, 2012 Holding(s) in Company Feb 27, 2012 Final Results 2011 Feb 27, 2012 Directorate Change Feb 27, 2012 Holding(s) in Company Feb 16, 2012 Holding(s) in Company Feb 13, 2012 Holding(s) in Company Feb 09, 2012 Holding(s) in Company

About BATM Company Profile BATM Offices Management & Board Members

Investors Today Stock Quote Corporate Governance Advisers and Registrars

News & Events Regulatory News Press Coverage LinkedIn

BATM Group Telecom Division Medical Division

http://www.batm.com/index.php?page=news&article=86 29/08/2012

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Press Coverage

Change of adviser

Oct 04, 2011

RNS Number : 4675P BATM Advanced Communications Ld 04 October 2011

BATM Advanced Communications Limited

Change of adviser

BATM Advanced Communications Limited ("BATM" or the "Company") (LSE: BVC) announces that, with immediate effect, finnCap Limited has been appointed as the Company's Financial Adviser and will act as Joint Corporate Broker, together with Shore Capital.

Contacts:

Threadneedle Communications Josh Royston / Graham Herring +44 20 7936 9605

finnCap Marc Young / Brian Patient +44 20 7220 0500

Shore Capital Pascal Keane +44 20 7408 4090

About BATM

BATM is a world leader in the design and supply of IP packet-based systems such as high-capacity, self-routing switches with extensive QoS capabilities. For more information, visit the BATM web site at www.batm.com

This information is provided by RNS The company news service from the London Stock Exchange

END

2011

Oct 26, 2011 Interim Management Statement May 04, 2011 Interim Management Statement Apr 21, 2011 Acquisition of ANDA Networks, Inc.

http://www.batm.com/index.php?page=press-releases&article=76 29/08/2012

BATM :: Press Coverage Page 2 of 2

About BATM	Investors	News & Events	BATM Group
Company Profile	Today Stock Quote	Regulatory News	Telecom Division
BATM Offices	Corporate Governance	Press Coverage	Medical Division
Management & Board Members	Advisers and Registrars	LinkedIn

http://www.batm.com/index.php?page=press-releases&article=76 29/08/2012

EMPLOYMENT AGREEMENT

Entered into this 6th day of the month of January, 2011

BETWEEN: BATM Advanced Communications Ltd., with its principal offices at Bldg. No. 1, Kfar Netter Industrial Center, POB 3737, Kfar Netter, 40593 Israel (hereinafter - the "Company"); and

BETWEEN: Dr. Zvi Marom, Israeli I.D. No.052733201 residing at 17 Ma'ale Ha'argamon Street, Even Yehuda, Israel (hereinafter the "Employee")

WHEREAS:

(1) The Company is engaged in the research, development, manufacture, marketing and commercialization of advanced technological systems, networking and access equipment and apparatus (the "Business"); and

(2) Employee has been employed by the Company continuously since 1992 and has held the position of President & CEO as well as executive director in the Company; and

(3) The Company is interested in continuing to employ the Employee as President & CEO as well as executive director, and Employee desires to continue being employed by the Company in that capacity and on the terms and conditions set forth below.

Now, therefore, in consideration of the premises and mutual agreements hereinafter contained, the parties hereto do agree as follows:

1. Definitions and Interpretation

The definitions and interpretation provisions set out in Schedule 1 will apply throughout this agreement unless inconsistent with the context.

2. Employment and duties

The Company employs the Employee as its President & CEO, or in such other capacity as may be mutually agreed between the Company and the Employee from time to time upon the terms and conditions set forth herein. Employee will report only to the Board of Directors of the Company.

3. Term

3.1 This agreement shall be in effect for a period of three (3) years commencing from January 1, 2011 until December 31, 2013.

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3.2 Notwithstanding the aforementioned, either Party may terminate this Agreement by giving six (6) months written notice to the other Party hereto.

4. Extent of services

4.1 The Employee shall at all times during the term of this Agreement:

4.1.1 devote the whole of his time, attention and ability during his normal work to the duties of his appointment;

4.1.2 faithfully and diligently perform those duties and exercise such powers consistent with them which are from time to time assigned to or vested in him;

4.1.3 obey all lawful and reasonable directions of the Board;

4.1.4 use his best endeavours to promote the interests of the Company and its Group Companies;

4.1.5 keep the Board promptly and fully informed (in writing if so requested) of his conduct of the business or affairs of the Company and its Group Companies and provide such explanations as the Board may require;

4.1.6 not at any time make any untrue or misleading statement relating to the Company or any Group Company.

4.2 the Employee shall (without further remuneration) if and for so long as the Company requires during the period of this Agreement:

4.2.1 carry out the duties of his appointment on behalf of any Group Company;

4.2.2 act as an officer of any Group Company or hold any other appointment or office as nominee or representative of the Company or any Group Company;

4.2.3 carry out such duties and the duties attendant on any such appointment as if they were duties to be performed by him on behalf of the Company.

4.3 The Employee will not, without the prior consent of the Board;

4.3.1 incur on behalf of the Company any capital expenditure in excess of such sum as may be authorized from time to time by resolution of the Board;

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4.3.2 enter into on behalf of the Company any commitment, contract or arrangement which is otherwise than in the normal course of business or is outside the scope of his normal duties or is of an unusual or onerous or long term nature;

4.3.3 engage any person on terms which vary from those established from time to time by resolutions of the Board;

4.3.4 dismiss any employee of the Company without giving proper notice or without following the normal disciplinary procedure and in any such case he will immediately report such dismissal and the reason for it to the Board.

5. Job Location

5.1 The Employee's employment will be based at the Company's head office. The Employee will undertake such travel inside and outside the State of Israel as may be required for the proper performance of his duties.

5.2 The Company will have the right upon reasonable grounds, from time to time, and subject to the consent of the Employee which will not be unreasonably withheld, to vary the Employee's normal place of work but so that he will not be obliged to reside outside the State of Israel. In such event the Company will reimburse to the Employee such removal and other expenses as the Employee may reasonably and with the prior approval of the Company incur in consequence of any such variation.

6. Compensation

6.1 During his appointment the Company shall pay to the Employee:

6.1.1 a gross (before tax) basic salary at the rate in NIS equal to $260,000 (two hundred and sixty thousand US dollars) per year which shall accrue day-to-day and be payable by equal monthly installments in arrears on or about the 5th day of each month. The salary shall be deemed to include any fees receivable by the Employee as an executive director of the Company or any Group Company or any other company or unincorporated body in which he holds office as nominee or representative of the Company or any Group Company; and

6.1.2 a bonus calculated in accordance with the provisions of Schedule 2, payable in respect of each financial year of the Company (subject to any payment on account) within 21 days after the adoption of the consolidated financial accounts of the

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Company for that financial period at the annual general meeting and subject to the approval of the Board of Directors.

6.2 The Employee's basic salary shall be reviewed by the Remuneration Committee in each year and the rate of the salary may be increased by the Company with effect from that date by such amount, if any, as it shall deem fit;

"$ in this agreement shall mean the sum in NIS equivalent to the representative rate of exchange of the USD last published by the Bank of Israel before any actual payment under this agreement, but no less than NIS 3.7 to NIS 1.00.

7. Expenses

Employee shall be entitled to reimbursement of all travelling, hotel, entertaining and other expenses incurred wholly in pursuing the business of the Company, upon presentation by Employee of an itemized account of expenditure together with proper evidence of actual payment, in accordance with the Company's standard operating procedures.

8. Vacation and recreation fee

Employment shall be entitled to twenty five (25) working days of paid vacation during each year that this agreement is in effect. Unused vacation time shall be carried over to subsequent years without any limitations. Employee will be entitled to redeem unused vacation days at his sole discretion.

In addition to the above, Employee shall be entitled to 15 recreation days (demei havra'a) per year according to the rate of "demei havra'a" set forth in the Extension Order regarding the Participation of Employers in vacation and recreation expenses (the "Extension Order") as will apply from time to time. Said recreation fees shall be paid to the Employee on July 1st of each year, all in accordance with the Extension Order.

9. Social benefits

9.1 The Company shall on a monthly basis contribute amounts to the "manager's insurance scheme" maintained by Employee (or to such other scheme or similar arrangement as Employee from time to time may effect):

9.1.1 an amount equivalent to eight and three tenths per cent (8.3%) of Employee's basic salary hereunder in respect of severance fund provision; and

9.1.2 an amount equivalent to two and one half per cent (2.5%) of such salary in respect of disability insurance;

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9.1.3 an amount equivalent to five percent (5%) of such salary in respect of a recognized provident fund (Kupat Gemel). A further five per cent (5%) of Employee's basic salary will be deducted by the Company from the basic salary and paid on Employee's behalf to the provident fund.

For the purpose hereof, "basic salary" shall mean Employee's gross salary referred to in Section 6 hereinabove, as the same may be revised from time to time, but shall exclude any regular expense allowance and/or bonuses which Employee may at any time be additionally granted pursuant hereto.

Employee will be entitled to all the monies accrued in the severance fund and by the provident fund in any event by which his employment by the Company shall be terminated, whether at the Company's initiative or at Employee's.

9.1.4 The Company shall, on a monthly basis, pay for Employee to a recognized training fund (Keren Hishtalmut) sums equivalent to seven and a half percent (7.5%) of the basic salary and will deduct two and a half per cent (2.5%) from the Employee's basic salary to be similarly paid to the said training fund.

9.2 All the taxes arising from the payment of the social benefits referred to in this clause 9 above to the respective schemes or funds will be the sole liability of the Company and the Employee will remain free and clear of any liability thereof. To avoid any doubt it is agreed that any taxes which may apply to the Employee upon releasing funds from any such scheme of Fund will be the sole responsibility of the Employee.

10. Company car

10.1 Subject to the Employee holding a current full driving license, the Company shall provide the Employee for his sole business use and private use by him (and his immediate family) with a car of a make, model and specification of his choice, subject to the Audit Committee approving such choice as commensurate with both the status of the Employee and the image of the Company (which approval shall not be unreasonably withheld).

10.2 The Company shall bear all standing and running expenses of the car.

10.3 The Employee shall always comply with all regulations laid down by the Company from time with respect to company cars; shall forthwith notify the Company of any accidents involving his company car and of any charges of driving offenses which are brought against him and, on the termination of his appointment

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whether lawfully or unlawfully, shall forthwith return his company car to the Company at its head office.

11. Sickness

11.1 If the Employee is absent because of sickness (including mental disorder) or injury he shall report this fact forthwith to the Company secretary's office and if the Employee is so prevented for seven or more consecutive days he shall provide a medical practitioner's statement on the eighth day and weekly thereafter so that the whole period of absence is certified by such statements. Immediately following his return to work after a period of absence the Employee shall complete a self-certification form available from the Company secretary's office detailing the reason for his absence.

11.2 The Employee shall be entitled to paid sick leave of up to thirty (30) days per year. Unused sick leave days shall be carried on to subsequent years up to a total of one hundred and eighty (180) days.

11.3 The Employee will not be eligible for sick leave payments if he has received payments arising under the insurance scheme referred to in section 11.1.2 herein above.

11.4 The Employee shall not be entitled to convert any un-utilized sick leave for money or any other benefits during the term of this Agreement.

12. Physical checkup

Employee will undergo a general physical checkup once every year. The checkup will be administered at the Company's expense in a clinic of Employee's choice.

13. Share options

Commencing on March 15th, 2011 and on each subsequent March 15th and provided that the Company has an EBITDA of 12% annually, the Company will grant the Employee 500,000 options per annum for as long as this Agreement is in effect; each such lot of options shall vest after twenty four (24) months from the date of each grant provided that the Employee is still in the employment of the Company on the vesting date, and the Employee may exercise each lot of vested options during a period of three (3) years thereafter by written notice to the Company. The exercise price shall be the then current market price less ten (10%) percent. All taxes payable, if payable, on taking up the options and/or exercising options, or selling them or the underlying shares in the Company will be the sole responsibility of the Employee.

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14. Termination and provisions on termination

14.1 The Company will be entitled to terminate the Employee's employment at any time by written notice with immediate effect (or - if the Company so decides - with notice) on any of the grounds set out in clause 14.2. In any such case the Employee will not be entitled to any further payment or compensation (except such sums as will have already accrued and due to him).

14.2 The circumstances referred to in clause 14.1 are in any circumstances which the Company reasonably considers justified termination without notice including (without limitation) any circumstance where the Employee:

14.2.1 commits an act of gross misconduct or is guilty of conduct which in the opinion of the Board brings or might bring him or the Company into disrepute; or

14.2.2 commits any material breach of any term of this Agreement which is either not capable of remedy or is not remedied after notice from the Company specifying the breach and requiring its remedy; or

14.2.3 is incapable for any reason of performing his duties in whole or to a substantial degree for any consecutive or cumulative period of 120 days in any 12 month period of this agreement; or

14.2.4 is adjudged bankrupt or makes any arrangement or composition with his creditors generally; or

14.2.5 is disqualified from acting as a director of the Company or (otherwise than at the request of the Board or in order to avoid personal liability on his part made all reasonable efforts to avoid the situation in question) resigns as a director of the Company.

14.3 Termination by the Company will be without prejudice to any claims which the Company may have for damages arising from any breach by the Employee giving rise to such Termination.

14.4 Upon Termination for whatever reason:

14.4.1 the Employee will deliver to the Company all notes, memoranda and other correspondence, documents papers and property belonging to the Company or any other company in the Group or any client of the Company or of any company in the Group which may have been prepared by him or have come into his possession during the course of or as a result of his employment with the Company and

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will not retain or permit any other person to retain copies or extracts of them.

14.4.2 (without prejudice to any rights which the Employee may have to compensation, damages or otherwise) the Employee will immediately upon request by a majority of the Board resign from office as a director of the Company [and from all offices held by him any other company in the Group]. If the appropriate resignations are not signed and delivered by the Employee to the Board within seven days after such request the Board may appoint any one of its number to sign the notice of resignation as attorney for and on behalf of the Employee and the Employee hereby appoints any of the other members of the Board as his attorney for such purpose.

14.5 Once notice to terminate the Employee's employment has been given by the Company or the Employee, the Company:

14.5.1 shall be under no obligation to vest in or assign to the Employee any powers or to provide any work for the Employee; and

14.5.2 may exclude the Employee from any premises of the Company provided always that salary and any other contractual benefits shall not cease to be payable or provided by reason only of the Company exercising its rights pursuant to sub-clauses 14.5.1 and 14.5.2 of this clause. This clause shall not affect the general right of the Company to suspend for good cause, nor affect the rights and obligations of the parties prior to the service of such notice.

15. Inventions and Copyright

15.1 Any Intellectual Property which the Employee may devise, write or make either solely or jointly with others during the term of his employment with the Company or relating to or resulting from or suggested by any work which he has done or may during the term of his Employment do for the Company or any other Group Company will be and remain the property of the Company whether or not such Intellectual Property is capable of being protected by letters patent or other similar protection.

15.2 The Employee will promptly disclose and deliver to the Company, or as it may direct, all information and data in his possession necessary for a full understanding of such Intellectual Property and will without charge to, but at the cost and expense of the Company, execute and do all such acts, matters, documents and things as may be necessary or reasonable to obtain or assist the Company to obtain

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patent or other protection for such Intellectual Property in any or all countries and to vest title to it in the Company absolutely.

15.3 To the extent that they do not vest in the Company by operation of law or under this agreement, the Employee hereby assigns to the Company as beneficial owner all the rights, title and interest of the Employee in and to and all rights of action for damages for infringement of the Copyright Material to hold them absolutely for the entire period of copyright, design right or other rights subsisting in them and any renewals and extensions of them and after that in perpetuity. The Employee hereby irrevocably and unconditionally waives any and all moral rights under all applicable Copyright Laws or any rights of a similar nature under any law in any other jurisdiction in and to the Copyright Material.

15.4 The assignment and waiver contained in clause 15.3 will not be affected by reason of the termination of this agreement for whatever reason.

15.5 The Employee hereby appoints the Company as his attorney for the purpose of executing in the name and on behalf of the Employee all such deeds and documents as may be required pursuant to this clause 15.

15.6 The Company will be under no obligation to apply for or seek to obtain patent, design or other protection in relation to any such Intellectual Property or in any way to use exploit or seek to benefit from any such Intellectual Property.

16. Secrecy and non-disclosure

16.1 Without the prior written consent of the Company in each instance, Employee agrees to treat as secret and confidential all of the processes, methods, formulae, procedures, techniques, know-how, software, designs, data, drawings and other information which are not of public knowledge or record pertaining to the Company's Business which information the Employee acquires information during the course of his employment, and Employee agrees not to use, disclose, for any purpose other than the pursuance of his duties pursuant to this agreement publish, or in any other manner reveal, directly or indirectly, at any time during or after the term of the agreement any such processes, methods, formulae, procedures, techniques, software, designs, data, drawings and other information pertaining to the Company's Business.

16.2 The Employee shall not prepare, take away, utilise for his own purpose or disclose any list of customers, clients or persons,

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firms or companies who or which have been in the habit of dealing with the Company.

16.3 The terms of this clause 16 will survive the termination of this agreement, however this agreement is terminated.

17. Non-competition

17.1 Employee agrees that, during the term of this agreement and for a period of 1 year after the termination of his employment with the Company, he will not, directly or indirectly, anywhere in the world, interest himself in, be connected with, or engage in any projects that are competitive with significant projects in which the Company is engaged or is actively contemplating engaging during the term of this agreement or at the time of such period before termination, unless otherwise specifically permitted under this agreement.

17.2 The restrictions in Article 17.1 shall not apply to any activities that are consented to in writing by the Company after disclosure by Employee of his proposed activities.

18. Waiver

Failure to insist upon compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver relinquishment of any right or power hereunder, at any one or more times, be deemed a waiver or relinquishment of such right or power at any other time or times.

19. Severability

The invalidity or un-enforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. The parties to this agreement agree and intend that this agreement shall be enforced as fully as it may be enforced consistent with applicable statutes and rules of law.

20. Prior agreements

This Agreement will take effect as from January 1, 2011 and all previous agreements or arrangements, whether written or oral, express or implied, between the Employee and the Company or any company in the Group, relating to the services or employment of the Employee will be deemed to have been superceded by this Agreement.

21. Notices

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All notices, requests and other communications to any party hereunder shall be given in writing and telecopied, mailed (by registered mail) or delivered by hand as follows:

If to the Company:

Bldg. 1 Kfar Netter Industrial Center POB 3737 Kfar Netter 40593 Israel

If to Employee:

Dr. Zvi Marom 17, Maale Ha'argaman St. Even Yehuda Israel

or to such other address (or telecopier number) as such party may hereafter specify for the purpose of notice to the other party hereto.

Each such notice, request or other communication shall be effective:

21.1 if given by telecopier, when such telecopy is transmitted to the telecopier number specified herein and the appropriate answerback is received; or 21.2 if given by any other means, when delivered at the address specified herein.

22. Applicable law

This agreement shall be governed by, and construed in accordance with Israeli law and each party agrees to submit to the exclusive jurisdiction of the appropriate courts in the City of Tel-Aviv, as regards any claim or matter arising under this agreement.

23. Certain remedies

No remedy conferred upon the Company or Employee by agreement is intended to be exclusive of any other remedy, and each and every other such remedy shall be cumulative, and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity.

C:\Users\awechsler\AppData\Local\Microsoft\Windows\Temporary Internet Files\OLK8786\Employment Agreement with Zvi Marom (060211) (2).doc

BATM Advanced Communications Ltd., acting by two directors:

Director: _________________________

The Employee:

By: Dr. Zvi Marom

C:\Users\awechsler\AppData\Local\Microsoft\Windows\Temporary Internet Files\OLK8786\Employment Agreement with Zvi Marom (060211) (2).doc

SCHEDULE 1

DEFINITIONS AND INTERPRETATION

In this agreement

the following words and expressions will have the following meanings unless the context otherwise requires:

"Remuneration Committee" a committee appointed by the Board pursuant to the Company's Articles of Association.

"Board" the board of directors of the Company at the relevant time or committee of the board of directors to which powers have been properly delegated.

"Copyright Material" all literary or artistic material, including without limitation any design or design drawing written, produced or devised by the Employee pertaining to the operation or business for the time being of any Group Company or resulting from or suggested by any work which the Employee will do pursuant to his employment.

"Effective Date" the date this Agreement comes into effect as set out in clause 3.1.

"Group" the Company [and any holding company of the Company for the time being] and any subsidiaries for the time being of the Company [or of any such holding company] and the expression "Group Company" will be construed accordingly.

"Holding company" and "subsidiary" a company is a "subsidiary" of another company (its "holding company") if that other company:

(a) holds a majority of the voting rights in it; or (b) is member of it and has the right to appoint or remove a majority of its board of directors; or (c) is a member of it and controls alone, pursuant to an agreement with other shareholders or members, a majority of the voting rights in it, or if it is a subsidiary of a company which is itself a subsidiary of that other company.

C:\Users\awechsler\AppData\Local\Microsoft\Windows\Temporary Internet Files\OLK8786\Employment Agreement with Zvi Marom (060211) (2).doc

"Intellectual Property" inventions, marks, designs, literary or artistic works and written material, improvements, processes and systems pertaining to the business of the Company or any Group Company.

"Term" the period from the Effective Date until the Termination Date.

"Termination" the termination of this agreement for any reason (including termination of the Executive's employment).

"Termination Date" the date on which this agreement terminates irrespective of the cause or manner.

Unless otherwise specified, references to any enactment will be construed as references to such enactment as from time re-enacted and to any previous enactment consolidated in it and to any regulation or order made under it and in force.
Words denoting the singular will include the plural and vice versa and words denoting any gender will include all genders.
Unless otherwise stated all references to clauses in this agreement are references to clauses in and schedules to this agreement.
The provisions set out in the schedule to this agreement will be incorporated in and form part of this agreement.
The clause headings in this agreement are for the convenience of the parties only and will not affect its interpretation in any way.

SCHEDULE 2

Bonus payable on earnings/profit achievements (clause 6.1.2)

In this schedule, the following words and expressions have the following meanings:

"financial year" the financial year of the Company, ie., any period in respect of which a profit and loss account of the Company is required to be made up by its constitution or by the terms of the Companies Law, 1999.

"Profits" (a) the consolidated profits (less losses) of Company before tax and before amortization of goodwill and other intangible assets as shown by the audited consolidated profit and loss account thereof for any financial year, before deducting the Profit Share and the profit shares of any other senior employees of the Company, multiplied by the average number of shares of the company in issue at the commencement of the financial year and divided by the number of shares of the Company in issue at the end of the financial year, and (b) if in the previous year for which the comparison is to be made for calculating the profit share, the consolidated audited financial statements for the entire calendar year showed a loss and the current year shows a "profit", then in such case for the purpose of making the comparison and calculation of the profit share, the previous year's loss will be considered as GBP 1.00.

The Profit Share will be calculated as follows:

2.1 in any financial year to which neither paragraphs 2.2 nor 2.3 apply the Profit Share shall be 1.75% of the profits in the financial year to which the Profit Share relates.

2.2 if in any financial year the net profit for that financial year has increased by at least 50% but less than 100% over the net profit of the previous financial year then Profit Share shall be 2.75% of the profit in the financial year to which the Profit Share relates.

2.3 if in any financial year the net profit for that financial year has increased by at least 100% over the net profit of the previous financial year then the Profit Share shall be 3.75% of the profits in the financial year to which the Profit Share relates, PROVIDED that in no event shall the Employee be entitled to receive as the Profit Share an amount in excess of 4 times his annual salary.

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The Profit Share will be calculated:

3.1 in respect of a financial year of 12 calendar months by applying the percentage in paragraph 2 to the profits for that financial year; or

3.2 in respect of a financial year of more or less than 12 calendar months by applying the percentage in paragraph 2 to the equivalent annual percentage of the profits for that financial year and increasing or reducing, as the case may be, the amount so calculated in the proportion in which the number of days in that financial year bears to 365.

4.1 The following provisions apply as to the payment and computation of the Profit Share:

4.1.1 the Company may at its discretion pay to the Employee from time to time during each financial year any sum on account of the Profit Share. If any such payment exceeds the total amount of the Profit Share payable to the Employee in respect of the financial year during which such payment was made, the excess will, at the option of the Company, either be carried forward with or without time limit on account of the Profit Share to which the Employee will be entitled in the future or be repaid by the Employee to the Company on 30 days notice. Any such excess is to be repaid before any further payment on account of the Profit Share is made by the Company;

4.1.2 the Company will, within 14 days after the report on the accounts of the Company has been signed by the auditors of the Company, deliver to the Employee a statement showing the amount of the profits for such financial year and the amount, if any, of the Profit Share, which will be payable 14 days after that date, less any sum paid to the Employee on account of it under paragraph 4.1.1 of this schedule;

4.1.3 in respect of any financial year during which this agreement has commenced or has been terminated, the Company will, within 14 days after the report on the accounts of the Company for that financial year has been signed by the auditors of the Company, deliver to the Employee or to his legal personal representatives, as the case may be, a statement showing the amount of the profits for such financial year and the amount, if any, of the relevant Profit Share, which will be a ratable proportion of the Profit Share calculated from the Effective Date or to the Termination Date which he would have received if this agreement had existed or continued for the whole of such financial year. Such amount will be payable 14

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days after such date, less any sum paid to the Employee on account of it under paragraph 4.1.1 of this schedule.

If there is a dispute as to the amount of the profits for any financial year or as to any amount payable or deductible under the provisions of this schedule, the certificate of the auditors of the Company, whose fees will be borne by the Company, and a chartered accountant appointed by the Employee, whose fees will be borne by the Employee, or if they fail to agree then of such person as is appointed on the application of either party by the President of the Israel Institute of Chartered Accountants, as to such amount, will be final and binding on the Company and on the Employee or his legal personal representatives, as the case may be. In giving such certificate, the auditors and chartered accountants and, if appropriate, the person appointed as previously stated, whose fees will be apportioned between the parties in such manner as such person considers appropriate, will be deemed to be acting as experts and not as arbitrators.

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BATM :: Regulatory News Page 1 of 2

HOMe | CONTACT US search

COMPANY INVESTORS OUR BUSINESS RESOURCES NEWS CENTER CONTACT US

REGULATORY NEWS PRESS COVERAGE

Regulatory News

Global OEM Agreement

Oct 26, 2011

Link: http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11016017

RNS Number : 8370Q BATM Advanced Communications Ltd 26 October 2011

BATM Advanced Communications Limited

Global OEM Agreement

BATM Advanced Communications Limited ("BATM" or the "Company") (LSE: BVC), a leading designer and producer of telecom systems and medical laboratory diagnostic systems, is pleased to announce that it has signed a global OEM agreement with the world's largest tier 1 telecoms vendor.

The agreement enables this leading vendor to sell BATM's Carrier Ethernet access products through its many locations around the world. Under the terms, BATM, who were recently awarded the 'Best Carrier Ethernet Demarcation Product EMEA' at the Carrier Ethernet World Congress, will be responsible for training the vendor's sales teams, with BATM expected to generate revenues from the end of the second quarter of 2012 onwards.

Dr Zvi Marom, Chief Executive of BATM, commented:

"We are delighted to have signed this agreement with the leading tier 1 telecoms vendor in the world. In our final results statement in March I stated that we were building the necessary channels to replace the revenues recorded with Nokia Siemens Networks. This is clearly a significant step, among others, in that strategy. Our award winning products continue to offer the best Carrier Ethernet solutions in the market and we look forward to working alongside this major global partner."

Ends -

Enquiries

BATM Advanced Communications +972 9866 2525

Dr Zvi Marom, Chief Executive

Ofer Bar-Ner, CFO

Threadneedle Communications 020 7653 9850

Josh Royston / Graham Herring

finnCap 020 7220 0500

Marc Young / Brian Patient

Shore Capital 020 7408 4090

http://www.batm.com/index.php?page=news&article=108 29/08/2012

BATM :: Regulatory News Page 2 of 2

Pascal Keane

This information is provided by RNS The company news service from the London Stock Exchange

END

2012	2011
Aug 22, 2012	Price Monitoring Extension
Aug 22, 2012	Second Price Monitoring Extension
Aug 16, 2012	BATM Interim Results 2012
Aug 08, 2012	Election of Home State
Aug 05, 2012	BATM interim results 2012 - Webcast Registration - 16 August 2012 - 9.30am BST
Webcast - 16 August 2012 - 9.30am BST
Jul 24, 2012	Notice of Results 24-Jul-12
Jul 02, 2012	Result of AGM - 02 Jul-12
Jul 02, 2012	AGM Statement 02-Jul-2012
Jun 26, 2012	Holding(s) in Company
Jun 06, 2012	Notice of Annual General Meeting
May 16, 2012	Holding(s) in Company
May 04, 2012	Holding(s) in Company
May 02, 2012	CE certification for HCV (Hepatitis C) screening kit
Apr 30, 2012	Annual Financial Report for 2011
Apr 11, 2012	Interim Management Statement
Mar 23, 2012	CE certification for HIV screening kit
Mar 22, 2012	Holding(s) in Company
Mar 15, 2012	Holding(s) in Company
Mar 06, 2012	Holding(s) in Company
Feb 27, 2012	Final Results 2011
Feb 27, 2012	Directorate Change
Feb 27, 2012	Holding(s) in Company
Feb 16, 2012	Holding(s) in Company
Feb 13, 2012	Holding(s) in Company
Feb 09, 2012	Holding(s) in Company
About BATM	Investors	News & Events
---	---	---
Company Profile	Today Stock Quote	Regulatory News
BATM Offices	Corporate Governance	Press Coverage
Management & Board Members	Advisers and Registrars	LinkedIn

http://www.batm.com/index.php?page=news&article=108 29/08/2012

BATM :: Press Coverage Page 1 of 2

COMPANY	INVESTORS	OUR BUSINESS	RESOURCES	NEWS CENTER	CONTACT US
REGULATORY NEWS PRESS COVERAGE	Press Coverage
Interim Management Statement
	Oct 26, 2011
	BATM Advanced Communications Limited ("BATM" or the "Company") (LSE: BVC), a leading designer and producer of telecom systems and medical laboratory diagnostic systems, is today issuing its Interim Management Statement for the period from 1 July 2011 to 30 September 2011.
	Current trading update
	Total revenues in the third quarter of 2011 (Q3) were $30.4 million, compared with $29.0 million in the equivalent period in 2010. This 5.0% increase in turnover during Q3 brings revenues for the nine months to September 30 to $95.0 million, an increase of 12.7% over the same period in 2010.
	During the third quarter of the year the sales mix was 65% from the Telecoms division and 35% from the Medical division, compared to 68% and 32% respectively in the third quarter of 2010. Gross margin was slightly higher during the third quarter of 2011 over the same period last year.
	Within the Telecom division the OEM business with Nokia Siemens Networks is expected to further decline in the coming quarter and this will impact the profitability of the Telecom division. The announcement made today regarding the signing of a major new global OEM vendor demonstrates the Company's commitment to and confidence in rebuilding the profitability of this aspect of the division.
	Despite the uncertain global economic outlook, the Company continues to generate new business opportunities in both the Medical and Telecom divisions, and the Board expects this to continue.
	Financial position
	The Company's balance sheet remains strong and as at October 24 the effective cash balance stood at $46.1 million, a decrease of $8.6 million compared to the position at 30 June 2011, mainly as a result of dividends and related tax payments of $5.8 million, and increased inventory of $1.5 million, which includes those of the ANDA Networks assets acquired in April.
	New agreement signed
	As announced this morning, we are pleased to have signed a new OEM agreement with the world's largest tier 1 telecom vendor. The agreement will see this leading vendor sell our Carrier Ethernet Access products through its many locations around the world. We believe this agreement demonstrates that our strategy of seeking alternative channels to the declining Nokia Siemens Networks business is succeeding. We expect to start generating significant revenues from this contract during 2012.
	New Listing
	The Company has received approval from the Tel-Aviv Stock Exchange to dual list its shares there. We expect that the listing will become effective and trading will commence on this market before the end of the year, as previously announced.

http://www.batm.com/index.php?page=press-releases&article=75 29/08/2012

BATM :: Press Coverage Page 2 of 2

Outlook

The Board believes that the performance for the last quarter of this year will be similar to the third quarter, rather than the comparable period last year which was particularly strong. Therefore, we believe that the second half performance will be broadly in line with the first half of the year and as a result guidance for full year revenues will likely be in the region of $130 million with corresponding operating profit excluding amortisation of intangibles of $7.0 million.

Ends -

Enquiries

BATM Advanced Communications +972 9866 2525 Dr Zvi Marom, Chief Executive Ofer Bar-Ner, CFO

Threadneedle Communications 020 7653 9850 Josh Royston / Graham Herring

finnCap 020 7220 0500 Marc Young / Brian Patient

Shore Capital 020 7408 4090 Pascal Keane

This information is provided by RNS The company news service from the London Stock Exchange

END

2011 Oct 04, 2011 Change of adviser May 04, 2011 Interim Management Statement Apr 21, 2011 Acquisition of ANDA Networks, Inc.

About BATM	Investors	News & Events	BATM Group
Company Profile	Today Stock Quote	Regulatory News	Telecom Division
BATM Offices	Corporate Governance	Press Coverage	Medical Division
Management & Board Members	Advisers and Registrars	LinkedIn

http://www.batm.com/index.php?page=press-releases&article=75 29/08/2012

BATM :: Regulatory News Page 1 of 2 HOME | CONTACT US search

COMPANY	INVESTORS	OUR BUSINESS	RESOURCES	NEWS CENTER	CONTACT US
REGULATORY NEWS
PRESS COVERAGE	Regulatory News
Trading Statement

Dec 12, 2011

Link: http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11059870

RNS Number : 8036T BATM Advanced Communications Ld 12 December 2011

12 December 2011 BATM Advanced Communications Limited

Trading Update

BATM Advanced Communications Limited ("BATM" or the "Company") (LSE: BVC), a leading designer and producer of broadband data and telecoms systems and medical laboratory equipment, provides an update on trading for the fourth quarter of 2011. Trading in our Telecoms division, as a result of a recent, faster than anticipated decline in sales of certain legacy products, has been below the expectations indicated in our recent Interim Management Statement. We believe that this is due to general weak market conditions and that others in our peer group are experiencing the same effects.

We now expect that revenues and profits for the Company for the year to 31st December 2011 will be below the guidance given in our October announcement. Following this marked recent softening in demand from certain US operators for legacy telecoms products, the Board is undertaking a strategic review of this segment of our Telecoms division and will consider withdrawing from it in 2012. The products affected currently account for approximately 22 per cent. of the Telecoms division's revenues. The focus of the Telecoms division will be on the higher margin, new IP, direct and OEM prospects. We expect this focus to generate growth next year, underpinned by our recent successes in signing new agreements with both the world's largest tier 1 telecoms vendor and also with Motorola.

Update on Tel Aviv Listing

In order to finalise the steps mentioned above we have asked for approval to delay our listing on the Tel-Aviv Stock Exchange for a few months and we expect a positive response shortly. A further update on the timing of the Tel-Aviv listing will be made in due course.

Ends -

Enquiries

BATM Advanced Communications +972 9866 2525 Dr Zvi Marom, Chief Executive Ofer Bar-Ner, CFO

Threadneedle Communications 020 7653 9850 Josh Royston / Graham Herring

finnCap 020 7220 0500 Marc Young / Brian Patient

http://www.batm.com/index.php?page=news&article=102 29/08/2012

BATM :: Regulatory News Page 2 of 2

Pascal Keane This information is provided by RNS The company news service from the London Stock Exchange

END

2012 2011 Aug 22, 2012 Price Monitoring Extension Aug 22, 2012 Second Price Monitoring Extension Aug 16, 2012 BATM Interim Results 2012 Aug 08, 2012 Election of Home State Aug 05, 2012 BATM interim results 2012 - Webcast Registration - 16 August 2012 - 9.30am BST Webcast - 16 August 2012 - 9.30am BST Jul 24, 2012 Notice of Results 24-Jul-12 Jul 02, 2012 Result of AGM - 02 Jul-12 Jul 02, 2012 AGM Statement 02-Jul-2012 Jun 26, 2012 Holding(s) in Company Jun 06, 2012 Notice of Annual General Meeting May 16, 2012 Holding(s) in Company May 04, 2012 Holding(s) in Company May 02, 2012 CE certification for HCV (Hepatitis C) screening kit Apr 30, 2012 Annual Financial Report for 2011 Apr 11, 2012 Interim Management Statement Mar 23, 2012 CE certification for HIV screening kit Mar 22, 2012 Holding(s) in Company Mar 15, 2012 Holding(s) in Company Mar 06, 2012 Holding(s) in Company Feb 27, 2012 Final Results 2011 Feb 27, 2012 Directorate Change Feb 27, 2012 Holding(s) in Company Feb 16, 2012 Holding(s) in Company Feb 13, 2012 Holding(s) in Company Feb 09, 2012 Holding(s) in Company

About BATM Company Profile BATM Offices Management & Board Members

Investors Today Stock Quote Corporate Governance Advisers and Registrars

News & Events Regulatory News Press Coverage LinkedIn

BATM Group Telecom Division Medical Division

http://www.batm.com/index.php?page=news&article=102 29/08/2012

BATM :: Regulatory News Page 1 of 2

HOME | CONTACT US search

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REGULATORY NEWS PRESS COVERAGE

Regulatory News

CE certification for HIV screening kit

Mar 23, 2012

Link: http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11155292

RNS Number : 9058Z BATM Advanced Communications Ltd 23 March 2012

BATM Advanced Communications Limited

CE certification for HIV screening kit

BATM Advanced Communications Limited ("the Company") (LSE: BVC), a leading designer and producer of broadband data and telecom systems and medical laboratory equipment, is delighted to announce that its fully owned subsidiary Adaltis, a manufacturer of medical diagnostics equipment, has received CE certification for its Detect HIV 4th generation (AIDS 4th generation) Total Screening Kit.

The kit is able to detect simultaneously HIV 1&2 antibodies and HIV p24 antigens, with the 4th generation screening able to detect the latest strains of the virus. Testing in external, independent labs has shown performance results of 100% accuracy for diagnostic sensitivity and 99.7% for diagnostic specificity, clearly marking this screening kit as the top of its class. This level of accuracy will ensure that patients receive reliable diagnosis and that laboratories are spared the significant and needless expense of repeat testing.

Initial deliveries of the new kit will start in the second quarter of this year, with an increasing buildup of production through the fourth quarter and into next year.

Dr Zvi Marom, Chief Executive, of BATM commented:

"The sensitivity and specificity performance levels of our Total Screening Kit are clearly outstanding and we are delighted to have received CE certification. We have received great interest in this product and certification now allows us to increase sales in several territories.

"This important step in our medical division augurs well for its future with the prospect of improved margins and sales. The Company is encouraged that its success with this kit will extend to other kits that are under certifications."

Ends -

For further information:

Enquiries

BATM Advanced Communications +972 9866 2527 Ofer Bar-Ner, CFO

Newgate Threadneedle 020 7653 9850 Josh Royston / Graham Herring

finnCap 020 7220 0500 Marc Young / Brian Patient

Shore Capital 020 7408 4090 Pascal Keane

Notes to Editors

According to a report in January 2012 from TriMarkPublications.com, there are an estimated 33.3 million people living with HIV worldwide and approximately 2.6 million people are newly infected each year. Although the Asian and African regions account for more than 90% of the HIV-infected population, the U.S. and European regions make up greater than 60% of

http://www.batm.com/index.php?page=news&article=106 29/08/2012

BATM :: Regulatory News Page 2 of 2

the HIV testing market.

The same report also states that the global HIV-AIDS testing market is forecasted to catapult to $4.4 billion by 2016.

This information is provided by RNS The company news service from the London Stock Exchange

END

2012	2011
Aug 22, 2012	Price Monitoring Extension
Aug 22, 2012	Second Price Monitoring Extension
Aug 16, 2012	BATM Interim Results 2012
Aug 08, 2012	Election of Home State
Aug 05, 2012	BATM interim results 2012 - Webcast Registration - 16 August 2012 - 9.30am BST
Webcast - 16 August 2012 - 9.30am BST
Jul 24, 2012	Notice of Results 24-Jul-12
Jul 02, 2012	Result of AGM - 02 Jul-12
Jul 02, 2012	AGM Statement 02-Jul-2012
Jun 26, 2012	Holding(s) in Company
Jun 06, 2012	Notice of Annual General Meeting
May 16, 2012	Holding(s) in Company
May 04, 2012	Holding(s) in Company
May 02, 2012	CE certification for HCV (Hepatitis C) screening kit
Apr 30, 2012	Annual Financial Report for 2011
Apr 11, 2012	Interim Management Statement
Mar 22, 2012	Holding(s) in Company
Mar 15, 2012	Holding(s) in Company
Mar 06, 2012	Holding(s) in Company
Feb 27, 2012	Final Results 2011
Feb 27, 2012	Directorate Change
Feb 27, 2012	Holding(s) in Company
Feb 16, 2012	Holding(s) in Company
Feb 13, 2012	Holding(s) in Company
Feb 09, 2012	Holding(s) in Company
About BATM	Investors	News & Events
---	---	---
Company Profile	Today Stock Quote	Regulatory News
BATM Offices	Corporate Governance	Press Coverage
Management & Board Members	Advisers and Registrars	LinkedIn

http://www.batm.com/index.php?page=news&article=106 29/08/2012

BATM :: Regulatory News Page 1 of 2 HOME | CONTACT US search

COMPANY	INVESTORS	OUR BUSINESS	RESOURCES	NEWS CENTER	CONTACT US
REGULATORY NEWS
PRESS COVERAGE	Regulatory News
Interim Management Statement

Apr 11, 2012

BATM Advanced Communications Limited ("BATM" or the "Company") (LSE: BVC), a leading designer and producer of telecom systems and medical laboratory diagnostic and sterilisation systems, is today issuing its Interim Management Statement for the period from 1 January 2012 to 31 March 2012.

Current trading update

Financial position

The Company's balance sheet remains strong and at March 31 the effective cash balance stood at $42.7 million, a decrease of $4.2 million compared to the position at December 31 2011, mainly as a result of repayment of a long term loan that is expected to generate a one off gain of approximately $0.7 million.

Telecom Division

Our Telecom division is, following its re-organisation, making progress in line with our previous guidance. New customers are being won worldwide as the division focuses on being a key supplier to next generation telecoms networks.

Medical Division

The Medical division continues to make significant progress in gaining validation for its products and in growing its market presence. This progress can be evidenced by our recent announcement that the Company had received CE certification for its Detect HIV 4th Generation Total Screening Kit, which proved 100% accurate in independent testing.

The improved margins that we reported have been demonstrated in all three areas of operations: diagnostics, sterilisation and distribution. This is in line with our long term target to increase our operating margins in the Medical division to the levels of our Telecom division.

Outlook

BATM has achieved its goals for the first quarter and significant progress has been made in the Medical Division.

Ends -

Enquiries

BATM Advanced Communications +972 9866 2525 Dr Zvi Marom, Chief Executive Ofer Bar-Ner, CFO

Threadneedle Communications 020 7653 9850 Josh Royston / Graham Herring

FinnCap 020 7220 0500 Marc Young

http://www.batm.com/index.php?page=news&article=97 29/08/2012

BATM :: Regulatory News Page 2 of 2

Shore Capital 020 7408 4090 Pascal Keane

2012 2011

Aug 22, 2012 Price Monitoring Extension Aug 22, 2012 Second Price Monitoring Extension Aug 16, 2012 BATM Interim Results 2012 Aug 08, 2012 Election of Home State Aug 05, 2012 BATM Interim results 2012 - Webcast Registration - 16 August 2012 - 9.30am BST Webcast - 16 August 2012 - 9.30am BST Jul 24, 2012 Notice of Results 24-Jul-12 Jul 02, 2012 Result of AGM - 02 Jul-12 Jul 02, 2012 AGM Statement 02-Jul-2012 Jun 26, 2012 Holding(s) in Company Jun 06, 2012 Notice of Annual General Meeting May 16, 2012 Holding(s) in Company May 04, 2012 Holding(s) in Company May 02, 2012 CE certification for HCV (Hepatitis C) screening kit Apr 30, 2012 Annual Financial Report for 2011 Mar 23, 2012 CE certification for HIV screening kit Mar 22, 2012 Holding(s) in Company Mar 15, 2012 Holding(s) in Company Mar 06, 2012 Holding(s) in Company Feb 27, 2012 Final Results 2011 Feb 27, 2012 Directorate Change Feb 27, 2012 Holding(s) in Company Feb 16, 2012 Holding(s) in Company Feb 13, 2012 Holding(s) in Company Feb 09, 2012 Holding(s) in Company

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http://www.batm.com/index.php?page=news&article=97 29/08/2012

תקנון ותזכיר ההתאגדות של החברה

פקודת החברות

תזכיר התאגדות

של

שם החברה (1992)

(א) בעברית - ב.א.ט.מ. 2000 בע"מ

(ב) באנגלית - ב.א.ט.מ. B.A.T.M. 2000 LTD.

המטרות שלשמן נתאגדה החברה:

א. לנהל עסק של חברה לפיתוח ולהשקעות על כל ענפיו, בישראל ובעולם כולו, להשקיע בכל סוגי הנכסים והזכויות, מתכות יקרות, סחורות, חפצי אמנות, וכן לתווך בהם, ליבאם ליצאם ולשווקם.

ב. לעסוק בכל סוגי החרושת, התעשייה, הייצור, המסחר, המלאכה, השירותים, המקצועות והעיסוקים ובכל הענפים והשטחים של הפעילות הכלכלית והמקצועית מכל מין וסוג שהוא, כפי שייראה למנהלי החברה מפעם לפעם.

ג. לנהל בישראל עסקים כבעלי הון, מממנים, בעלי זכיון וסוחרים לקבל עצמה לנהל ולבצע כל מיני פעולות כספיות ופעולות מסחריות ואחרות, לנהל כל עסק אחר הנראה ככזה שאפשר לנהל מתן נוחות - בקשר עם כל אחת מהמטרות המנויות בתזכיר זה או במי מהן, לנהל כל עסק העשוי להנדיל במישרין או בעקיפין את ערך רכוש החברה או את ערך זכויותיה או מי מהן או כל עסק הבא להקל על מימוש רכושה או זכויותיה או הבא לעשות רווחים.

ד. לנהל עסקים של מנהלי נכסים והשקעות, נאמנים, סוכנים, נציגים, באי כח, בעלי הון, משקיעים ובעלי זכויות וזכיונות ובקשר עם מטרות אלה, או איזה מהם לנהל כך עסק אשר במישרין או בעקיפין עשוי להקל את מימוש או ניצול נכסיה או זכויותיה של החברה או אשר במישרין או בעקיפין עשוי להיטיב לעניני החברה או בעלי מניותיה או מישהו מהם.

ה. לרכוש, להשיג, לקבל, להחזיק, לנהל, למכור ולהעביר בישראל ומחוצה לה ידע, תהליכי ייצור ושווק זכויות, זכיונות, פטנטים, מדגמים, ציוד, סחורות, תכניות, רשיונות, וכל סוג זכויות מסחריות וטובות הנאה מכל סוג ומין וכן לעשות כל הסכמים ולבצע כל פעולה בקשר להם.

ו. לעסוק בכל בדיקות ונסיונות, מדעיים, טכניים ואחרים ובכלל זה לשם השבחתן או מתן השתדלות להשבחתן של כל המצאות וזכויות פטנטים, אשר החברה תהא זכאית להן או תרכש לעצמה, או תרצה לרכש לעצמה.

.ז. לעסוק בכל מכירה, קניה, השאלה, שכירות, חכירה, השכרה וניצול בכל דרך וכל צורה של כל מטלטלין ו/או מקרקעין ו/או זכויות ואו התחייבויות מכל מין וסוג שהוא וכן להתקשר בחוזים, הסכמים ו/או כל התקשרות לצורך ביצוע כל מטרה עפ"י תזכיר זה.

.ח. לנהל עסק של רכישה, מכירה, החלפה, פיתוח, תכנון, השבחה ותיווך במקרקעין כל כל סוגיו ולשמש כסוכנים של בעלי זכויות במקרקעין לצורך ניהולם, פיתוחם, השבחתם ומכירתם וכן לשמש כסוכנים של מי שמעוניין לרכוש זכויות במקרקעין.

.ט. לרכוש מניות, סטוק של מניות, אגרות חוב, סטוק של אגרות חוב, בונדס, התחייבויות ובטחונות ע"י חתימה מקורית או באופן אחר, לערוב לחתימה על בטחונות כאלה, לרכוש, לקבל, לשנות, להוציא, למכור, להמיר, למסור, למשכן, להעביר ולהחזיק ברכוש ובזכויות מכל המינים.

.י. לקבל על עצמה ו/או למלא תפקיד של מנהל או מנהל בפועל ו/או להשתתף בהנהלה, בפקוח או כשליטה על נכסים, רכוש ועסקים או בפעולה של כל חברה שהיא או מפעל שהוא ולמטרה זו להתקשר בחוזים ו/או למנות מנהלים, מנהלי חשבונות, מומחים או סוכנים שהם ולשלם את שכרם.

.יא. להוציא מניות, אגרות חוב, ערבויות התחייבויות ובטחונות מכל המינים ולהבטיח את הנ"ל בכל אופן שתמצא לנכון, לקבוע שהם ניתנים להעברה, שהם מוצאים לזמן קבוע או לזמן בלתי מוגבל, ולשעבד ולבטחונם את רכוש החברה בהווה או בעתיד, כולו או מקצתו, ואם תמצא לנכון גם את הונה הבלתי נפרע והמוניטין.

.יב. לתת אשראי נגד בטחונות או בלעדיהם ובדרך כלל לפי תנאים שהחברה תמצא לנאותים להפקיד או להלוות כספים, ניירות ערך ורכוש לאנשים או לגופים משפטיים בתנאים שתקבע החברה וביחוד נגד שעובדים, משכנתאות, ערבויות או בטוחות מכל מין וסוג לפי ראות עיני החברה.

.יג. ללוות ולהבטיח תשלום כספים בכל דרך שתראה לחברה ובמיוחד על ידי הוצאת אגרות חוב או סטוק של אגרות חוב המובטחים ושאינם מובטחים ע"י שעובדים שוטפים או קבועים, על נכסי החברה כולם או מקצתם, הקיימים או העתידיים או ע"י ערבויות, ערבונות, בטוחות או בטחונות מכל מין וסוג, לרבות הון המניות שתשלומו טרם נדרש ולפדות, לקנות או לפרוע בטחונות כנ"ל.

.יד. למשוך, לעשות, לקבל, להעביר או לנכות, להוציא ולתת שטרי חוב, שטרי חליפין, תעודות מטען, תעודות למכ"ז, אגרות חוב או שטרות ממינים אחרים העוברים לסוחר או ניתנים להעברה.

.טו. לבקש, לקנות או לרכוש באמצעים אחרים ולהגן או להאריך ולחדש בישראל או בחו"ל כל מיני פטנטים, זכויות המצאה, רשיונות, הגנות וזכיונות הנראים כמביאים תועלת או יתרון לחברה, וכן תוכל להשתמש ולהפיק תועלת, ליצור עפ"י רשיונות או להעניק רשיונות/זכויות קדימה בקשר עם הנ"ל וכן תוכל החברה להוציא כספים לשם נסיונות או בדיקות או לשם השבחתם או בהשתדלות להשבתם של כל מיני פטנטים, זכויות לגבי פטנטים, המצאות או זכויות שהחברה תרכשם לעצמה או אשר ברצונה לרכוש.

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3
```markdown
טז.
לקנות או לרכוש בדרך אחרת ולקבל על עצמה עסק או חלקו, מוניטין ורכוש של איזה איש או גוף משפטי, העוסקים באחד העסקים שהחברה הזאת רשאית לעסוק בהם, או שיש ברשותה רכוש המתאים לצרכי החברה הזאת ולקבל על עצמה את התחייבויות של אותו איש או גוף משפטי, כולם או מקצתם או לרכוש לעצמה חלק או להתאחד או לעשות כל מיני סידורים בדבר השתתפות ברווחים או לשם התאגדות או לשם הגבלת התחרות או לשם עזרה הדדית בינה ובין אותו האיש או הגוף המשפטי וכן תוכל החברה לתת או לקבל בתורת התמורה בעד אחת מן הפעולות או הדברים הנ"ל או בעד רכוש, שנרכש כל מיני מניות (בין שנפרעו בשלמותן או מקצתן), אג"ח, סטוק של אגרות חוב או בטחונות כפי שיוסכם וכן תוכל להחזיק ולשמור לעצמה או למכרן ולהחזיק בכל מיני מניות, אג"ח, סטוק אגרות חוב, בטחונות שקיבלה באחת הדרכים הנ"ל.

יז.
להשביח, לנהל, לעבד, לפתח, להמיר, ולהחכיר בשכר קבוע או באחוזים קבועים או בעד השתתפות ברווחים בדרך אחרת, וכן תוכל למשכן, למכור, למסור, ולהפיק תועלת, לתת רשיונות, זכויות אחרות וזכויות קדימה או לעסוק באופן אחר ברכושה כולו או מקצתו וזכויותיה כולן או מקצתן, של החברה באותה התמורה שהחברה תמצא לנכון.

יח.
להוציא ולהשליש כל מיני בטחונות שהחברה רשאית להוציא בתורת משכנתא בכדי להשיג סכום כסף שהוא פחות מן הסכום הנומינלי של הבטחונות הנ"ל וכן גם בתורת ערבות בעד הוצאה לפועל של חוזים או התחייבויות של החברה או של לקוחות או של אנשים אחרים.

יט.
לשלם בעד כל מיני רכוש או זכויות שנרכשו ע"י החברה ולשלם שכר לכל איש, גוף, אגודה שיתופית, חברה או גוף משפטי הנותנים לה את שרתם, במזומנים או במניות מסולקות בשלמות או מקצתן בין בזכויות בכורה או בזכויות מוגבלות בנוגע לדיבידנדים או לתשלום הקרן או בנוגע לעניין אחר, או ע"י כל מיני בטחונות שיש לחברה הרשות להוציאם או מקצתם בצורה אחת ומקצתם בצורה אחרת ובכלל באותם התנאים שהחברה תחליט עליהם.

כ.
לקבל תשלום בעד נכסים או זכויות שמסרה או העבירה בדרך אחרת או שסחרה בהם החברה בין במזומנים או בתשלומים בשיעורים או אחרת במניות של החברה אחרת, או בהתאגדות אחרת המסולקות בשלמות או במקצתן או שהן ניתנות בזכויות מוגבלות או זכויות בכורה בנוגע לרווחים או לתשלום הקרן או לעניין אחר או כאגרות חוב או כסטוק של אג"ח או במשכנתאות או בטחונות אחרים של כל חברה, גוף משפטי, אגודה שיתופית או התאגדות, או מקצתם בצורה אחת ומקצתם בצורה אחרת ובכלל באותם התנאים שהחברה תחליט עליהם וכן תוכל החברה להחזיק, למסור או לעסוק באופן אחר בכל מיני מניות וסטוק או בטחונות אחרים שרכשה כנ"ל.

כא.
לייסד או ליזום או להשתתף ביסוד או ביזום של חברה או אגודה שיתופית או גוף משפטי אחר אשר מטרותיה כוללות את דבר רכישתן וקבלתן של נכסיה והתחייבויותיה היא, כולם או מקצתם, או שיש לחשוב שיביא תועלת באופן אמצעי או בלתי אמצעי לענייניה ומטרותיה של החברה הזו וכן תוכל לרכוש ולהחזיק מניות סטוק או בטחונות אחרים או לערוב בעד תשלומים של בטחונות או התחייבויות של כל חברה, אגודה שיתופית או גוף משפטי כנ"ל, או של כל חברה שמטרותיה דומות למטרות החברה הזאת או של כל חברה העוסקת או שברצונה לעסוק

4

בעסקים שהחברה הזאת מעונינת בהם או שהחברה הזאת תוכל להפיק מהם תועלת.

כב. להשתתף בשותפות או לבוא לידי סידור בדבר השתתפות ברווחים שיתוף ענינים או שיתוף פעולה עם החברה, פירמה, גוף, אגודה שיתופית או איש העוסקים או החושבים לעסוק באחד העסקים הנכנסים לכלל מטרותיה של החברה וכן תוכל לרכוש, להחזיק, למכור ולסחור ולהעביר מניות סטוק או בטחונות אחרים של כל חברה, גוף או אגודה שיתופית כנ"ל, לתמוך בהם או לעזור להם בדרך אחרת.

כג. להיות סוגן או עמיל ונאמן לכל איש, גוף או אגודה שיתופית, פירמה או חברה, לקבל על עצמה ולהוציא לפועל חוזי משנה וכן לפעול ע"י עמילים, סוכנים או קבלני משנה או אחרים בכל עסקי החברה.

כד. למכור או להעביר באופן אחר רכוש החברה כולו או מקצתו בין באופן כללי או חלקים חלקים בתמורה כזאת שתמצא החברה למתאימה וביחוד בתמורה מניות, אג"ח או בטחונות של כל חברה או אגודה שיתופית או גוף הקונה את המפעל.

כה. לשלם את ההוצאות שהוצאו בקשר עם יסודה, ביסוסה ורישומה של החברה, כולן או מקצתן וכן תוכל להתקשר עם איש, פירמה, גוף, אגודה שיתופית או חברה בדבר בתשלום ההוצאות הנ"ל ותוכל לשלם דמי עמידות לסוכנים ואנשים אחרים בעד התימה, סידור, מכירה או בעד ערבות להחתמה של מניות, אג"ח, סטוק של אג"ח או בטחונות שלה.

כד. לדרוש, לספק ולהשיג פקודות וחוקים, צווים או רשיונות מאת כל שלטון למען תת האפשרות לחברה להוציא לפועל איזו שהיא ממטרותיה, או למען תביא שינויים בחוקתן או לכל מטרה אחרת אשר תמצא החברה לטוב לה. וכן להתנגד לכל פעולה או לכל דרישה העלולה להזיק לענינה באופן אמצעי או באופן בלתי אמצעי.

כז. לעשות סידור עם כל ממשלה או שלטון, (שלטון עליון, עירוני, מקומי או אחר) או עם התאגדות, גוף, חברה, אגודה שיתופית, פירמה או איש שיש להם טעם לחשוב שיוכלו לעזור לה בהשגת מטרותיה או אילו ממטרותיה וכן תוכל לקבל ממשלה כזאת או שלטון מקומי, התאגדות, גוף, חברה, אגודה שיתופית, פירמה או איש כל מיני צ'רטרים, חוזים, חוקים, זכויות, זכויות קדימה וזכויות שהחברה תחשבם לרצויים לה, ותוכל להשתמש ולפעול בהתאם לכל הצ'רטרים, החוזים, החוקים, הזכויות, זכויות קדימה והזכויות הנ"ל.

כה. לחלק בין חבריה את רכוש בעין או את תמורת רכושה שנמכר או נמסר, אולם אסור לה לחלק חלוקה הגוררת אחריה את הקטנת ההון, אלא אם כן קבלה את האישור הנדרש באותו זמן לפי החוק.

כט. לעשות את כל הפעולות הנ"ל, כולן או מקצתן, בכל חלקי התבל בין בתור בעלים ובין בתור סוכנים, נאמנים, קבלנים או בדרך אחרת, בעצמה או בשותפות עם אחרים ועל ידי סוכנים, קבלני משנה, נאמנים או בדרך אחרת.

ל. להשתדל להשיג את אישור החברה ורישומה בישראל או בכל ארץ אחרת.

5

.לא לעשות כל מיני פעולות אחרות שהינן קשורות או מועילות למטרות הנ"ל או איזה מהן או שנראות לכאלה.

לב. כל אחת מהמטרות הנ"ל תחשב למטרה ראשית ובלתי תלויה באחרות ולא תהיה מוגבלת באיזה אופן שהוא או מסייגת ע"י הקשר או המסקנה הנובעים מנוסח איזה מטרה אחרת או משמה של החברה.

3. אחריותם של החברים מוגבלת.

4. הון המניות של החברה הוא 16,600 שקל חדש (ששה עשר אלף ושש מאות) מחולק ל- 16,000 (שש עשרה אלף) מניות רגילות בנות 1 שקל חדש כ"א ו-600 (שש מאות) מניות הנהלה בנות 1 שקל חדש ב"א. הרשות בידי החברה להוציא את הון מניותיה המקורי או המוגדל כולו או מקצתו עם זכויות בכורה ביחס לזכות ההצבעה דיבידנדים או לסילוק הקרן ובכלל אותם התנאים שיקבעו מדי פעם בפעם ע"י החלטה מיוחדת של האסיפה הכללית והזכויות הניתנות מזמן לזמן לכל סוג וסוג של מניות בהון החברה, אפשר יהיה לשנותן, להגדילן או לנהוג באופן שיקבע בתקנות ההתאגדות.

אנו האנשים ששמותיהם וכתובותיהם רשומים מטה רוצים להתאגד בהתאם לתזכיר ההתאגדות הזה ומסכימים לקחת את מספר המניות בהון החברה, כרשום בצד שמותינו המפורטים מטרה זה אחר זה:

|  מס' סד' | שם | תאור | כתובת | מספר המניות שכל חותם לוקח | חתימה  |
| --- | --- | --- | --- | --- | --- |
|   | בנימין ברץ | עורך דין | אבן גבירול
510 מניות
רגילות
1 מנית הנהלה
1 מנית |  |   |
|   | עורך דין | אבן גבירול
68, תל-אביב | אבן גבירול
רגילות
490 מניות
רגילות
1 מניות | שלומי ברדוגו |   |

22.1.92
תאריך

(NGK)

# מדינת ישראל
## STATE OF ISRAEL

### משרד המשפטים
### MINISTRY OF JUSTICE

### רשם החברות
### REGISTRAR OF COMPANIES

**מספר תיק:** 520042813
**ייב שבט תשיע**
**27/01/2010**

![img-0.jpeg](img-0.jpeg)

לכבוד
ליפא מאיר ושות' עוייד
איתמר בן אבי 4
תל אביב 64736

א"י

### הנדון: באטמ תקשורת מתקדמת בע"מ

הנני מאשר קבלת המכתב מיום 10/01/2010, על החומר הרצוף בו.
ביום 27/01/2010 נרשמה הפעולה כדלהלן:
שינוי בתקנון, לפי החלטת האספה הכללית מיום 17/06/2009.

בכבוד רב,
יהודה כץ, עוייד
בירשם החברות

מרבה כלל, רח' יפו 97 (קומה 13), ירושלים 94340
Clal Center (13th Floor), 97 Jaffa Rd, Jerusalem
טל' 02-6209444, ת"ד 28178, ירושלים מיקוד 91281

חנכת

# באטמ תקשורת מתקדמת בע"מ

(להלן: החברה) 52-004281-3 .א.

30.6.2009

לכבוד
רשם החברות
ת.ד. 28178
ירושלים 91281

.ג.א.

## הנדון: הודעה על שינוי תקנון החברה עפ"י סעיף 21 לחוק החברות

1. אני הח"מ, עפר ברנר, ת.ז. 058748252, מודיע בזאת לכבוד רשם החברות כי באסיפה כללית שנתית של החברה שהתקיימה ביום 17.6.09 בלונדון, אנגליה, התקבלה החלטה מיוחדת לשנות את תקנון החברה כמפורט להלן:

1. To amend the Company's articles of association:

1.1 by amending Article 1.4 by removing the words "and for the time being in force" and replacing with the words "having effect as if made under sections 783, 784(3), 785 and 788 of the United Kingdom Companies Act 2006";

1.2 by amending Article 9.4.3 by deleting the words "as defined in section 428 of the United Kingdom Companies Act 1985 and replacing them with the words "as defined in section 974 United Kingdom Companies Act 2006";

1.3 in Article 20A.2.9 replacing the words "United Kingdom Companies Act 1985" with the words "United Kingdom Companies Act 2006"

1.4 in Article 20.A.3 by replacing the words "United Kingdom Companies Act 1985 with the words "United Kingdom Companies Act 2006"

1.5 in Article 46.2 by replacing the words "Any director may at any time" with the words – "Any two directors may at any time" ...

1.6 by deleting Article 69 (Notices) and replacing it with a new Article 69 as set out below.

"69. Notices

69.1 The Company can deliver a notice or other document, including a share certificate and the Company's financial reports, to a shareholder:

69.1.1 by delivering it by hand to the address recorded for the shareholder on the register;

69.1.2 by sending it by post or other delivery service in an envelope (with postage or delivery paid) to the address recorded for the shareholder on the register;

![img-1.jpeg](img-1.jpeg)

- 2 -

69.1.3 by fax (except for share certificates) to a fax number notified by the shareholder in writing;

69.1.4 by electronic mail (except a share certificate) to an address notified by the shareholder in writing;

69.1.5 by a website (except a share certificate) the address of which shall be notified to the shareholder in writing;

69.1.6 by a relevant system in accordance with Article 5; or

69.1.7 by advertisement in at least one national newspaper in the United Kingdom and one national newspaper in the State of Israel.

69.2 This article does not affect any provision in any relevant legislation or the articles requiring notices or documents to be delivered in a particular way.

69.3 If a notice or document is delivered by hand, it is treated as being delivered at the time it is handed to or left for the shareholder.

69.4 If a notice or document is sent by post or other delivery service not referred to below, it is treated as being delivered:

69.4.1 48 hours after it was posted, if first class post was used; or

69.4.2 72 hours after it was posted or given to delivery agents, if first class post was not used,

provided it can be proved conclusively that a notice or document was delivered by post or other delivery service by showing that the envelope containing the notice or document was:

69.4.3 properly addressed; and

69.4.4 put into the post system or given to delivery agents with postage or delivery paid.

69.5 If a notice or document (other than a share certificate) is sent by fax, it is treated as being delivered at the time it was sent.

69.6 If a notice or document (other than a share certificate) is sent by electronic mail, it is treated as being delivered at the time it was sent.

69.7 If a notice or document (other than a share certificate) is sent by a website, it is treated as being delivered when the material was first made available on the website, or if later, when the recipient received (or is deemed to have received) notice of the fact that the material was available on the website.

69.8 If a notice or document (other than a share certificate) is sent by a relevant system, it is treated as being delivered when the Company (or a sponsoring system participant acting on its behalf) sends the issuer instruction relating to the notice or document.

69.9 If a notice is given by advertisement, it is treated as being delivered at midday on the day when such advertisement appears in the newspapers.

69.10 All notices to be given to the members shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the Register of Members, and any

- 3 -

notice so given shall be sufficient notice to the holders of such share.

69.11 Any member whose address is not described in the Register of Members, and who shall not have designated in writing an address for the receipt of notices, shall not be entitled to receive any notice from the Company.

2. לנוחיות הציבור, מצורף להודעה זו עותק מעודכן ומשולב של תקנון החברה לאחר השינויים המפורטים לעיל.

![img-2.jpeg](img-2.jpeg)

אני הח"מ, ארתור מוהר, עייד [רישיון מספר 7957] מאשר כי מר עפר ברגר, המוכר לי אישית, חתם על הודעה זו בפני, לאחר שהוזרתיו כדין, ואישר את נכונות ההודעה בדבר שינויים בתקנון החברה.

![img-3.jpeg](img-3.jpeg)

Amended by special resolution in an Annual General Meeting of the Company held on June 26th, 2000; further amended by special resolution passed at an Annual General Meeting of the Company held on 26 July 2007 and further amended by special resolution passed at an Annual General Meeting of the Company held on 17 June 2009

# THE COMPANIES ORDINANCE A COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATION OF BATM ADVANCED COMMUNICATIONS LIMITED

![img-4.jpeg](img-4.jpeg)

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# CONTENTS

## PRELIMINARY
1. Interpretation ... 1
2. Not a Private Company ... 1

## SHARE CAPITAL
3. Share Capital ... 2
4. Increase of Share Capital ... 2
5. Special Rights: Modifications of Rights ... 2
6. Consolidation, Subdivision, Cancellation and Reduction of Share Capital ... 3
7. Issuance of Share Certificates: Replacement of Lost Certificates ... 4
8. Registered Holder ... 4
9. Disclosure of interests in shares ... 4
10. Allotment of Shares ... 8
11. Payment in Instalments ... 8
12. Calls on Shares ... 8
13. Prepayment ... 9
14. Forfeiture and Surrender ... 9
15. Lien ... 10
16. Sale after Forfeiture or Surrender or in Enforcement of Lien ... 10
17. Redeemable Shares ... 11
18. Conversion of Shares into Stock ... 11
19. Effectiveness and Registration ... 12
20. Record Date for General Meetings ... 16

## TRANSMISSION OF SHARES
21. Descendants' Shares ... 17
22. Receivers and Liquidators ... 17

## GENERAL MEETINGS
23. Annual General Meeting ... 17
24. Extraordinary General Meeting ... 17
25. Notice of General Meetings: Omission to Give Notice ... 17

## PROCEEDINGS AT GENERAL MEETINGS
26. Quorum ... 18
27. Chairman ... 18
28. Adoption of Resolutions at General Meetings ... 18
29. Resolutions in Writing ... 20
30. Power to Adjourn ... 20
31. Voting Power ... 20
32. Voting Rights ... 21

## PROXIES
33. Instrument of Appointment ... 21
34. Effect of Death of Appointor or Revocation of Appointment ... 22

## BOARD OF DIRECTORS
35. Powers of Board of directors ... 22
36. Exercise of Powers of Directors ... 23
37. Delegation of Powers ... 23
38. Number of Directors ... 27
39. Election and Removal of Directors ... 27
40. Disqualification of Directors ... 28
41. Continuing Directors in the Event of Vacancies ... 28

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42. Vacation of Office...28
43. Remuneration of Directors...29
44. Conflict of Interests...29
45. Alternate Directors...30

## PROCEEDINGS OF THE BOARD OF DIRECTORS...31
46. Meetings...31
47. Quorum...31
48. Chairman of the Board of directors...31
49. Validity of Acts Despite Defects...31

## GENERAL MANAGER...31
50. General Manager...31

## MINUTES...32
51. Minutes...32

## DIVIDENDS...32
52. Declaration of Dividends...32
53. Funds Available for Payment of Dividends...32
54. Amount Payable by Way of Dividends...32
55. Interest...33
56. Payment in Specie...33
57. Capitalisation of Profits, Reserves etc...33
58. Implementation of Powers under articles 56 and 57...33
59. Deductions from Dividends...34
60. Retention of Dividend...34
61. Unclaimed Dividends...34
62. Mechanics of Payment...34
63. Receipt from a Joint Holder...35

## ACCOUNTS...35
64. Books of Account...35
65. Audit...36
66. Accountant - Auditors...36

## BRANCH REGISTERS...36
67. Branch Registers...36

## RIGHTS OF SIGNATURE, STAMP AND SEAL...36
68. Rights of Signature, Stamp and Seal...36

## NOTICES...37
69. Notices...37

## INSURANCE AND INDEMNITY...38
70. Insurance and Indemnity...38

## WINDING UP...39
71. Winding Up...39

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---

THE COMPANIES ORDINANCE
A COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
BATM ADVANCED COMMUNICATION LIMITED

PRELIMINARY

1. Interpretation

1.1 Unless the subject or the context otherwise requires: words and expressions defined in the Companies Law in force on the date when these articles or any amendment thereto, as the case may be, first became effective shall have the same meanings herein; words and expressions importing the singular shall include the plural and vice versa; words and expressions importing the masculine gender shall include the feminine gender; and words and expressions importing persons shall include bodies corporate.

1.2 The captions in these articles are for convenience only and shall not be deemed a part hereof or affect the construction of any provision hereof.

1.3 London Stock Exchange means The London Stock Exchange Limited.

1.4 The Regulations means the English Uncertificated Securities Regulations 1995(SI 1995 No 3272) including any modification thereof or any regulation in substitution therefor made under Section 207 of the United Kingdom Companies Act 1989 having effect as if made under sections 783, 784(3), 785 and 788 of the United Kingdom Companies Act 2006.

1.5 The "Companies Law" means the Israeli Companies Law, 5759 – 1999 which came into effect on 1 February 2000 as well as all regulations promulgated under this law.

1.6 "Special Resolution" shall mean the resolution adopted by a majority of 75% of the shareholders entitled to vote and present and voting at a Shareholders' Special or Annual general meeting, as the case may be.

1.7 "General Meeting" shall mean either an Annual General Meeting or a Shareholders' Special Meeting.

2. Not a Private Company

2.1 The Company is not a private company.

2.2 The liability of the shareholders is limited as prescribed under the Companies Law.

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# SHARE CAPITAL

## 3. Share Capital

3.1 The share capital of the Company is 10,000,000 (Ten Million) New Israeli Shekels (NIS -) divided into 100,000,000 (One Hundred Million) Ordinary Shares of a nominal value of 0.1 New Israeli Shekel (NIS) each. Each fully paid up Ordinary Share in the Company confers on the holder thereof the right to one vote at the Company's General Meeting for each share held by such shareholder of record, the equal right to receive dividends if and when declared and the equal right to receive assets of the Company upon distribution of the Company's assets following the winding up of the Company due to liquidation or dissolution.

## 4. Increase of Share Capital

4.1 The Company may, from time to time, by special resolution, whether or not all the shares then authorised have been issued, and whether or not all the shares theretofore issued have been called up for payment, increase its share capital by the creation of new shares. Any such increase shall be in such amount and shall be divided into shares of such nominal amounts, and such shares shall confer such rights and preferences, and shall be subject to such restrictions, as such special resolution shall provide.

4.2 Except to the extent otherwise provided in such special resolution, such new shares shall be subject to all the provisions applicable to the shares of the original capital.

## 5. Special Rights: Modifications of Rights

5.1 Subject to the provisions of the Memorandum of Association of the Company, and without prejudice to any special rights previously conferred upon the holders of existing shares in the Company, the Company may, from time to time, by Special Resolution, provide for shares with such preferred or deferred rights or rights of redemption or other special rights and/or such restrictions, whether in regard to dividends, voting, repayment of share capital or otherwise, as may be stipulated in such Special Resolution the Company may, by a Special Resolution, adopted by a shareholders' meeting duly convened in accordance with these articles amend these Articles or any part thereof.

5.2

5.2.1 If at any time the share capital is divided into different classes of shares, the rights attached to any class, unless otherwise provided by these articles, may be modified or abrogated by the Company, by Special Resolution, subject to the consent in writing of the holders of seventy-five per cent (75%) of the issued shares of such class or the sanction of a Special Resolution passed at a separate General Meeting of the holders of the shares of such class.

5.2.2 The provisions of these articles relating to General Meeting shall, mutatis mutandis, apply to any separate General Meeting of the holders of the shares of a particular class, provided, however, that the requisite quorum at any such separate General Meeting shall be one or more

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members present in person or proxy and holding not less than one-third of the issued shares of such class.

## 6. Consolidation, Subdivision, Cancellation and Reduction of Share Capital

6.1 The Company may, from time to time, by special resolution (subject, however, to the provisions of article 5.2 hereof and to applicable law):

6.1.1 consolidate and divide all or any of its issued or unissued share capital into shares of larger nominal value than its existing shares;

6.1.2 subdivide its shares (issued or unissued) or any of them, into shares of smaller nominal value than is fixed by the Memorandum of Association (subject however, to the provisions of the Companies Law), and the resolution whereby any share is subdivided may determine that, as among the holders of the shares resulting from such subdivision, one or more of the shares may, as compared with the others, have any such preferred or deferred rights or rights of redemption or other special rights, or be subject to any such restrictions, as the Company has power to attach to unissued or new shares;

6.1.3 cancel any shares which, at the date of the adoption of such special resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled; or

6.1.4 reduce its share capital in any manner, and with and subject to any authorisation or consent required, by law.

6.2 With respect to any consolidation of issued shares into shares of larger nominal value, and with respect to any other action which may result in fractional shares, the Board of directors may settle any difficulty which may arise with regard thereto, as it deems fit, including, inter alia, resort to one or more of the following actions:

6.2.1 determine, as to the holder of shares so consolidated, which issued shares shall be consolidated into each share of larger nominal value;

6.2.2 allot, in contemplation of or subsequent to such consolidation or other action, such shares or fractional shares sufficient to preclude or remove fractional share holdings;

6.2.3 redeem in the case of redeemable preference shares, and subject to applicable law, such shares or fractional shares sufficient to preclude or remove fractional share holdings;

6.2.4 cause the transfer of fractional shares by certain shareholders of the Company to other shareholders thereof so as to most expeditently preclude or remove any fractional shareholdings, and cause the transferees to pay the transferors the fair value of fractional shares so transferred, and the Board of directors is hereby authorised to act as agent for the transferors and transferees with power of substitution for purposes of implementing the provisions of subarticle 6.2.4.

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# SHARES

## 7. Issuance of Share Certificates: Replacement of Lost Certificates

7.1 The Company may issue share certificates, which will bear the rubber stamp or printed name of the Company and shall bear the signatures of two Directors (or if there be only one Director, the signature of such Director), or of any other person or persons authorised thereto by the Board of directors;

7.2 Each member shall be entitled to one numbered certificate for all the shares of any class registered in his name, and if the Board of directors so approves, to several certificates, each for one or more of such shares, Each certificate shall specify the serial numbers of the shares represented thereby and may also specify the amount paid up thereon;

7.3 A share certificate registered in the names of two or more persons shall be delivered to the person first named in the Register of Members in respect of such co-ownership;

7.4 The company is not bound to register more than four persons as the joint holders of any share or shares, except in the case of executors or trustees of a deceased member. In the case of a share held jointly by several persons, the company is not bound to issue more than one certificate for it.

7.5 If a share certificate is worn out, lost or destroyed, it shall be replaced, without charge (other than exceptional out of pocket expenses) upon the furnishing of such evidence of ownership and such indemnity, as the Board of directors may think fit, prior to the issue of a replacement certificate;

7.6 Where a member transfers part of his holding of shares, he will be entitled to a certificate for the balance of his holding without charge.

## 8. Registered Holder

8.1 Except as otherwise provided in these articles, the Company shall be entitled to treat the registered holder of any share as the absolute owner thereof, and, accordingly, shall not, except as ordered by a court of competent jurisdiction, or as required by statute, be bound to recognise any equitable or other claim to, or interest, in such share on the part of any other person.

## 9. Disclosure of interests in shares

9.1 For the purposes of this article, unless the context otherwise requires:-

9.1.1 "2006 Act" means the United Kingdom Companies Act 2006;

9.1.2 "disclosure notice" means a notice issued by or on behalf of the Company requiring disclosure of interest in shares pursuant to section 793 of the 2006 Act;

9.1.3 "specified shares" means all or, as the case may be, some of the shares specified in a disclosure notice;

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9.1.4 "restrictions" means one or more, as the case may be, of the restrictions referred to in article 9.3;

9.1.5 "restriction notice" means a notice issued by or on behalf of the Company stating, or substantially to the effect, that (until such time as the Board of Directors determines otherwise pursuant to article 9.4) the specified shares referred to therein shall be subject to one or more of the restrictions stated therein;

9.1.6 "restricted shares" means all or, as the case may be, some of the specified shares referred to in a restriction notice;

9.1.7 a person other than the member holding a share shall be treated as appearing to be interested in that share if:-

(a) the member has informed the Company, whether under any statutory provision relating to disclosure of interests or otherwise, that the person is, or may be, or has been at any time during the three years immediately preceding the date upon which the disclosure notice is issued, so interested; or

(b) the Board of Directors (after taking account of any information obtained from the member or, pursuant to a disclosure notice, from any other person) knows or has reasonable cause to believe that the person is, or may be, or has been at any time during the three years immediately preceding the date upon which the disclosure notice is issued, so interested; or

(c) in response to a disclosure notice, the member or any other person appearing to be so interested has failed to establish the identities of all those who are so interested and (after taking into account the response and any other relevant information) the Board of Directors has reasonable cause to believe that such person is or may be so interested;

9.1.8 "connected" shall have the meaning given to it in section 839 of the Income and Corporation Taxes Act 1988;

9.1.9 "interested" shall be construed as it is for the purpose of section 793 of the 2006 Act;

9.1.10 "recognised investment exchange" shall have the same meaning as in the Financial Services and Markets Act 2000; and

9.1.11 for the purposes of articles 9.2.2 and 9.4 the Company shall not be treated as having received the information required by the disclosure notice in accordance with the terms of such disclosure notice in circumstances where the Board of Directors knows or has reasonable cause to believe that the information provided is false or materially incorrect.

9.2 Notwithstanding anything in these articles to the contrary, if:-

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9.2.1 a disclosure notice has been served on a member or any other person appearing to be interested in the specified shares; and

9.2.2 the Company has not received (in accordance with the terms of such disclosure notice) the information required therein in respect of any of the specified shares within 14 days after the service of such disclosure notice,

then the Board of Directors may (subject to article 9.7) determine that the member holding the specified shares shall, upon the issue of a restriction notice referring to those specified shares in respect of which information has not been received, be subject to the restrictions referred to in such restriction notice, and upon the issue of such restriction notice such member shall be so subject. As soon as practicable after the issue of a restriction notice the Company shall serve a copy of the notice on the member holding the specified shares.

9.3 The restrictions which the Board of Directors may determine shall apply to restricted shares pursuant to this article shall be one or more, as determined by the Board of Directors, of the following:-

9.3.1 that the member holding the restricted shares shall not be entitled, in respect of the restricted shares, to attend or be counted in the quorum or vote either personally or by proxy at any general meeting or at any separate meeting of the holders of any class of shares or upon any poll or to exercise any other right or privilege in relation to any general meeting or any meeting of the holders of any class of shares;

9.3.2 that no transfer of the restricted shares shall be effective or shall be registered by the company, provided that where the restricted shares are held in uncertificated form registration of a transfer may only be refused if permitted by the Regulations;

9.3.3 that no dividend (or other moneys payable) shall be paid in respect of the restricted shares and that, in circumstances where an offer of the right to elect to receive shares instead of cash in respect of any dividend is or has been made, any election made thereunder in respect of such specified shares shall not be effective.

9.4 The Board of Directors may determine that one or more of the restrictions imposed on restricted shares cease to apply at any time. If the company receives in accordance with the terms of the relevant disclosure notice the information required therein in respect of all or any restricted shares, which would otherwise be given effect to, pursuant to a sale:-

9.4.1 on a recognised investment exchange; or

9.4.2 on any stock exchange outside the United Kingdom on which the Company's shares are normally dealt; or

9.4.3 on any acceptance of a takeover offer (as defined in section 974 United Kingdom Companies Act 2006) for the shares of the class of which such restricted shares form part,

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to a party not connected with the member holding such restricted shares or with any other person appearing to be interested in such restricted shares, then all the restrictions imposed on such restricted shares shall cease to apply with effect from the date on which any such notice as aforesaid is received by the Company provided always that if, within ten days after such receipt, the Board of Directors decides that it has reasonable cause to believe that the change in the registered holder of such restricted shares would not be as a result of an arm's length sale resulting in a material change in the beneficial interests in such restricted shares, the restrictions imposed on the restricted shares shall continue to apply.

9.5 Where the Board of Directors makes a decision pursuant to the proviso to article 9.4, the company shall notify the purported transferee of such decision as soon as practicable and any person may make representations in writing to the Board of Directors concerning any such decision. The company shall not be liable to any person as a result of having imposed restrictions or deciding that such restrictions shall continue to apply if the Board of Directors acted in good faith.

9.6 Where dividends or other moneys are not paid as a result of restrictions having been imposed on restricted shares, such dividends or other moneys shall accrue and, upon the relevant restriction ceasing to apply, shall be payable (without interest) to the person who would have been entitled had the restriction not been imposed.

9.7 Where the aggregate number of shares of the same class as the specified shares in which any person appearing to be interested in the restricted shares (together with persons connected with him) appears to be interested represents less than 0.25 per cent. (in nominal value) of the shares of that class in issue (excluding any shares of that class held as treasury shares) at the time of service of the disclosure notice in respect of such specified shares only the restriction referred to in article 9.3.1 may be determined by the Board of Directors to apply.

9.8 Shares issued in right of restricted shares shall on issue become subject to the same restrictions whilst held by that member as the restricted shares in right of which they are issued. For this purpose, shares which are allotted or offered or for which applications are invited (whether by the company or otherwise) pro rata (or pro rata ignoring fractional entitlements and shares not allocated to certain members by reason of legal or practical problems associated with offering shares outside the United Kingdom) shall be treated as shares issued in right of restricted shares.

9.9 The Board of Directors shall at all times have the right, at its discretion, to suspend, in whole or in part, any restriction notice given pursuant to this article either permanently or for any given period and to pay to a trustee any dividend payable in respect of any restricted shares or in respect of any shares issued in right of restricted shares. Notice of any suspension, specifying the sanctions suspended and the period of suspension, shall be given to the relevant holder in writing within seven days after any decision to implement such a suspension.

9.10 The limitations on the powers of the Board of Directors to impose and retain restrictions under this article are without prejudice to the Company's power to apply to the court pursuant to any other statutory power that the Company may have to apply these or any other restrictions on any conditions.

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# 10. Allotment of Shares

10.1 The unissued shares from time to time shall be under the control of the Board of directors, who shall have the power to allot shares or otherwise dispose of them to such persons, on such terms and conditions (including inter alia terms relating to calls as set forth in article 12.6 hereof), and either at par or at a premium, or, subject to the provisions of the Companies Law, at a discount, and at such times, as the Board of directors may think fit, and the power to give to any person the option to acquire from the Company any shares, either at par or at a premium, or, subject as aforesaid, at a discount, during such time and for such consideration as the Board of directors may think fit.

# 11. Payment in Instalments

11.1 If by the terms of allotment of any share, the whole or any part of the price thereof shall be payable in instalments, every such instalment shall, when due, be paid to the Company by the then registered holder(s) of the share of the person(s) entitled thereto.

# 12. Calls on Shares

12.1 The Board of directors may, from time to time, make such calls as it may think fit upon members in respect of any sum unpaid in respect of shares held by such members which is not, by the terms of allotment thereof or otherwise, payable at a fixed time, and each member shall pay the amount of every call so made upon him (and of each instalment thereof if the same is payable in instalments), to the person(s) and at the time(s) and place(s) designated by the Board of directors, as any such time(s) may be thereafter extended and/or such persons(s) or place(s) changed. Unless otherwise stipulated in the resolution of the Board of directors (and in the notice hereafter referred to), each payment in response to a call shall be deemed to constitute a pro rata payment on account of all shares in respect of which such call was made.

12.2 Notice of any call shall be given in writing to the member(s) in question not less than 14 days prior to the time of payment, specifying the time and place of payment, and designating the person to whom such payment, shall be made, provided, however, that before the time for any such payment the Board of directors may, by notice in writing to such member(s), revoke such call in whole or in part, extend such time, or alter such person and/or place. In the event of a call payable in instalments, only one notice thereof need be given.

12.3 If, by the terms of allotment of any share or otherwise, any amount is made payable at any fixed time, every such amount shall be payable at such time as if it were a call duly made by the Board of directors and of which due notice had been given, and all the provisions herein contained with respect to such call shall apply to each such amount.

12.4 The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof and all interest payable thereon.

12.5 Any amount unpaid in respect of a call shall bear interest from the date on which it is payable until actual payment thereof, at such rate (not exceeding 3% above the

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base rate charged by leading commercial banks in Israel), and at such time(s) as the Board of directors may prescribe.

12.6 Upon the allotment of shares, the Board of directors may provide for differences among the allottees of such shares as to the amount of calls and/or the times of payment thereof.

## 13. Prepayment

13.1 With the approval of the Board of directors, any member may pay to the Company any amount not yet payable in respect of his shares, and the Board of directors may approve the payment of interest on any such amount until the same would be payable if it had not been paid in advance, at such rate and time(s) as may be approved by the Board of directors. Any such payment in advance will not entitle the holder of the Shares in question to participate in any dividend in respect of the amount advanced. The Board of directors may at any time cause the Company to repay all or any part of the money so advanced, without premium or penalty. Nothing in article 13 shall derogate from the right of the Board of directors to make any call before or after receipt by the Company of any such advance.

## 14. Forfeiture and Surrender

14.1 If any member fails to pay any amount payable in respect of a call, or interest thereon as provided for herein, on or before the day fixed for payment of the same, the Company, by resolution of the Board of directors, may at any time thereafter, so long as the said amount or interest remains unpaid, forfeit all or any of the shares in respect of which the said call had been made. Any expense incurred by the Company in attempting to collect any such amount or interest including, inter alia, attorneys' fees and costs of suit, shall be added to, and shall, for all purposes (including the accrual of interest thereon), constitute a part of the amount payable to the Company in respect of such call.

14.2 Upon the adoption of a resolution of forfeiture, the Board of directors shall cause notice thereof to be given to such member, which notice shall state that, in the event of the failure to pay the entire amount so payable within a period stipulated in the notice (which period shall not be less than 14 days and which may be extended by the Board of directors), such shares be ipso facto forfeited, provided, however, that prior to the expiration of such period, the Board of directors may nullify such resolution of forfeiture, but no such nullification shall estop the Board of directors from adopting a further resolution of forfeiture in respect of the non payment of the same amount.

14.3 Whenever shares are forfeited as herein provided, all dividends theretofore declared in respect thereof and not actually paid shall be deemed to have been forfeited at the same time.

14.4 The Company, by resolution of the Board of directors, may accept the voluntary surrender of any share.

14.5 Any share forfeited or surrendered as provided herein shall become the property of the Company, and the same, subject to the provisions of these articles, may be sold, reallotted or otherwise disposed of as the Board of directors thinks fit.

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14.6 Any member whose shares have been forfeited or surrendered shall cease to be a member in respect of the forfeited or surrendered shares, but shall, notwithstanding, be liable to pay, and shall forthwith pay, to the Company, all calls, interest and expenses owing upon or in respect of such shares at the time of forfeiture or surrender, together with interest thereon from the time of forfeiture or surrender until actual payment, at the rate prescribed in article 12.5 above, and the Board of directors, in its discretion, may enforce the payment of such moneys, or any part thereof, but shall not be under any obligation to do so. In the event of such forfeiture or surrender, the Company, by resolution of the Board of directors, may accelerate the date(s) of payment of any or all amounts then owing by the member in question (but not yet due) in respect of all shares owned by such member, solely or jointly with another, and in respect of any other matter or transaction whatsoever.

14.7 The Board of directors may at any time, before any share so forfeited or surrendered shall have been sold, reallotted or otherwise disposed of; nullify the forfeiture or surrender on such conditions as it thinks fit but no such nullification shall estop the Board of directors from re-exercising its powers of forfeiture pursuant to this article 14.

## 15. Lien

15.1 Except to the extent the same may be waived or subordinated in writing, the Company shall have a first and paramount lien upon all the shares other than fully paid shares registered in the name of each member (without regard to any equitable or other claim or interest in such shares on the part of any other person), and upon the proceeds of the sale thereof, for his debts, liabilities and engagements arising from any cause whatsoever, solely or jointly with another, to or with the Company, whether the period for the payment, fulfilment or discharge thereof shall have actually arrived or not. Such lien shall extend to all dividends from time to time declared in respect of such share. Unless otherwise provided, the registration by the Company of a transfer of shares shall be deemed to be a waiver on the part of the Company of the lien (if any) existing on such shares immediately prior to such transfer.

15.2 The Board of directors may cause the Company to sell any shares subject to such lien when any such debt, liability or engagement has matured, in such manner as the Board of directors may think fit, but no such sale shall be made unless such debt, liability or engagement has not been satisfied within 14 days after written notice of the intention to sell shall have been served on such member, his executors or administrators.

15.3 The net proceeds of any such sale, after payment of the costs thereof, shall be applied in or toward satisfaction of the debts, liabilities or engagements of such member (whether or not the same have matured), or any specific part of the same (as the Company may determine), and the residue (if any) shall be paid to the member, his executors, administrators or assigns.

## 16. Sale after Forfeiture or Surrender or in Enforcement of Lien

16.1 Upon any sale of shares after forfeiture or surrender or for enforcing a lien, the Board of directors may appoint some person to execute an instrument of transfer of the shares so sold and cause the purchaser's name to be entered in the

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---

Register of Members in respect of such shares, and the purchaser shall not be bound to see to the regularity of the proceedings, or to the application of the purchase money, and after his name has been entered in the Register of Members in respect of such shares, the validity of the sale shall not be impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively.

## 17. Redeemable Shares

17.1 The Company may, subject to applicable law, issue redeemable shares and redeem the same.

17.2 Where the Company's shares are listed on any Stock Exchange and the Company has listed redeemable shares then:

17.2.1 purchases must be limited to a maximum price which, in the case of purchases through the market of redeemable shares other than those which are normally bought and traded in by a limited number of investors who are particularly knowledgeable in investment matters, must not exceed 5% above the average market value for the ten business days before the purchase; and

17.2.2 if purchases are by tender, tenders must be available to all shareholders alike.

## 18. Conversion of Shares into Stock

18.1 The Board of directors may, with the sanction of the members previously given by Special Resolution, convert any paid up shares into stock, and may, with like sanction, reconvert any stock into paid-up shares of any denomination.

18.2 The holders of stock may transfer the same, or any part thereof, in the same manner and subject to the same regulations, as the shares from which the stock arose might have been transferred prior to conversion, or as near thereto as circumstances admit, provided, however, that the Board of directors may from time to time fix the minimum amount of stock so transferable, and restrict or forbid the transfer of fractions of such minimum, but the minimum shall not exceed the nominal value of each of the shares from which such stock arose.

18.3 The holders of stock shall, in accordance with the amount of stock held by them, have the same rights and privileges as regards dividends, voting at meetings of the Company and other matters as if they held the shares from which such stock arose, but no such right or privilege, except participation in the dividends and profits of the Company, shall be conferred by any such aliquot part of such stock as would not, if existing in shares, have conferred that right or privilege.

18.4 Such of the articles of the Company as are applicable to paid-up shares shall apply to stock, and the words "share" and "shareholder" (or "member") therein shall include "stock" and "stockholder."

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# TRANSFER OF SHARES

## 19. Effectiveness and Registration

19.1 No transfer of shares shall be registered unless in the reasonable opinion of the Board of directors a proper instrument of transfer has been submitted to the Company, together with the share certificate(s) and such other evidence of title as the Board of directors may reasonably require. Until the transferee has been registered in the Register of Members in respect of the shares so transferred, the Company may continue to regard the transferor as the owner thereof.

19.2 The Board of directors may, in its discretion and to the extent that it deems necessary, close the Register of Members for the registration of transfer of shares for such periods as may be determined by the Board of directors, and no transfers of shares shall be registered during any period in which the Register of Members is so closed.

19.3 The Board of directors may, in their absolute discretion and without giving any reason, refuse to register any transfer of shares unless:

19.3.1 subject to article שגיאה! מקור ההפניה לא נמצא, it is in respect of a fully paid share;

19.3.2 it is duly stamped, is deposited at the office or such other place as the Board of directors may appoint and is accompanied by the certificate for the shares to which it relates and such other evidence as the Board of directors may reasonably require to show the right of the transferor to make the transfer;

19.3.3 it is in respect of only one class of share;

19.3.4 it is in favour of not more than four transferees except in the case of executors or trustees of a deceased member; or

19.3.5 it is in respect of a share on which the Company does not have a lien in respect of which the Company has not served a notice pursuant to article 15.2.

19.4 In exceptional circumstances approved by the London Stock Exchange, the Board of directors may refuse to register any transfer of shares to which article 19.3 would otherwise apply, provided that their refusal does not disturb the market.

19.5 If the Board of directors refuse to register a transfer of any shares, they must, within 2 months after the date on which the transfer was lodged with the Company, send to the transferor and the transferee notice of the refusal.

19.6 The Company is not entitled to charge any fee in respect of the registration of any instrument of transfer, probate, letters of administration, certificate of marriage or death, power of attorney, stop notice or other document relating to or affecting the title to any shares.

19.7 Any transfers of shares which the Board of Directors are required to register shall be registered within 14 days of the transfer being lodged with the Company.

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# 20(A) Uncertificated Shares

20(A).1. Notwithstanding any other provisions of these Articles, any shares in the Company may be issued, held, registered, converted to, transferred or otherwise dealt with in uncertificated form, and converted from uncertificated form to certificated form and vice versa, in accordance with the Regulations and practices instituted by the operator of the relevant system. To the extent that the provisions of these Articles concerning uncertificated shares are inconsistent with:

20(A).1.1. the holding of shares in uncertificated form;
20(A).1.2. the transfer of title to shares by means of a relevant system; or
20(A).1.3. any provision of the Regulations.

the provisions of these Articles shall not apply.

20(A).2. Without prejudice to the generality and effectiveness of Article 20(A).1 hereof:

20(A).2.1. Articles 8 and 20.1 shall not apply to uncertificated shares and Article 20.5. hereof shall apply in relation to such shares as if the reference therein to the date on which the transfer was lodged with the Company were a reference to the date on which the appropriate instruction was received by or on behalf of the Company in accordance with the facilities and requirements of the relevant system;

20(A).2.2. without prejudice to Article 20.3. hereof, the Board of directors may also refuse to register a transfer of uncertificated shares in such other circumstances as may be permitted or required by the Regulations and the relevant system;

20(A).2.3. references in these Articles to a requirement on any person to execute or deliver an instrument of transfer or certificate or other document which shall not be appropriate in the case of uncertificated shares shall, in the case of uncertificated shares, be treated as references to a requirement to comply with any relevant requirements of the relevant system and any relevant arrangements or regulations which the Board of directors may make from time to time pursuant to Article 20(A).2.10. hereof;

20(A).2.4. for the purposes referred to in Article 22.2. hereof, a person entitled by transmission on death or bankruptcy to a share in uncertificated form who elects to have some other person registered shall either:

20(A).2.4.1. procure that instructions are given by means of the relevant system to effect

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transfer of such uncertificated share to that person; or

20(A).2.4.2. change the uncertificated share to certificated form and execute an instrument of transfer of that certificated share to that person;

20(A).2.5. the Company shall enter on the Register of Members the number of shares which are held by each member in uncertificated form and in certificated form, and shall maintain the Register of Members in the former case as is required by the Regulations and the relevant system and, unless the Board of directors otherwise determines, holdings of the same holder or joint holders in certificated form and uncertificated form shall be treated as separate holdings;

20(A).2.6. a class of share shall not be treated as two classes by virtue only of that class comprising both certificated shares and uncertificated shares or as a result of any provision of these Articles or the Regulations which applies only in respect of certificated shares or uncertificated shares;

20(A).2.7. for the purposes referred to in Article 7.2 hereof, the Board may in respect of uncertificated shares authorise some person to transfer and/or require the holder to transfer the relevant shares in accordance with the facilities and requirements of the relevant system;

20(A).2.8. for the purposes of Article 63 hereof, any payment in the case of uncertificated shares may be made by means of the relevant system and, without prejudice to the generality of the foregoing, such payment may be made by the sending by the Company or any person on its behalf of an instruction to the operator of the relevant system to credit the cash memorandum account of the holder or joint holders of such shares or, if permitted by the Company, of such person as the holder or joint holders may in writing direct, and for such purposes the making of a payment in accordance with the facilities and requirements of the relevant system shall be a good discharge to the Company;

20(A).2.9. subject to the United Kingdom Companies Act 2006 the Board of directors may issue shares as certificated shares or as uncertificated shares in its absolute discretion and Articles 6, 57, 58 and 59 shall be construed accordingly;

20(A).2.10. the Board of directors may make such arrangements or regulations (if any) as it may from time to time in its absolute discretion think fit in relation to the evidencing and transfer of uncertificated shares and

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otherwise for the purpose of implementing and/or supplementing the provisions of this Article 20(A).1. hereof and the Regulations and the facilities and requirements of the relevant system and such arrangements and regulations (as the case may be) shall have the same effect as if set out in this Article 20(A);

20(A).2.11. for the purposes referred to in Articles 26. and 70. hereof, the Company may in respect of uncertificated shares give any notice or other document by means of the relevant system (subject always to the provisions of the Regulations and to the facilities and requirements of the relevant system); and

20(A).2.12. the Board of directors may resolve that a class of shares is to become a participating security and may at any time determine that a class of shares shall cease to be a participating security.

20(A).3. Where any class of shares in the capital of the Company is a participating security and the Company is entitled under the provisions of the United Kingdom Companies Act 2006 or the rules made and practices instituted by the operator of any relevant system or under these Articles to dispose of, forfeit, enforce a lien or sell or otherwise procure the sale of any shares which are held in uncertificated form, such entitlement (to the extent permitted by the Regulations and the rules made and practices instituted by the operator of the relevant system) shall include the right to:

20(A).3.1. request or require the deletion of any computer-based entries in the relevant system relating to the holding of such shares in uncertificated form; and/or

20(A).3.2. require any holder of any uncertificated shares which are the subject of any exercise by the Company of any such entitlement by notice in writing to change his holding of such uncertificated shares into certificated form within such period as may be specified in the notice prior to completion of any disposal, sale or transfer of such shares, or direct the holder to take such steps, by instructions given by means of a relevant system or otherwise, as may be necessary to sell or transfer such shares; and/or

20(A).3.3. appoint any person to take such other steps, by instruction given by means of a relevant system or otherwise, in the name of the holder of such shares as may be required to effect a transfer of such shares, and so that such steps shall be as effective as if they had been taken by the registered holder of the uncertificated shares concerned; and/or

20(A).3.4. transfer any uncertificated shares which are the subject of any exercise by the Company of any such entitlement by entering the name of the transferee in the Register of

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Members in respect of that share as a transferred share; and/or

20(A).3.5. otherwise rectify or change the Register of Members in respect of that share in such manner as may be appropriate; and/or

20(A).3.6. take such other action as may be necessary to enable those shares to be registered in the name of the person to whom the shares have been sold or disposed of or as directed by him.

20(A).4 For the purposes of this Article 20(A):

20(A).4.1. words and expressions shall have the same respective meanings as in the Regulations;

20(A).4.2. references herein to an uncertificated share or to a share (or to a holding of shares) being in uncertificated form are references to that share being an uncertificated unit of a security, and references to a certificated share or to a share being in certificated form are references to that share being a unit of a security which is not an uncertificated unit; and

20(A).4.3. “cash memorandum account” means an account so designated by the operator of the relevant system.”;

20(A).4.4 any reference in the Regulations to courts or UK courts shall be deemed to also include reference to the courts of the State of Israel.

## 20. Record Date for General Meetings

20.1 Notwithstanding any provision to the contrary in these articles, for the determination of the members entitled to receive notice of and to vote at a Shareholders Special or Annual General Meeting, or to express consent to or dissent from any corporate action in writing, or to receive payment of any dividend or other distribution of allotment of any rights or to exercise any rights in respect of shares of the Company, the Board of directors shall fix, in advance, a record date, which shall not be more than 21 days prior to the date of the scheduled meeting and not less than 4 days prior to the General Meeting or other action, as the case may be. No persons other than holders of record of shares as of such record date shall be entitled to notice of and to vote at such General Meeting, or to exercise such other right, as the case may be. A determination of members of record with respect to a General Meeting shall apply to any adjournment of such meeting, provided that the Board of directors may fix a new record date for an adjourned meeting.

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# TRANSMISSION OF SHARES

## 21. Descendants' Shares

21.1 In case of a share registered in the names of two or more holders, the Company may recognise the survivor(s) as the sole owner(s) thereof unless and until the provisions of article 21.2 have been effectively invoked.

21.2 Any person becoming entitled to a share in consequence of the death of any person, upon producing evidence of the grant of probate or letters of administration or declaration of succession (or such other evidence as the Board of directors may reasonably deem sufficient that he sustains the character in respect of which he proposes to act under this article or of his title), shall be registered as a member in respect of such share, or may, subject to the regulations as to transfer herein contained, transfer such share.

## 22. Receivers and Liquidators

22.1 The Company may recognise the receiver or liquidator of any corporate member in winding up or dissolution, or the receiver or trustee in bankruptcy of any member, as being entitled to the shares registered in the name of such member.

22.2 The receiver or liquidator of a corporate member in winding up or dissolution, or the receiver or trustee in bankruptcy of any member, upon producing such evidence as the Board of directors may deem sufficient that he sustains the character in respect of which he proposes to act under this article or of his title, shall with the consent of the Board of directors (which the Board of directors may grant or refuse in its absolute discretion), be registered as a member in respect of such shares, or may, subject to the regulations as to transfer herein contained, transfer such shares.

# GENERAL MEETINGS

## 23. Annual General Meeting

23.1 An Annual General Meeting shall be held once in every calendar year at such time (within a period of not more than 15 months after the last preceding Annual General Meeting) and at such place either within or without the State of Israel as may be determined by the Board of directors.

## 24. Extraordinary General Meeting

24.1 All General Meetings other than Annual General Meetings shall be called "Special Shareholders' Meetings". The Board of directors may, whenever it thinks fit, convene a Special Shareholders' Meeting at such time and place, within or without the State of Israel, as may be determined by the Board of directors, and shall be obliged to do so upon a requisition in writing in accordance with Section 62 of the Companies Law.

## 25. Notice of General Meetings: Omission to Give Notice

25.1 Not less than 21 days prior notice shall be given of every general meeting. Each notice shall specify the place and the day and hour of the meeting and the proposed agenda of the meeting. Notice shall be given to all members who would

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be entitled to attend and vote at such meeting, if it were held on the date when such notice is issued. Anything herein to the contrary notwithstanding, with the consent of all members entitled to vote thereon, a resolution may be proposed and passed at such meeting although a lesser notice than hereinabove prescribed has been given.

25.2 The accidental omission to give notice of a meeting to any member, or the non-receipt of notice sent to such member, shall not invalidate the proceedings at such meeting.

## PROCEEDINGS AT GENERAL MEETINGS

### 26. Quorum

26.1 Two or more members (not in default in payment of any sum referred to in article 32.1 hereof), present in person or by proxy, shall constitute a quorum at General Meetings. No business shall be transacted at a General Meeting or at any adjournment thereof, unless the requisite quorum is present when the meeting proceeds to business.

26.2 If within an hour from the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day in the next week, at the same time and place, or to such day and at such time and place as the Chairman may determine with the consent of the holders of a majority of the voting power represented at the meeting in person or by proxy and voting on the question of adjournment. No business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting as originally called. At such adjourned meeting, any two (2) members (not in default as aforesaid) present in person or by proxy, shall constitute a quorum.

### 27. Chairman

27.1 The Chairman, if any, of the Board of directors shall preside as Chairman at every General Meeting of the Company. If there is no such Chairman, or if at any meeting he is not present within fifteen (15) minutes after the time fixed for holding the meeting or is unwilling to act as Chairman, the members present shall choose someone of their number to be Chairman. The office of Chairman shall not, by itself, entitle the holder thereof to vote at any General Meeting nor shall it entitle such holder to a second or casting vote (without derogating, however, from the rights of such Chairman to vote as a shareholder or proxy of a shareholder if, in fact, he is also a shareholder or such proxy).

### 28. Adoption of Resolutions at General Meetings

28.1

28.1.1 An Ordinary Resolution shall be deemed adopted if approved by the holders of a majority of the voting power represented at the meeting in person or by proxy and voting thereon.

28.1.2 A Special Resolution shall be deemed adopted if approved by the holders of not less than 75 per cent. of the voting power represented at the meeting in person or by proxy and voting thereon.

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28.2 At any General Meeting, a resolution put to the vote of the meeting is decided on a show of hands, unless before or upon the declaration of the result of the show of hands a poll is demanded:

28.2.1 by the Chairman; or
28.2.2 by not fewer than five members present in person or by proxy and entitled to vote at the meeting; or
28.2.3 by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or
28.2.4 by a member or members holding shares of the Company conferring a right to vote at the meeting, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

28.3 The instrument appointing a proxy to vote at a meeting is deemed also to confer authority to demand or join in demanding a poll and to vote on a poll on the election of a Chairman and on a motion to adjourn a meeting. For the purposes of article 28.2, a demand by a person as proxy for a member is the same as a demand by the member.

28.4 If any votes are counted which ought not to have been counted or might have been rejected, or if any votes are not counted which ought to have been counted, the error will not vitiate the result of the voting unless it is pointed out at the same meeting, or at any adjournment of it, and it is in the opinion of the Chairman of the meeting of sufficient magnitude to vitiate the result of the voting.

28.5 If an amendment is proposed to any resolution under consideration but is in good faith ruled out of order by the Chairman of the meeting, the proceedings on the substantive resolution will not be invalidated by any error in such ruling. In the case of a resolution proposed as an extraordinary or special resolution, no amendment to it, other than a mere clerical amendment to correct a patent error, may in the event be considered or voted upon.

28.6 Subject to the provisions of article 28.9, if a poll is duly demanded, it will be taken in such manner as the chairman may direct, including the use of ballot or voting papers or tickets, and the result of a poll will be deemed to be the resolution of the meeting at which the poll was demanded. The Chairman may, in the event of a poll, appoint scrutineers, who need not be members, and may fix some place and time for the purpose of declaring the result of the poll.

28.7 A poll demanded on the election of a Chairman or on a question of adjournment must be taken immediately. A poll demanded on any other question must be taken immediately or at such time and place as the Chairman directs, not being more than 30 days from the date of the meeting or the adjourned meeting at which the poll was demanded. No notice need be given of a poll not taken immediately if the time and place at which it is to be taken are announced at the meeting at which it is demanded. In any other case, at least seven days' notice must be given specifying the time and place at which the poll is to be taken.

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28.8 In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the meeting at which the show of hands takes place or at which the poll is demanded is entitled to a further or casting vote.

28.9 The demand for a poll will not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll has been demanded.

28.10 A demand for a poll may, before the poll is taken, be withdrawn but only with the consent of the Chairman, and a demand so withdrawn will not be taken to have invalidated the result of a show of hands declared before the demand was made. If a poll is demanded before the declaration of the result of a show of hands and the demand is duly withdrawn with the consent of the Chairman, the meeting will continue as if the demand had not been made.

28.11 Unless a poll is demanded a declaration by the Chairman of the meeting that a resolution has been carried unanimously, or carried by a particular majority, or lost, and an entry to that effect in the minute book of the Company, shall constitute prima facie evidence of the matters recorded therein.

## 29. Resolutions in Writing

29.1 A resolution in writing signed by all members of the Company then entitled to attend and vote at General Meetings or to which all such members have given their written consent (by letter, facsimile, telex or e-mail or other electronic means or otherwise), or their oral consent by telephone (provided that a written summary thereof has been approved and signed by the Chairman of the Board of directors of the Company) shall be deemed to have been unanimously adopted by a General Meeting duly convened and held.

## 30. Power to Adjourn

30.1 The Chairman of a General Meeting at which a quorum is present may, with the consent of the holders of a majority of the voting power represented in person or by proxy and voting on the question of adjournment (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting as originally called.

30.2 It shall not be necessary to give any notice of an adjournment, whether pursuant to article 26.2 or article 30.1, unless the meeting is adjourned for 30 days or more in which event notice thereof shall be given in the manner required for the meeting as originally called.

## 31. Voting Power

31.1 Subject to the provisions of article 32.1 and subject to any provision hereof conferring special rights as to voting, or restricting the right to vote, every member shall have one vote for each share held by him of record, on every resolution without regard to whether the vote is conducted by a show of hands, by written ballot or by any other means.

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# 32. Voting Rights

32.1 No member shall be entitled to vote at any General Meeting (or be counted as a part of the quorum thereat), unless all calls and other sums then payable by him in respect of his shares in the Company have been paid, but this article shall not apply to separate General Meetings of the holders of a particular class of shares pursuant to article 5.2.

32.2 A company or other corporate body being a member of the Company may, by resolution of its directors or any other managing body thereof authorise any person to be its representative at any meeting of the Company, Any person so authorised shall be entitled to exercise on behalf of such member all the power which the latter could have exercised if it were an individual shareholder. Upon the request of the Chairman of the meeting, written evidence of such authorisation (in form acceptable to the Chairman) shall be delivered to him.

32.3 Any member entitled to vote may vote either personally or by proxy (who need not be a member of the Company), or, if the member is a company or other corporate body, by a representative authorised pursuant to article 32.2.

32.4 If two or more persons are registered as joint holders of any share, the vote of the senior who tenders a vote, in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holder(s); and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.

# PROXIES

## 33. Instrument of Appointment

33.1 The instrument appointing a proxy shall be in writing and shall be substantially in the following form:

I • of • being

(Name of Shareholder) (Address of Shareholder)

a member of • hereby appoint

(Name of the Company)

• •

(Name of Proxy) (Address of Proxy)

as my proxy to vote for me and on my behalf at the General Meeting of the Company to be held on the • day of 20• and at any adjournment(s) thereof.

Signed this • day of • 20•.

(Signature of Appointor)

or in any usual or common form or in such other form as may be approved by the Board of directors. It shall be duly signed by the appointor or his duly authorised attorney or, if such

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appointor is a company or other corporate body, under its common seal or stamp or the hand of its duly authorised agent(s) officer or attorney(s).

33.2 The instrument appointing a proxy (and the power of attorney or other authority, if any, under which such instrument has been signed) shall either be delivered to the Company (at its Registered Office, or at its principal place of business or at the offices of its registrar and/or transfer agent or at such place as the Board of directors may specify) not less than two hours (or not less than 24 hours with respect to a meeting to be held outside of Israel) before the time fixed for the meeting at which the person named in the instrument proposes to vote, or presented to the Chairman at such meeting.

## 34. Effect of Death of Appointor or Revocation of Appointment

34.1 A vote cast pursuant to an instrument appointing a proxy shall be valid notwithstanding the previous death of the appointing member (or of his attorney in fact, if any, who signed such instrument), or the revocation of the appointment or the transfer of the share in respect of which the vote is cast, provided no written intimation of such death, revocation or transfer shall have been received by the Company or by the Chairman of the meeting before such vote is cast and provided, further, that the appointing member, if present in person at said meeting, may revoke the appointment by means, of a written or oral notification to the Chairman or otherwise.

## BOARD OF DIRECTORS

## 35. Powers of Board of directors

### 35.1 In General

35.1.1 The management of the business of the Company shall be vested in the Board of directors, which may exercise all such powers and do all such acts and things as the Company is authorised to exercise and do, and are not hereby or by law required to be exercised or done by the Company in General Meeting. The authority conferred on the Board of directors by article 35 shall he subject to the provisions of the Companies Law, of these articles and any regulation or resolution consistent with these articles adopted from time to time by the Company in General Meeting, provided, however, that no such regulation or resolution shall invalidate any prior act done by or pursuant to a decision of the Board of directors which would have been valid if such regulation or resolution had not been adopted,

### 35.2 Borrowing Powers

35.2.1 Subject as provided in articles 35.2.2 to 35.2.11, the Board of directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part of it, and subject to the provisions of the Companies Law, to issue debentures and other securities whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

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35.2.2

The Board of directors must restrict the borrowings of the Company and exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiaries so as to secure, as regards subsidiaries so far as by such exercise they can secure, that, except with the previous sanction of an ordinary resolution, no money may be borrowed if the aggregate principal amount outstanding, including any premium payable on final repayment, of all money borrowed by the Company and its subsidiaries, excluding amounts borrowed by the Company and its subsidiaries from any other of such companies, then exceeds, or would as a result of such borrowing, exceed an amount equal to 4 (four) times the aggregate of:

1.1.1.1 the nominal amount paid up on the issued share capital of the Company; and
1.1.1.2 the amounts standing to the credit of the consolidated reserves of the Company and its subsidiaries whether distributable or undistributable and including, without limitation, share premium account, capital redemption reserve and profit and loss account.

35.2.3

The amounts referred to in article 35.2.2 are all as shown in a consolidation of the then latest audited balance sheets of the Company and each of its subsidiary companies but after:

1.1.1.3 making such adjustments as may be appropriate in respect of any variation in the issued and paid up share capital, the share premium account and the capital redemption reserve fund of the Company since the date of its latest audited balance sheet;
1.1.1.4 excluding from them any sums set aside for future taxation and amounts attributable to outside shareholders in subsidiaries;
1.1.1.5 deducting from them:

1.1.1.5.1 an amount equal to any distribution by the Company out of profits earned prior to the date of its latest audited balance sheet and which have been declared, recommended or made since that date except so far as provided for in such balance sheet;
1.1.1.5.2 goodwill and other intangible assets; and
1.1.1.5.3 any debit balances on profit and loss account; and

1.1.1.6 making such adjustments as may be appropriate to reflect any variation in the amount of such share capital and reserves which would result from any transaction for the purpose of which this calculation is being made or any transaction to be carried out contemporaneously with it. For this purpose, if any proposed allotment of shares for cash has been underwritten at any time when the underwriting of such shares is unconditional, such shares will be deemed to have been allotted and the

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1.1.1.14 a proportion of the borrowings of any partly owned subsidiary, but only to the extent that an amount equivalent to such proportion exceeds the amount of any borrowings from such partly owned subsidiary by the Company or another of its subsidiaries, such proportion being equal to the proportion of the issued equity share capital of the partly owned subsidiary, the beneficial interest of which is owned by the Company or another of its subsidiaries.

35.2.6 A report by the auditors as to the aggregate amount which may at any one time in accordance with the provisions of article 35.2.2 be owing by the Company and its subsidiaries without the sanction of an ordinary resolution is conclusive in favour of the Company and all persons dealing with the Company.

35.2.7 When the aggregate amount of borrowings required to be taken into account for the purposes of article 35.2.2 on any particular day is being ascertained, any of such money denominated or repayable in a currency other than sterling will be converted for the purpose of calculating the sterling equivalent either:

1.1.1.15 at the rate of exchange prevailing on that day in London, provided that all but not some only of such money will be converted at the rate of exchange prevailing in London 6 months before such day if by virtue of the current rate of exchange such aggregate amount would be less; for this purpose the rate of exchange will be taken as the middle market rate as at the close of business; or

1.1.1.16 where the repayment of such money is expressly covered by a forward purchase contract, currency option, back to back loan, swaps or other agreement taken out or entered into to reduce the risk associated with fluctuations in exchange rates, at the rate of exchange specified in it.

35.2.8 No debt incurred or security given in respect of money borrowed, or to be taken into account as money borrowed in excess of the limit in article 35.2.2, will be invalid or ineffectual, except in the case of express notice to the lender or the recipient of the security at the time when the debt was incurred or security given that such limit had been or was exceeded by the debt or security in question, but no lender or other person dealing with the Company will be concerned to see or enquire whether such limit is observed.

35.2.9 Subject as set out in articles 35.2.2 to 35.2.11, the Board of directors may secure or provide for the payment of any money to be borrowed or raised by a mortgage of or charge upon all or any part of the undertaking or property of the Company, both present and future, and upon any capital remaining unpaid upon the shares of the Company whether called up or not, or by any other security. The Board of directors may confer upon any mortgagees or persons in whom any debenture or security is vested such rights and powers as they think necessary or expedient. They may vest any property of the Company

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amount, including any premium, of the subscription moneys payable in respect of them, not being money payable later than 4 months after the date of allotment, will be deemed to have been paid up to the extent that underwriters are liable for them.

35.2.4 For the purposes of article 35.2.2 money borrowed is deemed to include the following except as otherwise taken into account:

1.1.1.7 the nominal amount of any issued share capital and the principal amount of any debentures or borrowed money, the beneficial interest of which is not for the time being owned by any of the Company and its subsidiaries, or any body whether corporate or unincorporate and the payment or repayment of which is the subject of a guarantee or indemnity by any of the Company and its subsidiaries;

1.1.1.8 the outstanding amount raised by acceptances by any bank, acceptance house or finance company under any acceptance credit opened on behalf of and in favour of any of the Company and its subsidiaries other than acceptances relating to the purchase or sale of goods or services in the ordinary course of trading;

1.1.1.9 the principal amount of any debenture, whether secured or unsecured, of any of the Company and its subsidiaries owned otherwise than by any of the Company and its subsidiaries;

1.1.1.10 the principal amount of any non-participating preference share capital and any other share capital which has limited rights to dividend and capital of any subsidiary owned otherwise than by any of the Company and its subsidiaries; and

1.1.1.11 any fixed or minimum premium payable on final repayment of any borrowing or deemed borrowing.

35.2.5 For the purpose of article 35.2.2 money borrowed is deemed not to include:

1.1.1.12 borrowings for the purposes of repaying the whole or any part of borrowings by any of the Company and its subsidiaries for the time being outstanding and so to be applied within 6 months of being so borrowed, pending their application for such purpose within such period;

1.1.1.13 borrowings for the purpose of financing any contract in respect of which any part of the price receivable by any of the Company and its subsidiaries is guaranteed or insured by the Export Credits Guarantee Department of the Department of Trade and Industry or by any other governmental department fulfilling a similar function or otherwise, to an amount not exceeding that part of the price receivable under the contract which is so guaranteed or insured; and

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In trustees for the purpose of securing any money so borrowed or raised and confer upon the trustees, or any receiver to be appointed by them, or by any debenture holder, such rights and powers as the Board of directors may think necessary or expedient in relation to the undertaking or property of the Company or its management or realisation or the making, receiving, or enforcing of calls upon the members in respect of unpaid capital, and otherwise. The Board of directors may make and issue debentures to trustees for the purpose of further security and the Company may remunerate any such trustees.

35.2.10 The Board of directors may give security for the payment of any money payable by the Company in same manner as for the payment of money borrowed or raised but, in such case, the amount will for the purposes of the limitation in article 35.2.2 be reckoned as part of the money borrowed.

35.2.11 The Board of Directors must keep a register of charges in accordance with the Companies Law and the fee to be paid by any person, other than a creditor or member of the Company, for each inspection of the register of charges which is kept in accordance with the requirements of the Companies Law should be as set by the Board of Directors from time to time in accordance with the requirements of the Companies Law.

### 35.3 Reserves

35.3.1 The Board of directors may, from time to time, set aside any amount(s) out of the profits of the Company as a reserve or reserves for any purpose(s) which the Board of directors, in its absolute discretion, shall think fit, and may invest any sum so set aside in any manner and from time to time deal with and vary such investments, and dispose of all or any part thereof, and employ any such reserve or any part thereof in the business of the Company without being bound to keep the same separate from other assets of the Company, and may subdivide or redesignate any reserve or cancel the same or apply the funds therein for another purpose, all as the Board of directors may from time to time think fit.

### 36. Exercise of Powers of Directors

36.1 A meeting of the Board of directors at which a quorum is present shall be competent to exercise all the authorities, powers and discretions vested in or exercisable by the Board of directors.

36.2 A resolution proposed at any meeting of the Board of directors shall be deemed adopted if approved by a majority of the directors present when such resolution is put to a vote and voting thereon.

36.3 A resolution in writing signed by all the directors then in office and lawfully entitled to vote thereon (as conclusively determined by the Chairman of the Audit Committee (Va'adat Bikoret), and in the absence of such determination by the Chairman of the Board of directors) or to which all such directors have given their consent (by letter, telegram, telex, facsimile or otherwise), or their oral consent by

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telephone (provided that a written summary thereof has been approved and signed by the Chairman of the Board of directors of the Company) shall be deemed to have been unanimously adopted by a meeting of the Board of directors duly convened and held.

36.4 The Board of directors shall appoint an Audit Committee (Va'adat Bikoret) and an Internal Auditor as such terms are defined in sections 114, 115 and 146 of the Companies Law.

## 37. Delegation of Powers

37.1 The Board of directors may, subject to the provisions of section 112(a) of the Companies Law, delegate some of its powers to committees (except in those matters set forth in section 112(a) of the Companies Law, each consisting of two or more persons (all of whose members must be directors), and it may from time to time revoke such delegation or alter the composition of any such committee. Any Committee so formed (in these articles referred to as a Committee of the Board of directors) shall in the exercise of the powers so delegated, conform to any regulations imposed on it by the Board of directors. The meetings and proceedings of any such Committee of the Board of directors shall mutatis mutandis, be governed by the provisions herein contained for regulating the meetings of the Board of directors, so far as not superseded by any regulations adopted by the Board of directors under this article. Unless otherwise expressly provided by the Board of directors in delegating powers to a Committee of the Board of directors, such Committee shall not be empowered to further delegate such powers.

37.2 The Board of Directors may, subject to the provisions of the Companies Law from time to time appoint a Secretary to the Company, as well as officers, agents, employees and independent contractors, as the Board of directors may think fit and may terminate the service of any such person. The Board of directors may, subject to the provisions of the Companies Law, determine the powers and duties, as well as the salaries and emoluments, of all such persons, and may require security in such cases and in such amounts as it thinks fit.

37.3 The Board of directors may from time to time, by power of attorney or otherwise, appoint any person, company, firm or body of persons to be the attorney or attorneys of the Company at law or in fact for such purpose(s) and with such powers, authorities and discretions, and for such period and subject to such conditions, as it thinks fit and any such power of attorney or other appointment may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board of directors may think fit, and may also authorise any such attorney to delegate all or any of the powers, authorities and discretions vested in him.

## 38. Number of Directors

38.1 The Board of directors shall consist of such number of Directors (not less than four nor more than 12) as may be determined by Ordinary Resolution of the General Meeting. The Board of Directors shall always consist of at least two External Directors, as that term is defined in section 239 of the Companies Law.

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# 39. Election and Removal of Directors

39.1 Directors shall be elected at the Annual General Meeting by the vote of the holders of a majority of the voting power represented at such meeting in person or by proxy and voting on the election of directors, and each director shall serve, subject to article 42 hereof, and with respect to a director appointed pursuant to article 41 hereof subject to such article, until the next Annual General Meeting following the Annual General Meeting at which such director was appointed, or his earlier removal pursuant to article 39. The holders of a majority of the voting power represented at a General Meeting and voting thereon shall be entitled to remove any director(s) from office, to elect directors in place of the directors so removed or to fill any vacancy, however created, in the Board of directors by way of ordinary resolution

39.2 No person other than a director retiring at the meeting, unless recommended by the Board of directors for appointment, is eligible for appointment to the office of a director at any general meeting unless, not fewer than four nor more than 21 clear days before the day appointed for the meeting, there is given to the Company notice in writing by some member duly qualified to be present and vote at the meeting for which such notice is given of his intention to propose such person for appointment stating the required particulars and, also, notice in writing signed by the person to be proposed of his willingness to be appointed.

# 40. Disqualification of Directors

40.1 No person shall be disqualified to serve as a director by reason of his not holding shares in the Company or by reason of his having served as a director in the past.

# 41. Continuing Directors in the Event of Vacancies

41.1 In the event of one or more vacancies in the Board of directors, the continuing directors may continue to act in every matter, and, pending the filling of any vacancy pursuant to the provisions of article 39, may temporarily fill any such vacancy, provided, however, that if they number less than a majority of the minimum number provided for pursuant to article 38 hereof, they may only act in an emergency, and may call a General Meeting of the Company for the purpose of electing directors to fill any or all vacancies, so that at least the minimum number of directors provided for pursuant to article 38 hereof are in office as a result of said meeting. Any Director appointed by the Board of directors in accordance with this article shall hold office only until the conclusion of the next following annual general meeting and is eligible for reappointment at that meeting

# 42. Vacation of Office

42.1 The office of a director shall be vacated, ipso facto, upon his death, or if he be found lunatic or become of unsound mind, or if he become bankrupt, or, if he becomes prohibited by law from being a director, or if the director is a company, upon its winding up.

42.2 The office of a director shall be vacated by his written resignation. Such resignation shall become effective on the date fixed therein, or upon the delivery thereof to the Company, whichever is later.

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# 43. Remuneration of Directors

43.1 No director shall be paid any remuneration by the Company for his services as director except as may be approved by the Company's Audit Committee and pursuant to the provisions of the Companies Law.

# 44. Conflict of Interests

44.1 Subject to the provisions of the Companies Law, the Company may enter into any contract or otherwise transact any business with any director in which contract or business such director has a personal interest, directly or indirectly; and may enter into any contract or otherwise transact any business with any third party in which contract or business a director has a personal interest, directly or indirectly.

44.2 A director may not vote in respect of any contract transaction or arrangement or any other proposal whatsoever in which he has an interest, whether directly or indirectly which, together with any interest of any person connected with him as defined in Regulation 45.3 below, is a material interest otherwise than by virtue of his interest in shares or debentures or other securities of or otherwise in or through the Company. A director is not counted in the quorum at a meeting in relation to any resolution on which he is debarred from voting.

44.3

44.3.1 A person is connected with a director of a company if, but only if, he (not being himself a director of it) is:

1.1.1.17 that director's spouse, child or step-child; or
1.1.1.18 except where the context otherwise requires, a body corporate with which the director is associated; or
1.1.1.19 a person acting in his capacity as trustee of any trust the beneficiaries of which include:

1.1.1.19.1 the director, his spouse or any children or step-children of his, or
1.1.1.19.2 a body corporate with which he is associated, or of a trust whose terms confer a power on the trustees that may be exercised for the benefit of the director, his spouse, or any children or step-children of his, or any such body corporate; or

1.1.1.20 a person acting in his capacity as partner of that director or of any person who, by virtue of paragraph 1.1.1.17, 1.1.1.18 or 1.1.1.19 of this regulation, is connected with that director;

44.3.2 In regulation 45.3.1:

1.1.1.21 a reference to the child or step-child of any person includes an illegitimate child of his, but does not include any person who has attained the age of 18; and

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1.1.1.22 paragraph 1.1.1.19 does not apply to a person acting in his capacity as trustee under an employees' share scheme or a pension scheme.

44.4 If any question arises at any meeting as to the materiality of a director's interest or as to the entitlement of any director to vote and such question is not resolved by his voluntarily agreeing to abstain from voting, such question must be referred to the chairman of the meeting and his ruling in relation to any other director will be final and conclusive, except in a case where the nature or extent of the interests of the director concerned have not been fairly disclosed. If the question concerns the chairman, it must be referred to such other director present at the meeting, other than the chairman, as the directors present appoint.

## 45. Alternate Directors

45.1 A director may, by written notice to the Company, appoint an alternate for himself (in these articles referred to as Alternate Director), remove such Alternate Director and appoint another Alternate Director in place of any Alternate Director appointed by him whose office has been vacated for any reason whatsoever. Unless the appointing Director, by the instrument appointing an Alternate Director or by written notice to the Company, limits such appointment to a specified period of time or restricts it to a specified meeting or action of the Board of directors, or otherwise restricts its scope, the appointment shall be for an indefinite period, and for all purposes.

45.2 Any notice given to the Company pursuant to article 45.1 shall become effective on the date fixed therein, or upon the delivery thereof to the Company, whichever is later.

45.3 An Alternate Director shall have all the rights and obligations of the Director who appointed him provided, however, that he may not in turn appoint an alternate for himself (unless the instrument appointing him otherwise expressly provides), and provided further that an Alternate Director shall have no standing at any meeting of the Board of directors or any committee thereof while the director who appointed him is present,

45.4 Any natural person, who is eligible to act as a director under the provisions of the Companies Law and who is not an acting director or alternate director on the Board, may act as an Alternate Director. An Alternate Director shall alone be responsible for his own acts and defaults and he shall not be deemed the agent of the director(s) who appointed him.

45.5 An Alternate Director shall alone be responsible for his own acts and defaults, and he shall not be deemed the agent of the director(s) who appointed him.

45.6 The office of an Alternate Director shall be vacated under the circumstances, mutatis mutandis, set forth in article 42, and such office shall ipso facto be vacated if the director who appointed such Alternate Director ceases to be a director.

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# PROCEEDINGS OF THE BOARD OF DIRECTORS

## 46. Meetings

46.1 The Board of directors may meet and adjourn its meetings and otherwise regulate such meetings and proceedings as the Board of directors think fit.

46.2 Any two directors may at any time, and the Secretary, upon the request of such Director, shall convene a meeting of the Board of directors, but not less than seven days' notice (oral or written) shall be given of any meeting so convened. The failure to give notice to a director in the manner required hereby may be waived by such director. The Board of Directors shall hold meetings as required for the conducting of the Company's business, but not less than once every three months pursuant to section 97 of the Companies Law.

## 47. Quorum

47.1 Until otherwise unanimously decided by the Board of directors, a quorum at a meeting of the Board of directors shall be constituted by the presence of not less than a majority of the directors then in office who are lawfully entitled to participate in the meeting (as conclusively determined by the Chairman of the Audit Committee and in the absence of such determination - by the Chairman of the Board of directors), but shall not be less than two.

## 48. Chairman of the Board of directors

48.1 The Board of directors may from time to time elect one of its members to be the Chairman of the Board of directors, remove such Chairman from office and appoint another in its place. The Chairman of the Board of directors shall preside at every meeting of the Board of directors, but if there is no such Chairman, or if at any meeting he is not present within fifteen (15) minutes of the time fixed for the meeting, or if he is unwilling to take the chair, the directors present shall choose one of their number to be the chairman of such meeting. The Chairman shall not have a casting vote.

## 49. Validity of Acts Despite Defects

49.1 Subject to the provisions of the Companies Law, all acts done bona fide at any meeting of the Board of directors, or of a Committee of the Board of directors, or by any person(s) acting as director(s), shall, notwithstanding that it may afterwards be discovered that there was some defect in the appointment of the participants in such meetings or any of them or any person(s) acting as aforesaid, or that they or any of them were disqualified, be as valid as if there were no such defect or disqualification.

# GENERAL MANAGER

## 50. General Manager

50.1 The Board of directors may from time to time appoint one or more persons, whether or not directors, as General Manager(s) of the Company and may confer upon such person(s), and from time to time modify or revoke, such title(s) (including Managing Director, Director General or any similar or dissimilar title) and such duties and authorities of the Board of directors as the Board of directors

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may deem fit, subject to such limitations and restrictions as the Board of directors may from time to time prescribe. Such appointment(s) may be either for a fixed term or without any limitation of time, and the Board of directors may from time to time (subject to the provisions of the Companies Law and of any contract between any such person and the Company) fix his or their salaries and emoluments, remove or dismiss him or them from office and appoint another or others in his or their place or places.

# MINUTES

## 51. Minutes

51.1 Minutes of each General Meeting and of each meeting of the Board of directors shall be recorded and duly entered in books provided for that purpose. Such minutes shall, in all events, set forth the names of the persons present at the meeting and all resolutions adopted thereat.

51.2 Any minutes as aforesaid, if purporting to be signed by the chairman of the meeting or by the chairman of the next succeeding meeting, shall constitute prima facie evidence of the matters recorded therein.

# DIVIDENDS

## 52. Declaration of Dividends

52.1 The Board of directors may from time to time subject to the provisions and rules laid down in the Companies Law for "permitted distributions" declare, and cause the Company to pay, such interim dividend as may appear to the Board of directors to be justified by the profits of the Company. The final dividend in respect of any fiscal period shall be proposed by the Board of directors and shall be payable only after the same has been approved by Ordinary Resolution of the General Meeting, but no such resolution shall provide for the payment of an amount exceeding that proposed by the Board of directors for the payment of such final dividend, and no such resolution or any failure to approve a final dividend shall affect any interim dividend theretofore declared and paid. The Board of directors shall determine the time for payment of such dividends, both interim and final, and the record date for determining the shareholders entitled thereto.

## 53. Funds Available for Payment of Dividends

53.1 No dividend shall be paid otherwise than out of the profits of the Company and subject to the rules permitting "permitted distributions", as defined in section 302 of the Companies Law.

## 54. Amount Payable by Way of Dividends

54.1 Subject to the rights of the holders of shares with special rights as to dividends, any dividend paid by the Company shall be allocated among the members entitled thereto in proportion to the nominal value of their respective holdings of the shares in respect of which such dividend is being paid.

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# 55. Interest

55.1 No dividend shall carry interest as against the Company.

# 56. Payment in Specie

56.1 Upon the recommendation of the Board of directors approved by Ordinary Resolution of the Company, a dividend may be paid, wholly or partly, by the distribution of specific assets of the Company or by distribution of paid up shares, debentures or debenture stock of the Company or of any other companies, or in any one or more of such ways.

# 57. Capitalisation of Profits, Reserves etc.

57.1 Upon the recommendation of the Board of directors approved by Ordinary Resolution of the General Meeting, the Company:

57.1.1 may cause any moneys, investments, or other assets forming part of the undivided profits of the Company, standing to the credit of a reserve fund, or to the credit of a reserve fund for the redemption of capital, or in the hands of the Company and available for dividends, or representing premiums received on the issuance of shares and standing to the credit of the share premium account, to be capitalised and distributed among such of the shareholders as would be entitled to receive the same if distributed by way of dividend and in the same proportion, on the footing that they become entitled thereto as capital, or may cause any part of such capitalised fund to be applied on behalf of such shareholders in paying up in full, either at par or at such premium as the resolution may provide, any unissued shares or debentures or debenture stock of the Company which shall be distributed accordingly, in payment, in full or in part of the uncalled liability on any issued shares or debentures or debenture stock; and

57.1.2 may cause such distribution or payment to be accepted by such shareholders in full satisfaction of their interest in the said capitalised sum.

# 58. Implementation of Powers under articles 56 and 57

58.1 For the purpose of giving full effect to any resolution under articles 56 or 57, and without derogating from the provisions of article 6.2 hereof, the Board of directors may settle any difficulty which may arise in regard to the distribution as it thinks expedient, and, in particular, may issue fractional certificates, and may fix the value for distribution of any specific assets, and may determine that cash payments shall be made to any members upon the footing of the value so fixed, or that fractions of less value at the nominal value of one share may be disregarded in order to adjust the rights of all parties, and may vest any such cash, shares, debentures, debenture stock or specific assets in trustees upon such trusts for the persons entitled to the dividend or capitalised fund as may seem expedient to the Board of directors. Where requisite, a proper contract shall be filed in accordance with section 130 of the Companies Law, and the Board of directors may appoint any person to sign such contract on behalf of the persons entitled to the dividend or capitalised fund.

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# 59. Deductions from Dividends

59.1 Except in the case of fully paid shares the Board of directors may deduct from any dividend or other money payable to any member on or in respect of a share all sums of money, if any, presently payable by him to the Company on account of calls or otherwise in relation to the shares of the Company. The Company may cease to send any cheque or warrant through the post for any dividend payable on any shares in the Company which is normally paid in that manner on those shares if, in respect of at least two consecutive dividends payable on those shares, the cheques or warrants have been returned undelivered or remain uncashed or, if following one such occasion, reasonable enquiries have failed to establish any new address of the registered holder. Subject to the provisions of these articles, the company must recommence sending cheques or warrants in respect of dividends payable on those shares if the holder or person entitled by transmission claims the arrears of dividend and does not instruct the Company to pay future dividends in some other way.

# 60. Retention of Dividend

60.1 The Board of directors may retain any dividend or other moneys payable or property distributable in respect of a share on which the Company has a lien, and may apply the same in or toward satisfaction of the debts, liabilities or engagements in respect of which the lien exists;

60.2 The Board of directors may retain any dividend or other moneys payable or properly distributable in respect of a share in respect of which any person is, under article 21 or 22, entitled to become a member, or which any person is, under said articles, entitled to transfer, until such person shall become a member in respect of such share or shall transfer the same.

# 61. Unclaimed Dividends

61.1 All unclaimed dividends or other moneys payable in respect of a share may be invested or otherwise made use of by the Board of directors for the benefit of the Company until claimed. The payment by the Board of directors of any unclaimed dividend or such other moneys into a separate account shall not constitute the Company a trustee in respect thereof, and any dividend unclaimed after a period of 12 years from the date of declaration of such dividend, and any such other moneys unclaimed after a like period from the date the same were payable, shall be forfeited and shall revert to the Company, provided, however, that the Board of directors may, at its discretion, cause the Company to pay any such dividend or such other moneys, or any part thereof, to a person who would have been entitled thereto had the same not reverted to the Company.

# 62. Mechanics of Payment

62.1 Any dividend or other moneys payable in cash in respect of a share may be paid by cheque or warrant sent through the post to, or left at the registered address of the person entitled thereto or by transfer to a bank account specified by such person (or, if two or more persons are registered as joint holders of such share or are entitled jointly thereto in consequence of the death or bankruptcy of the holder or otherwise, to any one of such persons or to his bank account), or to such person and at such address as the person entitled thereto may by writing direct.

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Every such cheque or warrant shall be made payable to the order of the person to whom it is sent or to such person as the person entitled thereto as aforesaid may direct, and payment of the cheque or warrant by the banker upon whom it is drawn shall be a good discharge to the Company. Every such cheque or warrant shall be sent at the risk of the person entitled to the money represented thereby.

## 63. Receipt from a Joint Holder

63.1 If two or more persons are registered as joint holders of any share, or are entitled jointly thereto in consequence of the death or bankruptcy of the holder or otherwise, any one of them may give effectual receipts for any dividend or other moneys payable or property distributable in respect of such share.

## ACCOUNTS

## 64. Books of Account

64.1 The Board of directors shall cause accurate books of account to be kept in accordance with the provisions of the Companies Law and of any other applicable law. Such books of account shall be kept at the Registered Office of the Company, or at such other place or places as the Board of directors may think fit, and they shall always be open to inspection by all directors. No member, not being a Director, shall have any right to inspect any account or book or other similar document of the Company, except as conferred by law or authorised by the Board of directors or by Ordinary Resolution of the Company,

64.2 The Board of directors must from time to time, in accordance with the provisions of the Company's Law, ensure that there are prepared and laid before the Company in general meeting such profit and loss accounts balance sheets, group accounts, if any, and reports as are specified in the Company's Law.

64.3 The auditors' report must be read before the Company in general meeting and is open to inspection as required by the Company's Law.

64.4 A copy of every balance sheet and profit and loss account, including every document required by law to be annexed to them, which is to be laid before the Company in general meeting, and of the directors' and auditors' reports, must, not fewer than 21 days before the date of the meeting, be sent to every member and to every holder of debentures of the Company, except that:

64.4.1 this article does not require copies of such documents to be sent to any person whose address the Company is not aware of nor to more than one of the joint holders of any shares or debentures; and

64.4.2 instead of these documents, there may be sent a copy of such summary financial statement as may be permitted, in such form as may be specified and subject to such conditions as may be required by law to be sent, to the members of and holders of debentures of the Company.

64.5 Whenever any of the Company's shares or debentures have been admitted to listing by the London Stock Exchange, the required number of such documents must, at the same time, be forwarded to the appropriate officer of the London Stock Exchange.

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# 65. Audit

65.1 At least once in every fiscal year the accounts of the Company shall be audited and the correctness of the profit and loss account and balance sheet certified by one or more duly qualified auditors.

# 66. Accountant - Auditors

66.1 The Company, at every annual General Shareholders' Meeting, shall appoint an independent accountant-auditor in accordance with the provisions of sections 154-170 of the Companies Law. The remuneration of the auditor(s), shall be determined by the Shareholders' General Meeting who may, by Ordinary Resolution, act (and in the absence of any action in connection therewith shall be deemed to have so acted), to authorise the Board of directors to fix such remuneration subject to such criteria or standards, if any, as may be provided in such Ordinary Resolution, and if no such criteria or standards are so provided, such remuneration shall be fixed in an amount commensurate with the volume and nature of the services rendered by such auditor(s). If the Board of Directors fixes the auditor(s) remuneration it shall submit a written report thereof to the Shareholders' Meeting.

# BRANCH REGISTERS

# 67. Branch Registers

67.1 The Company is authorised to maintain additional branch register(s) pursuant to Section 138 of the Companies Law to be kept in any place outside Israel as the Board of directors may think fit, and, subject to all applicable requirements of law, the Board of directors may from time to time adopt such rules and procedures as it may think fit in connection with the keeping of such branch registers.

# RIGHTS OF SIGNATURE, STAMP AND SEAL

# 68. Rights of Signature, Stamp and Seal

68.1 The Board of directors shall be entitled to authorise any person or persons (who need not be directors) to act and sign on behalf of the Company, and the acts and signature of such person(s) on behalf of the Company shall bind the Company insofar as such person(s) acted and signed within the scope of his or their authority.

68.2 The Company shall have at least one official stamp.

68.3 The Board of directors may provide for a seal. If the Board of directors so provides, it shall also provide for the safe custody thereof. Such seal shall not be used except by the authority of the Board of directors and in the presence of the person(s) authorised to sign on behalf of the Company, who shall sign every instrument to which such seal is affixed.

68.4 The Company may exercise the powers conferred by Section 102 of the Companies Law regarding a seal for use abroad, and such powers shall be vested in the Board of directors.

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# NOTICES

## 69. Notices

69.1 The Company can deliver a notice or other document, including a share certificate and the Company's financial reports, to a shareholder:

69.1.1 by delivering it by hand to the address recorded for the shareholder on the register;

69.1.2 by sending it by post or other delivery service in an envelope (with postage or delivery paid) to the address recorded for the shareholder on the register;

69.1.3 by fax (except for share certificates) to a fax number notified by the shareholder in writing;

69.1.4 by electronic mail (except a share certificate) to an address notified by the shareholder in writing;

69.1.5 by a website (except a share certificate) the address of which shall be notified to the shareholder in writing;

69.1.6 by a relevant system in accordance with Article 5; or

69.1.7 by advertisement in at least one national newspaper in the United Kingdom and one national newspaper in the State of Israel.

69.2 This article does not affect any provision in any relevant legislation or the articles requiring notices or documents to be delivered in a particular way.

69.3 If a notice or document is delivered by hand, it is treated as being delivered at the time it is handed to or left for the shareholder.

69.4 If a notice or document is sent by post or other delivery service not referred to below, it is treated as being delivered:

69.4.1 48 hours after it was posted, if first class post was used; or

69.4.2 72 hours after it was posted or given to delivery agents, if first class post was not used,

provided it can be proved conclusively that a notice or document was delivered by post or other delivery service by showing that the envelope containing the notice or document was:

69.4.3 properly addressed; and

69.4.4 put into the post system or given to delivery agents with postage or delivery paid.

69.5 If a notice or document (other than a share certificate) is sent by fax, it is treated as being delivered at the time it was sent.

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69.6 If a notice or document (other than a share certificate) is sent by electronic mail, it is treated as being delivered at the time it was sent.

69.7 If a notice or document (other than a share certificate) is sent by a website, it is treated as being delivered when the material was first made available on the website or, if later, when the recipient received (or is deemed to have received) notice of the fact that the material was available on the website.

69.8 If a notice or document (other than a share certificate) is sent by a relevant system, it is treated as being delivered when the Company (or a sponsoring system participant acting on its behalf) sends the issuer instruction relating to the notice or document.

69.9 If a notice is given by advertisement, it is treated as being delivered at midday on the day when such advertisement appears in the newspapers.

69.10 All notices to be given to the members shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the Register of Members, and any notice so given shall be sufficient notice to the holders of such share.

69.11 Any member whose address is not described in the Register of Members, and who shall not have designated in writing an address for the receipt of notices, shall not be entitled to receive any notice from the Company."

## INSURANCE AND INDEMNITY

### 70. Insurance and Indemnity

70.1 For purposes of these articles, the term **Office Holder** shall mean every Director and every officer of the Company, including, without limitation, each of the persons defined as in Section 1 (definitions) of the Companies Law.

70.2 Subject to the provisions of the Companies Law, the Company may enter into a contract for the insurance of all or part of the liability of any Office Holder, in respect of one of the following:

70.2.1 a breach of his duty of care to the Company or to another person;

70.2.2 a breach of his fiduciary duty to the Company, provided that the Office Holder acted in good faith and had reasonable cause to assume that such act would not prejudice the interests of the Company;

70.2.3 a financial obligation imposed on him in favour of another person in respect of an act performed in his capacity as an Office Holder.

70.3 Subject to the provisions of the Companies Law, the Company may indemnify an Office Holder in respect of one of the following:

70.3.1 a financial obligation imposed on him in favour of another person by a court judgment, including a compromise judgment or an arbitrator's award approved by court, in respect of an act performed in his capacity as an Office Holder;

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70.3.2 reasonable litigation expenses, including attorneys' fees, expended by an Office Holder or charged to him by a court, in a proceeding instituted against him by the Company or on its behalf or by another person, or in a criminal charge from which he was acquitted, all in respect of an act performed in his capacity as an Office Holder.

70.4 The provisions of articles 70.1, 70.2 and 70.3 above are not intended, and shall not be interpreted, to restrict the Company in any manner in respect of the procurement of insurance and/or in respect of indemnification (1) in connection with any person who is not an Office Holder, including, without limitation, any employee, agent consultant or contractor of the Company who is not an Office Holder, and/or (ii) in connection with any Office Holder to the extent that such insurance and/or indemnification is not specifically prohibited under law; provided that the procurement of any such insurance and/or the provision of any such indemnification shall be approved according to the Company's Law.

## WINDING UP

### 71. Winding Up

71.1 If the Company be wound up, then, subject to applicable law and to the rights of the holders of shares with special rights upon winding up, the assets of the Company available for distribution among the members shall be distributed to them in proportion to the nominal value of their respective holdings of the shares in respect of which such distribution is being made.

![img-0.jpeg](img-0.jpeg)

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- 4 -
# תשקיף החברה להנפקת מניות החברה
## מיום 3.7.1996

---

THIS DOCUMENT IS IMPORTANT. If you are in any doubt about it, you should consult your stockbroker, bank manager, accountant, solicitor or other independent professional adviser authorised under the Financial Services Act 1986 who specialises in advising on the acquisition of shares and other securities.

This document has been drawn up in accordance with the Public Offer of Securities Regulations 1995. A copy of this document has been delivered to the Registrar of Companies in England and Wales for registration in accordance with regulation 4(2) of those Regulations.

To the best of the knowledge of the Directors, who are the persons responsible for this prospectus, the information contained in it is in accordance with the facts and it makes no omission which is likely to affect the import of such information. The Directors, whose names are set out on page 3, accept responsibility accordingly.

Application has been made for the whole of the issued share capital of BATM Advanced Communications Limited ("BATM"), including the new Ordinary shares being issued pursuant to the Placing, to be admitted to trading on the Alternative Investment Market of the London Stock Exchange ("AIIM"). It is emphasised that no application has been made for admission of these securities to the Official List of the London Stock Exchange ("Official list"). AIM is a market designed primarily for emerging or smaller companies. The rules of this market are less demanding than those of the Official List. The Exchange has not itself examined this document.

The Israel Securities Authority ("ISA") has granted BATM an exemption from the requirement to obtain a permit from the ISA to publish this document. The ISA has also granted BATM an exemption from the reporting obligations to which Israeli companies whose shares are publicly traded as subject, provided that BATM places a copy of each of the reports filed by BATM pursuant to UK law in its main office for public viewing.

![img-0.jpeg](img-0.jpeg)

# BATM Advanced Communications Limited

(incorporated in Israel with registered number 52-004281-3)

# Placing by Shore Capital

of up to 6,517,450 ordinary shares of NIS 0.1 each at a price of 125p per share payable in full on application

SHARE CAPITAL

in ordinary shares of NIS 0.1 each

assuming full subscription in the Placing

Authorised

NIS 10,000,000

Issued and fully paid

NIS 3,105,611.20

The Ordinary Shares now being placed will, following allotment, rank pari passu in all respects with the ordinary shares of the Company now in issue and will have the right to receive all dividends declared or paid on the ordinary shares of the Company after the date of this document.

It should be noted that in connection with this document Shore Capital and Corporate Limited and Shore Capital Stockbrokers Limited are acting for BATM and no one else and will not be responsible to anyone other than BATM for providing the protection afforded to customers of Shore Capital and Corporate Limited and Shore Capital Stockbrokers Limited or for providing advice in relation to the Placing.

BATM is a high technology company. Investment in such companies can be speculative and involves a higher degree of risk than other investments. Your attention is drawn in particular to the section entitled "Risk Factors" on page 22 of this document.

The subscription list will open on 3 July 1996 and may be closed at any time thereafter. The issue is not underwritten and the Directors will not allot any shares unless applications are received for a minimum of 5,600,000 Ordinary Shares and the minimum subscription is received no later than 5.00 p.m. on 12 August 1996.

Copies of this document will be available free of charge to the public at the offices of Shore Capital Stockbrokers Limited, 1 Maddox Street, London W1R 9WA from 3 July, 1996 until 14 days after the date upon which the Ordinary Shares are admitted to trading on AIM.

# Indebtedness

At the close of business on 23 June, 1996, apart from intra group liabilities, neither BATM nor any of its subsidiaries had outstanding at that date any mortgages, charges, debentures, loan capital (including term loans), whether outstanding or created but unissued, or any other borrowings or indebtedness in the nature of borrowing including bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits, hire purchase commitments, obligations under finance leases, guarantees or other contingent liabilities. As at the same date, the Company and its subsidiaries had positive bank balances of $3,993,410.

BATM ADVANCED COMMUNICATIONS LIMITED

contents

Page

Directors and Advisers 3
Definitions 4
Glossary of Terms 5
Key Information 7
Racing Statistics 9
Expected Timetable 9

Part One
Introduction 10
History 11
Business 12
Group Structure 13
Industry Background and Company Strategy 15
Products 16
Joint Venture with Larscom 17
Intellectual Property 17
Directors, Management and Employees 18
Financial Record 19
Dividend Policy 20
Taxation and Investor Considerations 20
Reasons for the Placing 21
Risk Factors 22
The Company's Strengths 22
Current Trading and Prospects 22

Part Two Accountants' Report 24
Part Three Estimate for First Half of 1996 42
Part Four Statutory and General Information 43

2

BRTM R&amp;D VERITAS

Directors and Advisers

BRTM R&amp;D RICED COMMUNICATIONS LIMITED

Directors
Gershon Beres (Non-executive Chairman)
Dr Zvi Marom (Managing Director)
Jacob Rosen (Finance Director)
David Goldman MBE (Non-executive)
Yakov Be'ery (Non-executive)
whose business address is 9 Basel Street, PO Box 4048, Petach-Tikva, Israel

Registered Office
9 Basel Street, PO Box 4048
Petach-Tikva 49130, Israel

Nominated Advisers and Nominated Brokers
Shore Capital Stockbrokers Limited
1 Maddox Street, London W1R 9WA

Financial Advisers
Shore Capital and Corporate Limited
1 Maddox Street, London W1R 9WA

Israeli Financial Advisers
Be'ery Investments and Capital Raising Consultants Limited
Diamond Tower, 3A Jabotinsky Street,
Ramat-Gan 52520, Israel

Joint Reporting Accountants
BDO Stoy Hayward
8 Baker Street, London W1M 1DA

Auditors and Joint Reporting Accountants
Almagor &amp; Co CPA (ISR)
7 Abba Hillel Road, PO Box 3600
Ramat-Gan 52134, Israel

Solicitors to the Company in the UK
Fladgate Fielder
Heron Place, 3 George Street
London W1H 6AD

Solicitors to the Company in Israel
Baratz &amp; Co
Law Offices, 8 Shaul Hamelech Boulevard
Tel-Aviv 67433, Israel

Solicitors to the Issue
S J Berwin &amp; Co
222 Grays Inn Road, London WC1X 8HB

Company Secretary
Ms Riki Prize
9 Basel Street, PO Box 4048
Petach-Tikva 49130, Israel

Registrars
Independent Registrars Group Limited
Balfour House, 390-398 High Road
Ilford, Essex IG1 1NQ

3

BATM

Definitions

BATM ADVANCED COMMUNICATIONS LIMITED

The following definitions apply throughout the document, unless the context otherwise requires:—

"ACN" Advanced Communication Networks Inc., a US incorporated joint venture company in which BATM has a 50 per cent. interest.

"Act" Companies Act 1985 as amended by Companies Act 1989.

"Admission" admission of the Ordinary Shares to trading on AIM.

"AIM" the Alternative Investment Market of the London Stock Exchange.

"BATM" or "Company" BATM Advanced Communications Limited.

"BATM (UK)" B.A.T.M. (UK) Limited, a wholly owned UK subsidiary of BATM.

"BatNet" Bat-Net Communication Networks Limited, an 85 per cent. owned subsidiary of BATM.

"BTT" B.T.T. Beres Communication Technologies Limited, a company in which BATM has a 50 per cent. interest.

"Directors" or "Board" the directors of the Company.

"Group" the Company and its subsidiaries together with BTT and ACN.

"IBM" International Business Machines Corporation.

"Larscom" Larscom Inc.

"London Stock Exchange" London Stock Exchange Limited.

"Ordinary Shares" ordinary shares of NIS 0.1 each in the Company.

"Placing" placing of up to 6,517,450 Ordinary Shares in accordance with this document and the Placing Agreement.

"Placing Agreement" the conditional agreement between BATM, the Directors, the Vendor, Shore Capital and Corporate, Shore Capital Group plc and Shore Capital, particulars of which are summarised in Part Four, paragraph 13 of this document.

"Placing Price" the placing price of 125p per Ordinary Share.

"Placing Shares" 6,400,000 new Ordinary Shares to be issued pursuant to the Placing and 117,450 existing Ordinary Shares to be sold by the Vendor.

"Share Option Scheme" the share option scheme adopted by the Company, further details of which are set out in Part Four, paragraph 10 of this document.

"Share Ownership Plan" the share ownership plan adopted by the Company, further details of which are set out in Part Four, paragraph 9 of this document.

"Shore Capital and Corporate" Shore Capital and Corporate Limited, a member of the Securities and Futures Authority and financial adviser to the Company.

"Shore Capital" Shore Capital Stockbrokers Limited, a member of the London Stock Exchange and nominated adviser and stockbroker to the Company.

"Vendor" Mordechai Rosenstock.

4

Glossary

BATM ADVANCED COMMUNICATIONS LIMITED

|  "AS/400" | IBM mini-computer which operates under 5250 proprietary protocol.  |
| --- | --- |
|  "ATM" | Asynchronous Transfer Mode: high speed and high capacity broad band technology for transmitting voice, video and data over LANs and WANs.  |
|  "balun" | unit which joins two different types of cables and is used, in particular, for connecting workstations to IBM host computers.  |
|  "bandwidth" | communications channel's information bearing capacity usually expressed in hertz (cycles-per-second) or bits per second.  |
|  "blocking" | see Ethernet.  |
|  "BOD" or "Bandwidth on Demand" | facility enabling a communications network to expand its bandwidth where necessary to accommodate bursts in data traffic.  |
|  "bridge" | unit which usually links segments of the same protocols.  |
|  "Ethernet" | the most common protocol for LANs, involving networking systems which use a carrier-sensing access method in which workstations share a network cable, but only one workstation can use the cable at a time (i.e. one station blocks another). Ethernet is increasingly being replaced by fast Ethernet.  |
|  "fast Ethernet" | development of Ethernet standard which allows greater amounts of data to be transferred at faster rates.  |
|  "fibre-optic cable" | cable which is made of glass and enables transmission of digital signals by light. It has a much greater band width and can extend much longer distances without a repeater than traditional copper cable.  |
|  "gateway" or "protocol convertor" | unit which translates data or electrical signals of one protocol into another thereby linking one network to another where each network operates under a differing protocol.  |
|  "hub" | connector of computer stations in a star configuration. Hubs can be "active" or "passive". A passive hub simply connects and requires no electrical connection. An active hub connects and also regenerates/amplifies signals from one device to another, creating an effect similar to that of a repeater.  |
|  "Intranet" | publishing/communications system using Internet protocols for intra-organisation use.  |
|  "LAN" or "local area network" | cabling network linking computer equipment and systems within a relatively small geographical area such as a building or single department, sometimes to the level of campus.  |
|  "multiplexor" | unit which enables multiple users to share a single communications line, thereby providing an economic means of accessing remote units. It combines multiple signals onto a single line for transmission and at the receiving end of the line a second multiplexor separates those signals out.  |
|  "OEM" or "Original Equipment Manufacturer" | arrangement whereby a designer/manufacturer provides a supplier with equipment which the supplier sells under its own name.  |

Glossary

BRTM ADVANCED COMMUNICATIONS LIMITED

"PABX" or Private Automatic Branch Exchange
privately owned telephone exchange used by organisations for connecting their telephone extensions to the external lines provided by public carriers.

"protocol"
set of rules governing the information flow within a communications infrastructure.

"repeater"
unit which joins two cables and repeats the signal from one cable to the next, strengthening the signal and thereby increasing the reach of a LAN connection.

"structured wiring"
pre-planned cabling system designed to facilitate efficient future growth and relocation of communications equipment within a specified area.

"Token Ring"
protocol for token-passing ring networks which operate in a star configuration.

"Unix"
commonly used operating system for computers.

"WAN" or "wide area network"
cabling or cabling/radio network for linking remote computer systems over a larger geographical area than a LAN using publicly provided telecommunications links.

Key Information
BATM ADVANCED COMMUNICATIONS LIMITED

The following information should be read in conjunction with the full text of this document from which it has been derived:

## Business

BATM is a communications equipment manufacturer specialising in products used in local and wide area networks. The networking business was founded in 1991 and incorporated in 1992. Based in Israel, more than 90 per cent. of the turnover of this business is exported, principally to Western Europe, the largest market being Germany. The Company has financed its growth from its own cashflow and has been profitable virtually from establishment.

BATM has built up a large range of products. These products are designed to increase the rate, range and reliability of data transfer within communications networks and to facilitate communication between computers and computing systems which operate under a variety of communications standards.

The field in which BATM operates is rapidly growing. Computer networks within and between organisations are becoming ever more ubiquitous and the volume and range of traffic handled by them is growing rapidly in most parts of the world. The recent explosive growth in the Internet and Intranets is only one factor among many contributing to this growth. The increasing power of desktop PCs, the wider use of graphics, video and sound and the greater use of computer networks for internal communications are leading to an increasing demand for extra bandwidth which is stretching the capabilities of network infrastructure. BATM's equipment provides the extra bandwidth needed and offers management and control systems to enable customers to make more efficient use of their infrastructure of cable and telecommunications lines.

The Directors consider the Company's strengths to be:—

- its well positioned product portfolio
- its ability to innovate in a complex and fast changing field
- its growing reputation amongst equipment manufacturers and distributors as a problem solver
- its technical team who are recognised to be first class electronics and software engineers
- its lean flat structure allowing it to produce high quality, reliable products at competitive prices with excellent margins.

BATM's products are developed, designed and finally assembled in-house. Components are manufactured by sub-contractors or bought in. Its products are sold largely through distributors.

The Company operates in a number of niches, of which currently the most significant is the market for equipment to manage, control and switch traffic over networks of IBM AS/400 computers and terminals. The AS/400 is the mini-computer with the largest installed base in the world. BATM's largest single customer is the IBM group which, through operating subsidiaries in various countries, distributes these products and other complementary equipment. The equipment sells on functionality, versatility and reliability.

As well as the AS/400 range, the Company makes a similar range of products for the two main non-proprietary network standards, Ethernet and Token Ring. One of the principal benefits offered by these products is that they incorporate proprietary software written by BATM which make them easier to install and configure and enable them to present management information readily to the user in the language of their

7

Key Information
BATM ADVANCED COMMUNICATIONS LIMITED

choice. In addition, BATM manufactures a range of cable adapters and ancillary products offering attractive features to its customers. It also undertakes research and development, particularly software development, for major PABX manufacturers for a fee plus royalty interest.

More recently the Company has undertaken substantial research and development (all of which has been expensed) to take it into the fields of fast Ethernet and ATM switching and Bandwidth on Demand over a network. The work on ATM has been undertaken in collaboration with a small German company which the Directors consider to be a leader in the technology, whilst the Bandwidth on Demand product was financed in part by a major US corporation. The latter product has been launched in the US by BATM's US partner and is already selling. The new switch products are expected to be launched early in 1997 and are regarded by the Directors as cutting edge.

The Company's established product portfolio has strong growth potential through gaining further market exposure in territories in which it is already sold and by widening the number of countries in which it is sold. The new products offer excellent potential for growth, being aimed at markets expected by independent commentators to develop to become very large, although highly competitive.

At present the Company does not sell directly in North America, its only sales being of its Bandwidth on Demand product through its US partner. It intends to launch its new products in the United States in the autumn of 1996 and to establish a marketing and distribution channel for its products. To that end, it has recently set up, in conjunction with its German partner, a US company as a marketing and distribution base for those products.

**Trading Record and Estimate**

|  Years ended 31st December | 1993
US$000 | 1994
US$000 | 1995
US$000  |
| --- | --- | --- | --- |
|  Turnover | 2,867 | 4,913 | 7,619  |
|  Operating profit | 920 | 1,172 | 2,556  |
|  Profit before taxation | 1,005 | 1,154 | 2,720  |
|  Taxation | (56) | (99) | (70)  |
|  Profit for the financial year (after minority interests) | 949 | 1,055 | 2,646  |
|  Dividends | (167) | (298) | (200)  |
|  Retained profit | 782 | 757 | 2,446  |
|  Net assets | 1,665 | 2,422 | 4,800  |
|  Net cash and investments | 1,652 | 1,827 | 3,159  |

The trading record of the Company demonstrates strong profit growth and cash generation. BATM is an approved enterprise in Israel and has tax free status in respect of retained profits from its approved activities for a period of eight years from 1992. The charge for taxation is accordingly low.

The current order book is strong and the Directors are confident that 1996 will show good growth in both turnover and profits. The Directors estimate that sales for BATM (excluding Batnet and BTT, two small members of the Group) for the first half of 1996 will show growth of 52 per cent. over the comparable period in 1995. On the same basis they estimate profits before tax for the consolidated Group will be not less than

Key Information
BRTM ADVANCED COMMUNICATIONS LIMITED

US$1.45m for the first half of 1996, representing an increase of 11.5 per cent. over the comparable period of 1995. This estimate takes into account the very substantial increase in marketing and research and development expenses incurred by the Company as it begins to extend its sales beyond Europe and to develop new products.

## Use of Proceeds

The Placing will raise £8 million before expenses, assuming full subscription. The Company intends to use these monies to fund increased marketing of the Company's products and, in particular, expanding into the North American market, a new manufacturing / research and development facility in Israel, and provide additional working capital. It will also provide the means to enable the Company to acquire interests in strategic partners. Such acquisitions are expected to enhance the product range and extend corporate capabilities as well as cementing relationships.

## Placing Statistics

(Assuming full subscription to the Placing)

|  Placing price per share | 125p  |
| --- | --- |
|  Number of shares being placed* | 6,517,450  |
|  Funds raised by subscription of Placing Shares (before expenses) | £8,000,000  |
|  Number of shares in issue following the Placing | 31,056,112  |
|  Market capitalisation at the Placing Price | £38,820,140  |
|  Earnings per share: historic | 6.92p  |
|  Price/earnings ratio: historic | 18.1  |
|  Profit estimate for the six months ended 30th June 1996 | US$1,450,000  |

*6,400,000 new shares, 117,450 sale shares

## Expected Timetable

|  Placing closes | 1996  |
| --- | --- |
|  Basis of allocations announced | Friday 5th July  |
|  Dealings on AIM begin | Monday 8th July  |
|   | Friday 12th July  |

Part One Introduction
BATM ADVANCED COMMUNICATIONS LIMITED

BATM develops and manufactures communications equipment for use by organisations of all sizes in their communications networks. Historically, the Company focused on data communications systems for local area and wide area networks of computers, a rapidly growing field. As data communications systems become integrated with voice telephony and video conferencing, the Company has developed products to meet a broader range of applications.

Based in Israel, but exporting more than 90 per cent. of its networking products, predominantly to Europe, BATM has established an expertise in designing and manufacturing sophisticated products to handle the demands for reliable, manageable networks offering greater bandwidth to the user. Its expertise is evidenced by the number of industry leaders which have looked to the Company for solutions to technical problems and for innovative products to exploit new technologies.

Selling primarily through distributors, BATM has built up a large range of products. These products are designed to increase the rate, range and reliability of data transfer within communications networks and to facilitate communication between computers and computing systems which operate under a variety of communications standards.

In addition to its networking business, BATM has interests in two businesses focused primarily upon the Israeli market. BTT, in which it has a 50 per cent. interest, is a distributor of communications equipment within Israel and which, in particular, specialises in providing the Israeli telephone service with equipment to monitor and improve the efficiency of its systems. BatNet, in which BATM has a 85 per cent. interest, is a systems integrator, i.e. designer and installer of networks on a turnkey basis, and amongst other things acts as a testbed for some of BATM's products.

BATM has grown rapidly since the networking business began in 1991. As it has grown, it has moved closer to the cutting edge of new technology, in particular fast networks, Bandwidth on Demand and sophisticated network management. Consistently profitable, it has funded the required research and development from cashflow, grants and co-operative arrangements with partners. The Directors believe it is now well-placed to capitalise on this development activity.

Until recently the Company has concentrated mainly upon the European market, although it has now carried out its first sale in the Far East. However, the greatest short term potential for its new products is in North America and it intends to launch there during 1996. This North American operation will also be used to service the entire Americas as there is already demand for BATM's products in South America.

The Company's growth will lead it shortly to outgrow its existing factory/research and development facility. It has, through a contract with the Israel Land Authority, acquired an interest in a site to build a new centre close to the existing one. Although the Company has accumulated considerable cash resources, it wishes to raise equity finance to fund the expansion in America and the new facility. It also seeks to provide the means to fund "bolt-on" acquisitions which will complement its existing technical strengths.

For all these reasons, the Company now proposes to become public by admission of its shares to trading on the Alternative Investment Market of the London Stock Exchange. The Placing will raise £8 million before expenses (assuming full subscription) which, the Directors believe, will put the Company in a strong position to realise its ambitious growth plans.

10

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History

BATM ADVANCED COMMUNICATIONS LIMITED

BATM's business originated in a company founded by Dr Zvi Marom with Mr Gershon Beres. This company mainly wrote software for DEC computers running under the Unix and proprietary DEC operating systems as a sub-contractor. In 1991 the founders decided to move into the design and manufacturing of computer networking equipment. Mr Beres owned a substantial cable importing and distribution business within Israel with a wide range of contacts in Europe. Dr Marom had the technical expertise to develop this new business, having previously specialised in signal and data processing. This had included work on a project to make a town in Galilee, Carmiel, fully computerised offering interactive connections to its citizens.

As Israel offers tax privileges or grants to qualifying technology based companies, in 1992 Dr Marom and Mr Beres established a new company, BATM, to take this business forward with the benefit of these tax privileges (see Taxation and Investor Considerations section below). The predecessor company has been placed into members' voluntary liquidation.

The first range of products were in technical terms relatively simple, such as adaptors and ancillary equipment for cable, which took only a short time to develop. Whilst this initial range consisted essentially of "me too" products which the Company aimed to supply at competitive prices, the management soon decided to concentrate on achieving superiority by improving the versatility of the products. The original focus was on the German market where purchasing decisions are arguably more technically driven than in other markets and hence where distributors were willing to take and promote the products of relatively young manufacturers if convinced of their technical merits.

The next area of development for the Company was developing communications equipment for IBM's proprietary AS/400 mini-computer system. The AS/400 is the world's largest selling mini-computer and is installed in a wide range of operating environments (factories, offices, bank branches, shops etc.). BATM analysed the proprietary protocol used by AS/400 systems, namely the 5250 protocol, and developed a range of multiplexors, stars and convertors from optical fibre to copper. These offered AS/400 users competitive prices, a high degree of reliability and the versatility to install their computer and terminals using either cable already in place or modern structured wiring or a combination of both.

The advantages of this range of equipment were sufficient to interest various IBM operating subsidiaries and distributors to become distributors for these products.

Having successfully established this AS/400 range, BATM then introduced a similar range of products for the Token Ring networking standard, which is used predominantly in medium to large sites for a wide range of computer networks. The Token Ring range is sold through distributors, under the BATM label.

In May 1994, BATM entered into a joint venture agreement with Larscom, a data communications company based in Santa Clara, California and a subsidiary of Axel Johnson Inc. Under this agreement, BATM and Larscom agreed to develop a specialised bridging product to connect two Local Area Networks using inverse multiplexing, i.e. combining a number of medium speed data lines into a channel with wider bandwidth. Funding for this project was provided by Larscom and by the Binational Industrial Research and Development Foundation owned by the United States and Israel.

The project envisaged developing products which could, through remote management of bridging products, provide Bandwidth on Demand to the networks being bridged. The project represented BATM's first move into the United States and is described more fully below.

During 1995 the Company continued to broaden both its range of products and its distribution channels. Most significantly it began developing a new range of fast Ethernet products (Ethernet being the most widely used networking standard), designed to offer a migration path to ATM. In 1996 it agreed a joint development

11

History

BATM ADVANCED COMMUNICATIONS LIMITED

programme with a small German company to develop an ATM switch multiplexor. This device manages and controls networks operating at much higher bandwidths than are currently in use, working to and using the new ATM protocol adopted as an international standard by the communications industry.

BATM is now primarily a designer and manufacturer of communications equipment for corporate networks, both within buildings and between buildings. The Company's range is increasingly focused on products embodying considerable research and development, with the more straightforward adaptors with which it began now representing a decreasing proportion of turnover.

A common element of the new products is that their development involved a strong understanding of the communications protocol under which they operate. This understanding is then manifested in proprietary software routines which handle the communications traffic, managing its flow and re-routing or converting it as appropriate. These proprietary routines are often hard-coded onto silicon devices and assembled on printed circuit boards designed by the Company.

As a by-product of this activity, BATM is building up a speciality in designing and developing software for third party communications equipment. This work is undertaken under contract for an up-front fee and a royalty interest in the completed product. The joint venture with Larscom is essentially such an arrangement, and the Company has recently undertaken similar work for a sizeable German company. These research and development projects can lead to on-going co-operation and to BATM being asked to manufacture the product, as in the case of the Larscom joint venture.

However, the bulk of BATM's business involves manufacturing as well as research and development. Thus the Company's research and development team will normally design a product in its entirety and, other than in the case of a joint development, will hold all intellectual property rights to the product through copyright and, where appropriate, trademark protection (see Intellectual Property section below). BATM commissions independent sub-contractors to produce the requisite components on the basis of electronic assembly drawings supplied by its research and development department. The sub-contractors manufacture to the motherboard stage with bought-in components provided by BATM's purchasing department.

The Company then undertakes final assembly, testing and quality control in-house. This is primarily to ensure quality and reliability but has the added advantage that know-how in relation to the entire product rests solely within the Company. BATM typically provides a warranty for its products of between one and five years, depending upon their type. Return information collected by the Company indicates a low failure rate.

The Company conforms to and constantly updates the various certifications and standards for its products. The Company is in the final stages of its certification for ISO 9001; BTT (see below) is ISO 9002 authorised. The Company is authorised by several large data communication companies and customers to manufacture for them. These companies have certified BATM in relation to all their health and safety requirements.

12

Business
BATM ADVANCED COMMUNICATIONS LIMITED

## Operations and Premises

The Company's head office is in the Petach Tikva industrial zone to the east of Tel Aviv and close to Ben Gurion, Israel's main airport. A software team also occupies a small office in Herzlya, to the north of Tel Aviv. Research and development and manufacturing are undertaken on a site in the Yokneam Industrial Zone near Haifa in North Central Israel, an area which has excellent road connections to North and Central Israel. BATM recently contracted to acquire a site in Yokneam by way of a long lease. It is intended that this site, when developed, will replace the Company's existing facility.

## Sales, Marketing and Distribution

From its beginning, most of BATM's networking products were exported. In 1993 83% of turnover was exported, 89% in 1994 and 92% in 1995 with the largest market being Germany. To achieve these sales, BATM has largely dealt through distributors. Distribution is organised territory by territory, with the distributor taking stock. The distributor is responsible for technical support to the final customers with the assistance, if necessary, of BATM.

Distributors are primarily supported directly from Israel, but BATM also has an operating subsidiary in the UK to provide marketing and technical support for the UK and most of Scandinavia. The Company has, in conjunction with the its German development partner with which it is co-operating in ATM development, recently opened an operating company in the United States to service the Americas. These companies are discussed below.

## Group Structure

Although BATM is primarily a designer and manufacturer of communications equipment, it also has interests in two other businesses:

### B.T.T. Beres Communication Technologies Limited

The BTT business was formed eighteen years ago by Mr Beres as a division of his company, G. Beres Limited, to import and distribute communications equipment within Israel. The company was incorporated as a separate entity in April 1994. In August 1994 Mr Beres injected 30 per cent. of his interest in BTT into BATM at par consideration in return for BATM providing BTT with technical support from BATM's engineering staff. In 1995 BATM's interest was increased to 50 per cent. as a result of its subscribing additional equity at par value. The company now primarily distributes and maintains equipment for monitoring and improving the efficiency of telecommunications networks.

BTT supplies a wide range of major Israeli companies with communications equipment including connection modules and special telephony monitoring equipment. Its principal customer is now Bezeq, the Israeli telephone company, but its customers include ECI and Cellcom. It imports and distributes products from German, US, French and Japanese manufacturers for which it has exclusive rights.

In recent years it has concentrated upon equipment for monitoring and improving the efficiency of telecommunications networks:

13

BATM ADVANCED COMMUNICATIONS LIMITED

Group Structure

Monitoring: BTT sells and maintains equipment which monitors the operation of telephone lines. The equipment is supplied by a German company and identifies malfunctions within copper cables with a considerable degree of accuracy, thereby minimising the amount of excavation work required to detect and repair line faults. BTT currently supplies this equipment to Bezeq, Israel's leading telecommunications company. The company also has a separate maintenance agreement with Bezeq covering all such equipment which BTT has so far installed.

The monitoring equipment can only be used on copper cabling which has been encased in air pressurised tubing. It is estimated that around 85 per cent. of Bezeq's existing copper cabling is pressurised and, of that 85 per cent., half is currently subject to monitoring by BTT's equipment.

Efficiency Improvement: BTT also sells and maintains equipment which assesses the line efficiency of telecommunications networks. This equipment is manufactured by a British and an American company and works as a system to identify lines which are not being used because, for example, they have been involuntarily overlooked by a telecoms company during network expansion. This enables the telecom company to take steps either to ensure that such lines are put to better use or to disconnect the lines entirely and therefore reduce costs. Again, the primary customer for this equipment is Bezeq.

BTT's turnover was US$354,000 in 1994 but dipped in 1995 to US$285,000 as a result of a hiatus in orders by Bezeq, leading to a small loss in that year. Business has improved again in 1996 as a result of a resumption of orders. BTT has a staff of 4 and draws upon BATM engineers for additional support.

## Bot-Net Communication Networks Limited

BatNet acts as a systems integrator for Israeli companies, i.e. it specifies and installs networks on a turnkey basis.

In July 1995, BATM acquired a majority stake in BatNet and redefined its commercial aims to make them more synergistic with those of BATM. BATM has an 85 per cent. interest in the company with the remaining 15 per cent. held by Mr Gershon Beres. Its present objectives are to:

- continue as a systems integrator, selling and installing datacoms equipment produced by BATM and other complementary products to large end users such as the Israel Electrical Company and various Israeli Government bodies;
- establish a number of large scale sites where newly developed products by BATM can be tested and monitored; and
- identify and form alliances with companies and organisations considered complementary to BATM.

BatNet currently employs a staff of 7 and achieved turnover of US$1,120,000 in 1995 on which pre-tax profits were US$54,000.

## Distribution subsidiaries

BATM also has two distribution subsidiaries, B.A.T.M. (UK) Limited and Advanced Communication Networks Inc.

## B.A.T.M. (UK) Limited

BATM (UK) is a wholly owned subsidiary of BATM and was set up in 1994 to provide a marketing and customer support base for BATM's growing UK operations. It currently has two employees. Equipment

14

BATM

Group Structure

BATM ADVANCED COMMUNICATIONS LIMITED

manufactured by BATM in Israel is transported by air to BATM (UK) and on to the customer normally within 6 weeks of the company receiving an order. A relatively small amount of equipment is held as stock by BATM (UK).

BATM (UK) operates both independently and through a number of leading UK distributors. BATM (UK) is an approved supplier of a range of AS/400 communication products to IBM UK. IBM UK has undertaken to market, sell and provide support for these products to its UK AS/400 customers.

## Advanced Communication Networks Inc.

In April 1996 BATM established a US operating company, ACN. The company was formed as a 50:50 joint venture between BATM and its German development partner with the aim of marketing the products resulting from their joint research and development throughout North America.

## Industry Background and Company Strategy

The LAN/WAN field of data communications is one of the most dynamic areas of the information technology industry. As the number and expectations of users grow, so too does the demand for increased networking bandwidth. At the workgroup and the campus level, growth in desktop processing and video and graphics oriented applications has resulted in a continuous pursuit for increased networking bandwidth.

For WANs the situation is worse because the bandwidth available is not nearly sufficient to cope with the demand. The data communications industry is therefore continuously striving to improve the capabilities of existing computer networks by developing add-on products which enhance a network's data transfer rate and information bearing capabilities. At the same time, companies are spending a significant amount of their time and resources developing new methods of data transmission.

Telecommunications carriers have introduced new services at higher speeds and lower prices (megabit links, fractional megabit links, ISDN etc.) while looking for new methods of service (Bandwidth on Demand) and new universal protocols for combining voice and data such as ATM.

This market is highly competitive. The LAN and LAN to WAN field is dominated by a few big companies, mainly US based such as Cisco, Bay Networks, 3COM and Cabletron. In addition, major computer companies such as IBM have returned to this market and there are also several midsize companies with innovative devices such as Ascend, Cascade and New Bridge.

As a result of this rapid technological development and the consequent complexity of having to cope with constantly changing communications standards, relatively small and therefore flexible companies with innovative designs and niche know-how are well-placed to penetrate a share of the market provided they have sufficient marketing, support and distribution capabilities with which to attract customers.

Rather than attempting to compete directly with established market leaders, BATM has concentrated its efforts on particular market segments, developing specialised LAN products for medium size companies with computer networks of 20 to 400 workstations in Ethernet and larger networks in other protocols. As it has broadened its product range, it has sought to co-operate with major companies. By so doing, BATM is not only able to offer customers support for its products but also has access to the considerable marketing and distribution capabilities of these large companies.

BATM ADVANCED COMMUNICATIONS LIMITED

BATM develops and manufactures a range of products which, broadly speaking, divide into the following four categories: LANs, LAN to WAN, Proprietary Protocols and Structured Wiring.

## 1. LANs

BATM produces a variety of hubs, both active and passive, for use in Token Ring and Ethernet local area networks. The products are modular, easy to use, competitively priced and support the majority of cable types, including fibre optic. The cable connections are also upgradable in the field for greater flexibility.

BATM is currently developing switches for fast Ethernet which are expected to be available to the market from the beginning of 1997. The Directors consider that elements in these products put them at the cutting edge of technology.

## 2. LAN to UJAN

These products facilitate connection between local area networks and wide area networks by enabling data, video and sound to be transmitted at extremely high speeds between networks operating under different protocols. Products include multiplexors and other related equipment based around BOD and ATM technology.

### BOD

BATM's bandwidth on demand product enables Ethernet users to communicate over a WAN at the full Ethernet LAN speed by transmitting over multiples of high speed lines.

This product is now being introduced under the name EtherSpan by Larscom and first orders have already started to be shipped to customers. Models with video conferencing management are under development.

The Directors believe that these products offer a breakthrough in performance and price.

### ATM multiplexing/switching

The ATM protocol is expected to be the leading WAN protocol by the turn of the century. The Directors believe that ATM with fast Ethernet is a winning combination. In conjunction with its German partner, BATM is currently designing a switching machine that would be amongst the most powerful in the industry. This would have at least 16 and possibly up to 96 ports of non-blocking fast Ethernet with an ATM uplink.

The Company expects to launch these products into the market in the first quarter of 1997.

## 3. Proprietary Protocols

The principal range relates to the IBM protocol 5250 under which the AS/400 mini-computer operates. All such products are fully compatible with the AS/400 and subsequent models derived from that computer. These products are marketed in several parts of Europe in conjunction with IBM under the heading ACS ("Advanced Connectivity System") and include hubs and multiplexors. This ACS family of products facilitates communication between an AS/400 and other computers and computing systems operating under different communication standards. The ACS also allows extension in geographical terms of an existing AS/400 network, acceleration of data transference within such a network and operating an AS/400 within a structured wiring network rather than solely using the older twinax cable previously supported by IBM.

16

BATM
BATM ADVANCED COMMUNICATIONS LIMITED

The other major area of activity is real-time management software for proprietary PABXs. This software enables the control of switching matrices operating with relay based frames.

## 4. Structured Wiring

BATM offers a variety of accessories to improve connections between different cabling systems. Devices under this heading include panels, filters, baluns and surge protectors. All products conform to the latest industry standards and provide the user with a cost-effective alternative to rewiring.

## Joint Venture with Larscom

As discussed above, BATM has a joint venture with Larscom, a Californian company, to develop products in the Bandwidth on Demand area. This aims to provide the full 10Mbps bandwidth of a standard ethernet LAN over public data lines of 1.5Mbps and above by inverse multiplexing. The design is such that it can accommodate ATM in future.

These products are targeted towards large private networks and services provided by telephone carriers. The products resulting from this project offer bandwidth on demand service in a manner not previously possible.

The agreement with Larscom provides that Larscom may manufacture the products if it wishes, but, since their launch earlier in 1996, Larscom has sought supply from BATM. Larscom has the exclusive rights to the products in North America, whilst rights outside Israel and North America are shared between the partners (i.e. both can sell the products). Each party is entitled to a royalty on the other's sales. Further details of this agreement are set out in Part Four of this document.

## Intellectual Property

Intellectual property rights in relation to computer network hardware and software lie in the design of printed circuit boards, the software embodied in micro processor chips and written to run the data communications equipment and the trade marks under which products and services are supplied.

Software is automatically protected by copyright as soon as the software has been written. Copyright protects against copying but does not confer the same monopoly rights as patent protection. The Directors do not consider patent protection practical nor do they believe that filing for patents would be in the Company's best interest.

With the exception of one sub-contract for the development of rights for a third party, all BATM's software has been written by employees of the Company. Under Israeli law, software created by an employee in the course of his employment belongs to the employer.

17

Directors, Management and Employees
BRTM ADVANCED COMMUNICATIONS LIMITED

## Directors

Gershon Beres (Non-executive Chairman, aged 63) graduated in economics and statistics from Tel-Aviv University and has a post-graduate degree in industrial management from the Technion University, Haifa. He was district manager of N.C.R. Haifa for ten years and then general manager of Micro Communication System Limited for a further six years. In 1976 he left to found G.Beres Limited.

Dr. Zvi Marom (Managing Director, aged 41) co-founded BATM. A former first lieutenant in the Israeli Navy, he graduated first (with excellence) in electronics from the Naval Academy and first (with excellence) from the Advanced Naval Command Course. He has a post-graduate degree in medicine from the Sacler School of Medicine, Israel and a MSc in industrial electronics. He was head of the electronics faculty at the Israeli Open University and of the PC software programming department at the Centre for Education Technology, Israel. He has lectured and provided consultancy advice in the field of electronics to a wide range of individuals and corporations and he was primarily responsible for the design and implementation of an Israeli Government pilot project which provided a town with a total IT communications solution (Carmiel 2000). He is on the board of several national and international academic committees for computing and communications.

Jacob Rosen (Finance Director, aged 43) graduated in economics and accounting from Tel Aviv University. He was a controller of a small industrial company in the Koor group and then served as the assistant director of finance for Argaman Industries. Between 1988 and 1992 he was the head of finance in Gadot Industries and Petro-Chemicals, a large industrial company which dealt in both the Israeli and the export markets. In 1992 he left to become deputy managing director for finance of PST, a subsidiary of Geotek and Rafael companies which specialised in communications. From 1994 he was the deputy managing director for finance and a director of a software company in Israel. He is joining the Company at the beginning of July 1996.

David Goldman MBE (Non-executive, aged 59) is the founder and chairman of The Sage Group plc. Founded in 1981, Sage is an international computer software company with operating subsidiaries in the UK, France, Spain, Portugal and the USA. He is a former Coopers/Times Newspaper "Entrepeneur of the Year", holds an honorary Doctorate in Business Administration from Sunderland University - where he is also a Governor - and received his MBE for 'services to the computing industry'. He also holds a number of non-executive directorships outside of the technology industries.

Yakov Be'ery (Non-executive, aged 67) has a degree in electrical engineering and a masters degree in digital computers from the Technion University, Haifa. He is a veteran of the Israeli Defence Force's Signals and Communications Corp, with the rank of Lt. Colonel. He has spent almost 30 years working in electronic engineering and is a director of Neviot Limited, an Israeli listed company.

## Management and Employees

Whilst all major strategic and financial issues are determined by the Board, the more operational and day-to-day side of management is performed by the management board. The management board consists of the following key executives:- Dr Zvi Marom, Ben-Zion Crystal, Dov Lapid, Mordechai Rosenstock and, from July, Jacob Rosen.

Ben-Zion Crystal (research and development director, aged 43) joined BATM in 1993. He graduated in electronics from the Technion University, Haifa and has a post-graduate degree in industrial management from Haifa University. He was a systems design engineer in the Israeli army for four years. In 1983 he left to work for Fibronics, with whom he remained for the next ten years, specialising in the installation and design of Ethernet and Token Ring networks.

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BATM

Directors, Management and Employees

BATM ADVANCED COMMUNICATIONS LIMITED

Dov Lapid (sales and marketing manager, aged 41) joined BATM in 1995. He graduated in electrical engineering from the Technion University, Haifa and has a MBA from Tel-Aviv University. A major in the Israeli Air Force, he was in charge of its data communications department with responsibility for the development of some of the largest and most complex communication networks in Israel. He left the Air Force in 1983 and began work as a product manager with Telrad Telecommunications Industries, a telecommunications equipment manufacturer with a turnover in the order of US$300m. He remained with Telrad for ten years, during which time he became its export manager with responsibility for Telrad's export markets.

Mordechai Rosenstock (operations and production director, aged 41) holds an electrical engineering degree from the Technion University, Haifa. He was a system design engineer with Fibronics and subsequently technical director, Fibronics US, before joining BATM in 1991.

Excluding BTT and BatNet the Company employs 66 people, nearly all in Israel. 26 of the staff work in research and development and a high proportion of the remainder are also qualified engineers. BATM offers in-depth training for its staff and the Directors consider that it benefits from a high degree of technical expertise.

# Financial Record

The following is a summary of the trading record of BATM for the three years ended 31st December 1995. The summary has been extracted from the Accountants' Report set out in Part Two.

|  Years ended 31st December | 1993
US$000 | 1994
US$000 | 1995
US$000  |
| --- | --- | --- | --- |
|  Turnover | 2,867 | 4,913 | 7,619  |
|  Operating profit | 920 | 1,172 | 2,556  |
|  Share of profit/(loss) of associated undertaking | — | 10 | (29)  |
|  Financial income (expenses) (net) | 85 | (28) | 193  |
|  Profit before taxation | 1,005 | 1,154 | 2,720  |
|  Taxation | (56) | (99) | (70)  |
|  Profit after taxation | 949 | 1,055 | 2,650  |
|  Minority interests | — | — | (4)  |
|  Profit for the financial year | 949 | 1,055 | 2,646  |
|  Dividends | (167) | (298) | (200)  |
|  Retained profit | 782 | 757 | 2,446  |
|  Earnings per share (in cents)* | 3.85 | 4.28 | 10.73  |

* Earnings per share is based on the profit for the year and the number of shares in issue, adjusted for the 10 for 1 share split, the additional shares issued to employees and an ex-employee and the bonus issue immediately prior to the Placing.

The table shows that the Company has shown strong growth in both turnover and profits over the period. Indeed the Company has been profitable and generated cash virtually from its foundation.

Financial Record
BATM ADVANCED COMMUNICATIONS LIMITED

Turnover in 1995 was US$7.6m on which the Company earned profit after taxation and minority interests of just under US$2.65m. All research and development costs are taken to the profit and loss account in the period in which they incurred. The profits were largely generated within BATM's networking business with a small contribution from BatNet.

The Company's balance sheet at the end of December 1995 was strong with net worth of US$4.8m, of which over US$3m was held as cash, deposits or marketable securities.

## Dividend Policy

Provided the Company continues to achieve adequate profitability, the Directors anticipate paying dividends in respect of the financial year ending 31st December 1996 and will continue to do so afterwards as appropriate. They would expect to pay interim and final dividends in the ratio one third to two thirds and do not anticipate an interim dividend for 1996.

## Taxation and Investors Consideration

### Taxation

The following is a brief summary of the current tax regime applicable to BATM and the UK and Israeli tax consequences for persons acquiring Ordinary Shares. The summary is not intended, and should not be construed, as legal or professional tax advice. Investors should obtain such advice from their own professional adviser before applying for Ordinary Shares.

### Company

BATM's manufacturing facility was granted an "approved enterprise" status in 1992 and several subsequent investments relating to the facility were approved by the Investment Centre between 1992 and 1995. The Company elected to participate in the "Alternative Benefit Program" under which it received a full tax exemption on its undistributed income during its "Benefit Period". It was granted an eight year Benefit Period which commenced in 1992.

Thus, whilst tax is payable on profits made by non approved activities such as BatNet and BTT, it is not payable on profits earned by BATM within Israel which are not distributed to shareholders. In the event of a distribution of cash dividend out of tax-exempt income, the Company will be liable to corporate tax at a rate of 25 per cent. in respect of the amount distributed.

Income derived from sources other than the "approved enterprises" was taxable at the regular corporate tax rate of 37 per cent. in 1995. The corporate tax rate is 36 per cent. in 1996.

A more detailed discussion of Israeli taxation on companies is included in Part Four.

20

---

Taxation and Investor Considerations
BATM ADVANCED COMMUNICATIONS LIMITED

# Shareholder Considerations

## (a) Dividends

Any dividends received by UK domiciled individual or institutional shareholders from the Company and the associated Israeli withholding tax deducted at source are both included in arriving at such a shareholder’s total income and are regarded as the top slice of that income for taxation purposes. The amount of the Israeli withholding tax should be available as a credit against such a shareholder’s UK tax liability. However, if the amount of the Israeli withholding tax exceeds the UK tax liability, a repayment of the excess is not available.

The amount of any dividends received by non-UK domiciled individuals from the Company and the associated Israeli withholding tax will only be included in arriving at such a shareholder’s total income for UK taxation purposes to the extent that the dividends are remitted, or construed, to the UK.

The position for non-UK shareholders will depend upon the existence of a double tax treaty between Israel and their country for tax purposes, Israel has double tax treaties with most European countries.

## (b) Exchange restrictions for Israeli residents

Non-residents of Israel who purchase Ordinary Shares with pounds sterling or other foreign currency will be able to convert to dividends (if any) thereon, and any amounts payable on the dissolution, liquidation or winding up of the affairs of the Company, as well as the proceeds of any sale in Israel of Ordinary Shares to an Israeli resident, into freely repatriable pounds sterling, at the rate of exchange prevailing at the time of conversion, pursuant to regulations issued under the Currency Control Law 1978 of Israel.

Israeli residents are eligible to purchase securities of certain companies, including the Ordinary Shares, if they are listed on a foreign stock exchange in designated countries, which include Great Britain. Such investments must be effected through an Israeli commercial bank.

Under the applicable currency control regulations, the proceeds of a public offering outside Israel must be transferred to Israel. A special permit from the Controller of Foreign Currency will be required to retain any part of such funds outside Israel.

# Reasons for the Placing

As discussed above, the Company has plans to launch an innovative range of products in the next year or so and its Directors believe that these have considerable potential in new and existing markets. They have recently established ACN to market some of these products in the United States.

As the Company’s growth plans come to fruition, the Directors expect them to place an increasing demand on its cash resources. The US operation will need to be funded, as will the research and development programme, marketing the new products in Europe and the new facility planned at Yokneam. For all these reasons, it seems prudent to the Directors to seek additional equity.

In addition, the Directors wish to acquire interests in strategic partners to cement relationships and enhance BATM’s technical and marketing capabilities. These may be funded partly in cash and partly by way of issuing shares. By having its shares publicly quoted, the Directors intend to provide the Company with the means to implement such acquisitions.

21

Risk Factors
BATM ADVANCED COMMUNICATIONS LIMITED

Prospective investors in the Company's shares should be aware of the following risk factors:-

- Application has been made to admit the Ordinary Shares to trading on AIM. AIM is a new market designed primarily for emerging or smaller companies and shares traded on AIM do not necessarily have the same liquidity as shares traded on the Official List. Accordingly, an investment in such shares may be more difficult to realise than an investment in shares quoted on the Official List. In addition, due to the lower disclosure requirements imposed on companies whose shares are traded on AIM, there may not be adequate information to determine the value of such shares at any particular time.
- The Company is dependent on a number of key contractual relationships with customers, particularly IBM, for a substantial proportion of its turnover and on key personnel for its continuing success.
- BATM is a high technology company which provides an additional source of risk. New techniques and new entrants may affect BATM's business and other business risks are greater than for a company in a more mature industry.
- The value of the Ordinary Shares may go down as well as up. Investors may therefore realise less than their original investment.
- The Company may seek to raise further capital in due course to fulfil its potential.
- The Company is based in Israel which has an ongoing conflict with some of its neighbours.

Shore Capital and Winterflood Securities intend to act as market-makers in the shares following the Placing.

## The Company's Strengths

The Directors consider the Company's strengths to be:

- its well positioned product portfolio
- its ability to innovate in a complex and fast changing field
- its growing reputation amongst equipment manufacturers and distributors as a problem solver
- its technical team who are recognised to be first class electronics and software engineers
- its lean flat structure allowing it to produce high quality, reliable products at competitive prices with excellent margins.

## Current Trading and Prospects

The Company is currently experiencing strong growth in its business. Growth is particularly strong in both AS/400 and LAN products. BTT and BatNet are both generating profits on increased turnover. On the bases and assumptions set out in Part Three of this document, the Directors estimate that BATM (excluding BatNet

Current Trading and Prospects

BRTM ADVANCED COMMUNICATIONS LIMITED

and BTT) will achieve turnover for the first half of 1996 of US$4,700,000, an increase of 52 per cent. on the same period of 1995. On the same basis, the Directors estimate profits before taxation for the entire Group will be not less than US$1,450,000 for the first half of 1996, an increase of 11.5 per cent. on the same period of 1995. This estimate takes into account the very substantial increase in marketing and research and development expenses incurred by the Company as it begins to extend its sales beyond Europe and to develop new products.

Looking forward, the Directors anticipate continued growth in the remainder of 1996. Prospects for 1997 will reflect the reception of the new products in the fast Ethernet, Bandwidth on Demand and ATM areas as well as the continuing growth of the existing range into the new geographical markets.

Part Two: Accountants' Report
BATM ADVANCED COMMUNICATIONS LIMITED

BDO

BDO Stoy Hayward
Chartered Accountants
ALMAGOR &amp; Co. CPA (ISR)

8 Baker Street London W1M 1DA
7 Abba Hillel Rd. P.O. Box 3600
Zip 52134, Ramat-Gan, Israel

The Directors
BATM Advanced Communications Limited
9 Basel Street
PO Box 4048
49130 Petach-Tikva
Israel

and

The Directors
Shore Capital and Corporate Limited
1 Maddox Street
London
W1R 9WA

3 July 1996

Dear Sirs

BATM Advanced Communications Limited ("BATM" or "the Company") was incorporated in Israel in January 1992 as B.A.T.M. (1992) Limited and commenced trading in March 1992. It changed its name to BATM Advanced Communications Limited in May 1996 and became a public company in June 1996.

The financial information set out below is based upon the audited financial statements of BATM and its subsidiaries (together "the Group"), without adjustment.

We have examined the audited financial statements of BATM for the three years ended 31 December 1995 ("the Relevant Periods"). Our work has been carried out in accordance with the Auditing Guideline: Prospectuses and the reporting accountant.

The auditors to the Group were Ofer Minirav CPA (ISR) for the two years ended 31 December 1994 and Almagor &amp; Co CPA (ISR) for the year ended 31 December 1995. The audit report for each of the Relevant Periods was unqualified.

No audited financial statements have been prepared for the Group in respect of any period subsequent to 31 December 1995.

In our opinion the financial information set out below gives, for the purposes of the document of which this report forms a part, a true and fair view of the profits and losses and cash flows of the Group for each of the Relevant Periods and of its state of affairs at the end of each of the Relevant Periods and we accept responsibility for this report accordingly.

24

Part Two: Accountants' Report
BATM ADVANCED COMMUNICATIONS LIMITED

## 1. Accounting Policies

The following principal accounting policies have been consistently applied throughout the Relevant Periods and are in accordance with applicable United Kingdom accounting standards.

### (a) Presentation of financial information

The financial information has been prepared under the historical cost convention in US Dollars.

The US dollar is the functional currency of the Company. Transactions and balances denominated in US dollars are presented at their original amounts. Transactions and balances in other currencies are translated into US dollars. All exchange gains and losses arising from the translation of monetary balance sheet items are reflected in the profit and loss account as they arise.

The financial statements of a subsidiary undertaking and an associated undertaking in Israel whose functional currency is the new Israeli shekel (NIS) are translated as follows:

Assets and liabilities are translated into dollars at the rate of exchange ruling on the balance sheet date; results of operations are translated into dollars at an average exchange rate for the year. Exchange differences which arise from the translation of the opening net investment are taken to reserves.

### (b) Consolidated financial information

The consolidated financial information includes the financial information of the Company and all its subsidiary undertakings. Results of subsidiary undertakings are included from the date of acquisition. Inter-company balances and transactions are eliminated on consolidation.

The excess of cost over the equity on the acquisition of a subsidiary from controlling shareholders has been deducted from reserves in the period in which it arises.

### (c) Associated undertakings

The group's share of the results of associated undertakings is included in the consolidated profit and loss account using the equity method of accounting. The investment in associated undertakings included in the consolidated balance sheet is based on the group's share of the net assets of associated undertakings, together with any premium or discount arising on acquisition, less amounts written off. Any premium on acquisition is dealt with as if it were goodwill.

25

Part Two
Accountants' Report
BRTM ROVRNCED COMMUNICATIONS LIMITED

(d) Rates of exchange and linkage terms

Balances in, or linked to, currencies other than the dollar are included at the rate of exchange prevailing at the balance sheet date. Details of the percentage changes in the value based on rates of exchange of non-dollar currencies are as follows:

|  As at 31 December | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|  Change in the year: |  |  |   |
|  New Israeli shekel | (8.1%) | (1.1%) | (3.9%)  |
|  German mark | (7.4%) | 12.0% | 7.5%  |

(e) Revenue recognition

Revenues from the sale of products are recognised at the time of delivery to customers.

(f) Research and development costs

Research and development costs, net of grants, are expensed as incurred.

(g) Fixed assets

Fixed assets are stated at cost less accumulated depreciation and amortisation. Depreciation is provided by the straight-line method, at annual rates calculated as sufficient to write off the assets over their estimated useful lives. Amortisation of leasehold improvements is calculated over the period of the lease, assuming that an option to extend is exercised.

Rates of depreciation and amortisation are as follows:

|   | %  |
| --- | --- |
|  Computers | 20  |
|  Tools and equipment | 10-20 (mainly 20%)  |
|  Motor vehicles | 15  |
|  Office furniture and equipment | 6-15 (mainly 6%)  |
|  Leasehold improvements | 40  |

(h) Stocks

Stocks are stated at the lower of cost and net realisable value. Cost is determined on a "first in-first out" basis in respect of raw materials. Finished goods and work in progress are stated at cost which includes materials, direct labour costs, subcontractors and other production expenses.

Part Two: Accountants' Report

BATM ADVANCED COMMUNICATIONS LIMITED

## 2. Profit and Loss Accounts

|  Year ended 31st December | Notes | 1993 | 1994 | 1995  |
| --- | --- | --- | --- | --- |
|   |   |  $000 | $000 | $000  |
|  Turnover | 6(a) | 2,867 | 4,913 | 7,619  |
|  Cost of sales |  | (1,097) | (2,438) | (3,218)  |
|  Gross profit |  | 1,770 | 2,475 | 4,401  |
|  Net operating expenses | 6(b) |  |  |   |
|  Research and development costs, net |  | 180 | 257 | 497  |
|  Selling, general and administrative expenses |  | 670 | 943 | 1,355  |
|   |  | 850 | 1,200 | 1,852  |
|  Other operating income/(expenses), net | 6(c) | — | (103) | 7  |
|  Operating profit | 6(d) | 920 | 1,172 | 2,556  |
|  Share of profit/(loss) of associated undertaking |  | — | 10 | (29)  |
|  Financial income/(expenses), net | 6(g) | 85 | (28) | 193  |
|  Profit on ordinary activities before taxation |  | 1,005 | 1,154 | 2,720  |
|  Tax on profit on ordinary activities | 6(h) | (56) | (99) | (70)  |
|  Profit on ordinary activities after taxation |  | 949 | 1,055 | 2,650  |
|  Minority interests |  | — | — | (4)  |
|  Profit for the financial year |  | 949 | 1,055 | 2,646  |
|  Dividends | 6(i) | (167) | (298) | (200)  |
|  Retained profit |  | 782 | 757 | 2,446  |
|  Earnings per share (in cents) | 6(j) | 3.85 | 4.28 | 10.73  |

All amounts relate to continuing activities.

## 3. Statement of Recognised Gains and Losses

|  Year ended 31st December | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|   |  $000 | $000 | $000  |
|  Profit for the financial year | 949 | 1,055 | 2,646  |
|  Exchange differences on foreign currency translation | — | — | 9  |
|  Total recognised gains for the year | 949 | 1,055 | 2,655  |

Part Two Accountants' Report
BRTM RDVRNCED COMMUNICATIONS LIMITED

4. Balance Sheets

|  As at 31st December | Notes | 1993 | 1994 | 1995  |
| --- | --- | --- | --- | --- |
|   |   |  $000 | $000 | $000  |
|  Fixed assets |  |  |  |   |
|  Intangible assets |  | 3 | — | —  |
|  Tangible assets | 6(k) | 258 | 418 | 673  |
|  Investments | 6(l) | — | 9 | —  |
|  Minority interests |  | — | — | 5  |
|  Severance pay fund, net of provision | 6(m) | — | 7 | 15  |
|   |  | 261 | 434 | 693  |
|  Current assets |  |  |  |   |
|  Stocks | 6(n) | 415 | 477 | 625  |
|  Debtors | 6(o) | 782 | 1,245 | 2,296  |
|  Investments |  | 50 | 402 | 392  |
|  Cash at bank and in hand |  | 1,602 | 1,425 | 2,767  |
|   |  | 2,849 | 3,549 | 6,080  |
|  Creditors: amounts falling due within one year | 6(p) | (1,443) | (1,548) | (1,925)  |
|  Net current assets |  | 1,406 | 2,001 | 4,155  |
|  Total assets less current liabilities |  | 1,667 | 2,435 | 4,848  |
|  Creditors: amounts falling due after more than one year | 6(q) | (2) | (13) | (48)  |
|  Net assets |  | 1,665 | 2,422 | 4,800  |
|  Capital and reserves |  |  |  |   |
|  Share capital | 6(s) | 103 | 103 | 103  |
|  Profit and loss account | 6(t) | 1,562 | 2,319 | 4,697  |
|  Shareholders' funds |  | 1,665 | 2,422 | 4,800  |

Part Two Accountants' Report
BRTM RDA/UNCED COMMUNICATIONS LIMITED

5. Cash Flow Statements

|  Year ended 31st December | Notes | 1993
$000 | 1994
$000 | 1995
$000  |
| --- | --- | --- | --- | --- |
|  Net cash inflow from operating activities | 6(v) | 1,222 | 804 | 1,319  |
|  Returns on investments and servicing of finance |  |  |  |   |
|  Interest received/(paid) |  | (39) | 154 | 118  |
|  Dividends paid |  | (167) | (298) | —  |
|  Net cash (outflow)/inflow from returns on investments and servicing of finance |  | (206) | (144) | 118  |
|  Tax paid |  | (56) | (99) | —  |
|  Investing activities |  |  |  |   |
|  Sale and purchase of current asset investments |  | 429 | (534) | 85  |
|  Purchase of subsidiary undertaking | 6(w) | — | — | 120  |
|  Sale of shares in subsidiary undertaking | 6(x) | — | — | (5)  |
|  Purchase of fixed tangible and intangible assets |  | (129) | (231) | (319)  |
|  Sale of tangible fixed assets |  | — | 6 | 30  |
|  Net cash inflow/(outflow) from investing activities |  | 300 | (759) | (89)  |
|  Net cash inflow/(outflow) before financing |  | 1,260 | (198) | 1,348  |
|  Financing activities |  |  |  |   |
|  New long term loans |  | — | — | (6)  |
|  Repayment of long term loans |  | — | 21 | —  |
|  Net cash inflow/(outflow) from financing activities |  | — | 21 | (6)  |
|  Increase/(decrease) in cash and cash equivalents |  | 1,260 | (177) | 1,342  |
|  Cash and cash equivalents at beginning of period |  | 342 | 1,602 | 1,425  |
|  Cash and cash equivalents at end of period | 6(y) | 1,602 | 1,425 | 2,767  |

Part Two: Accountants' Report
BATM ADVANCED COMMUNICATIONS LIMITED

## 6. Notes to the Financial Information

### (a) Turnover and profits

The turnover and profit before taxation are wholly attributable to the research and development, production and marketing of data communication products in the field of local and wide area networks and premises management systems. Turnover is analysed by geographic market below:

|  Year ended 31st December | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|   |  $000 | $000 | $000  |
|  By destination |  |  |   |
|  Israel | 480 | 519 | 956  |
|  Europe | 2,296 | 4,201 | 6,235  |
|  America (mainly North America) | — | 108 | 221  |
|  South Africa | 83 | — | 132  |
|  Far East | 8 | 85 | 75  |
|   | 2,867 | 4,913 | 7,619  |

### (b) Net operating expenses

Research and development costs

|  Year ended 31st December | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|   |  $000 | $000 | $000  |
|  Research and development costs | 258 | 401 | 770  |
|  Less: participation | (78) | (144) | (273)  |
|   | 180 | 257 | 497  |

Selling, general and administrative expenses

|  Year ended 31st December | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|   |  $000 | $000 | $000  |
|  Selling expenses | 343 | 573 | 593  |
|  General and administrative expenses | 327 | 370 | 762  |
|   | 670 | 943 | 1,355  |

---

Part Two
Accountants' Report
BRTM ADVANCED COMMUNICATIONS LIMITED

(c) Other operating income/(expenses), net

|   | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|  Year ended 31st December | $000 | $000 | $000  |
|  Expenses of aborted issue of shares | — | (105) | —  |
|  Gain on disposal of fixed assets and fixed asset investments | — | 2 | 7  |
|   | — | (103) | 7  |

(d) Operating profit

|   | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|  Year ended 31st December | $000 | $000 | $000  |
|  This is arrived at after charging: |  |  |   |
|  Directors' remuneration (note (f)) | 45 | 52 | 82  |
|  Depreciation and amortisation | 73 | 72 | 109  |
|  Auditors' remuneration | 26 | 35 | 62  |

(e) Employees

|  Year ended 31st December | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|   |  Number | Number | Number  |
|  The average weekly number of employees during each period, including directors, was: | 26 | 37 | 69  |
|  Year ended 31st December | 1993 | 1994 | 1995  |
|   |  $000 | $000 | $000  |
|  Staff costs for all employees, including directors, consist of: |  |  |   |
|  Wages and salaries | 319 | 534 | 945  |
|  Social security costs | 26 | 41 | 51  |
|  Pension and other related costs | 116 | 190 | 295  |
|   | 461 | 765 | 1,291  |

Part Two: Accountants' Report
BRTM RDVRNCED COMMUNICATIONS LIMITED

(f) Directors

|   | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|  Year ended 31st December | $000 | $000 | $000  |
|  Emoluments: |  |  |   |
|  Remuneration for management services (highest paid director) | 45 | 52 | 82  |

The chairman did not receive emoluments throughout the period.

(g) Financial income/(expenses), net

|   | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|  Year ended 31st December | $000 | $000 | $000  |
|  Net interest receivable/(payable) before translation differences | (1) | 163 | 246  |
|  Gain/(loss) on current asset investments | 124 | (182) | 75  |
|  Translation differences | (38) | (9) | (128)  |
|   | 85 | (28) | 193  |

(h) Taxation

|   | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|  Year ended 31st December | $000 | $000 | $000  |
|  Israeli corporate tax at 25% on distributed profits (see note (z)) | 56 | 99 | 66  |
|  Overseas tax | — | — | 4  |
|   | 56 | 99 | 70  |

(i) Dividends

|   | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|  Year ended 31st December | $000 | $000 | $000  |
|  Ordinary dividends paid/proposed | 167 | 298 | 200  |

Part Two
Accountants' Report
BRTM ROVRNCED COMMUNICATIONS LIMITED

### (j) Earnings per share

Earnings per share is based on the profit for the year and the number of shares in issue throughout each year, adjusted for the 10 for 1 share split, the additional shares issued to employees and an ex-employee and the 8 for 1 bonus issue which took place immediately prior to the Placing. The number of shares used in the calculation for each year was 24,656,112.

### (k) Tangible fixed assets

|   | Land
$000 | Tools and equipment
$000 | Computers
$000 | Motor vehicles
$000 | Office furniture and equipment
$000 | Leasehold improvements
$000 | Total
$000  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  Cost  |   |   |   |   |   |   |   |
|  As at 1 January 1994 | — | 139 | 74 | 67 | 27 | 5 | 312  |
|  Acquisitions | — | 8 | 86 | 102 | 23 | 12 | 231  |
|  Disposals | — | — | — | — | (5) | — | (5)  |
|  As at 31 December 1994 | — | 147 | 160 | 169 | 45 | 17 | 538  |
|  Subsidiary acquired | — | — | 1 | 77 | 2 | — | 80  |
|  Disposal of subsidiary | — | — | — | — | (7) | — | (7)  |
|  Acquisitions | 108 | 2 | 68 | 132 | 8 | 1 | 319  |
|  Disposals | — | — | — | (34) | — | — | (34)  |
|  As at 31 December 1995 | 108 | 149 | 229 | 344 | 48 | 18 | 896  |
|  Accumulated depreciation  |   |   |   |   |   |   |   |
|  As at 1 January 1994 | — | 25 | 18 | 6 | 3 | — | 52  |
|  Charge for the year | — | 25 | 21 | 17 | 5 | 1 | 69  |
|  On disposals | — | — | — | — | (1) | — | (1)  |
|  As at 31 December 1994 | — | 50 | 39 | 23 | 7 | 1 | 120  |
|  Subsidiary acquired | — | — | — | 8 | — | — | 8  |
|  Disposal of subsidiary | — | — | — | — | (2) | — | (2)  |
|  Charge for the year | — | 25 | 39 | 39 | 4 | 2 | 109  |
|  On disposals | — | — | — | (12) | — | — | (12)  |
|  As at 31 December 1995 | — | 75 | 78 | 58 | 9 | 3 | 223  |
|  Net book value  |   |   |   |   |   |   |   |
|  As at 31 December 1995 | 108 | 74 | 151 | 286 | 39 | 15 | 673  |
|  As at 31 December 1994 | — | 97 | 121 | 146 | 38 | 16 | 418  |

Part Two
Accountants' Report
BATM ADVANCED COMMUNICATIONS LIMITED

## (1) Fixed asset investments

The following companies were subsidiary and associated undertakings and have been included in the consolidated financial information.

|   | Country of incorporation | Percentage holding of ordinary shares as at 31 December 1995 | Nature of business  |
| --- | --- | --- | --- |
|  Bat-Net Communication Networks Limited | Israel | 85% | Installation of communication networks  |
|  B.T.T. – Beres Communication Technologies Limited | Israel | 50% | Communication services  |
|  BATM (UK) Limited | United Kingdom | 100% | Marketing  |

In July 1995 the Company acquired from a shareholder for nil consideration an 85% interest in BatNet Communication Networks Limited ("BatNet"), which is engaged in the installation of communication networks. The excess of cost over net assets at acquisition was deducted from the shareholders' funds.

In August 1994 the Company purchased from a shareholder 30% of the shares of BTT-Beres Communication Technologies Limited ("BTT") at par. In 1995 BTT issued additional shares at par, increasing the Company's percentage shareholding to 50%. BTT is engaged in representing foreign companies and providing technical and support services in the communications field. The excess of cost over net assets at acquisition was deducted from the shareholders' funds.

In 1994 the Company established a wholly owned subsidiary in the United Kingdom under the name BATM (UK) Limited which is engaged in marketing the Company's products in Europe and providing services to foreign customers.

In 1994 the Company, together with others, established a company for the development of software products by the name of Metacom Limited ("Metacom"). The Company held 36% of the ownership and 50% of the control of Metacom. During 1995 the Company sold its 36% shareholding in Metacom Limited for nil consideration. The Company recorded a loss of US$ 6,000 on the transaction.

In 1993 the Company established a wholly owned subsidiary in Holland under the name BATM BV to be engaged in marketing the Company's products in Europe and providing services to foreign customers. During 1995 the Dutch subsidiary ceased activities, the Company recording a gain of US$ 5,000 in writing off the investment.

Part Two: Accountants' Report
BATM ADVANCED COMMUNICATIONS LIMITED

# Investments in associated undertakings

The movement in investments in associated undertakings has been as follows:

|   | 1994 | 1995  |
| --- | --- | --- |
|  As at 31st December | $000 | $000  |
|  As at beginning of year | — | 9  |
|  Goodwill written off | — | (16)  |
|  Share of profit/(loss) | 9 | (29)  |
|  Write off of investment | — | (6)  |
|  As at end of year | 9 | (42)  |

## (m) Accrued severance pay, net

|   | 1994 | 1995  |
| --- | --- | --- |
|  As at 31st December | $000 | $000  |
|  Amount funded for severance pay | 42 | 72  |
|  Liability | (35) | (57)  |
|   | 7 | 15  |

The Company's liability for severance pay is fully provided pursuant to Israeli law. Part of the liability is funded through amounts deposited with severance pay funds and insurance policies. The insurance policies are owned by the Company and have been entered into by the Company on behalf of individual employees. The amounts accumulated with the insurance company and the savings funds are not under the Company's control or management, and are therefore not reflected in the Company's balance sheet.

## (n) Stocks

|   | 1994 | 1995  |
| --- | --- | --- |
|  As at 31st December | $000 | $000  |
|  Raw materials | 263 | 435  |
|  Partly finished goods | 117 | 92  |
|  Finished goods | 97 | 98  |
|   | 477 | 625  |

Part Two: Accountants' Report
BRTM RDVRNCED COMMUNICATIONS LIMITED

(o) Debtors

|   | 1994 | 1995  |
| --- | --- | --- |
|  As at 31st December | $000 | $000  |
|  Trade debtors | 1,054 | 1,765  |
|  Government of Israel | 116 | 198  |
|  Value added tax | 54 | 115  |
|  Related parties | — | 171  |
|  Tax authorities | 3 | 5  |
|  Other debtors | 18 | 42  |
|   | 1,245 | 2,296  |

All of the above fall due within one year

(p) Creditors: Amounts falling due within one year

|   | 1994 | 1995  |
| --- | --- | --- |
|  As at 31st December | $000 | $000  |
|  Trade creditors | 828 | 829  |
|  Shareholders (including proposed dividend of $200,000 at 31 December 1995) | 135 | 81  |
|  Related parties | 105 | 470  |
|  Tax authorities | 94 | 47  |
|  Other creditors and accruals | 386 | 498  |
|   | 1,548 | 1,925  |
|   | 1994 | 1995  |
|  As at 31st December | $000 | $000  |
|  The balances with shareholders are linked to the CPI and non-interest bearing.  |   |   |
|  Details are as follows:  |   |   |
|  Highest balance during year due from shareholders | — | 133  |
|  Year end balance due to shareholders | 135 | 81  |

Port Two® Accountants' Report
BRTM. RDV/INCED COMMUNICATIONS LIMITED

(q) Creditors: Amounts falling due after more than one year

|  As at 31st December | 1994 | 1995  |
| --- | --- | --- |
|   |  $000 | $000  |
|  Obligations under finance leases | 13 | 6  |
|  Deficit in associated company (see note (1)) | — | 42  |
|   | 13 | 48  |

(r) Commitments

Royalties

The Company is currently obligated to pay royalties to the Office of the Chief Scientist of the Government of Israel ("Chief Scientist") at a rate of up to 3% of revenues derived in connection with products developed by the Company as a result of research and development funded by the Chief Scientist by way of grants, up to 150% of the amount received in new Israel shekels linked to the US dollar. The total amount of grants received, net of royalties paid, as at 31 December 1995 was US$ 616,000.

The Company is obligated to pay royalties to the Government of Israel's Fund for the Encouragement of Marketing Activities, at a rate of 3% on the increase in export sales by the Company, up to the amount granted in NIS, linked to the dollar. The total amount received, net of royalties paid, as at 31 December 1995 was US$ 127,000.

Total royalty expenses to the Chief Scientist and the Fund for the Encouragement of Marketing Activities in 1995, 1994 and 1993 were US$ 159,000, US$ 91,000 and US$ 2,000 respectively.

(s) Share capital

The share capital of the Company as at 31 December 1994 and 1995 was as follows:

|   | Authorised | Issued and fully paid  |
| --- | --- | --- |
|  Ordinary shares of NIS 1 par value | 2,799,400 | 250,000  |
|  Voting shares of NIS 1 par value | 600 | 2  |

By way of an agreement dated 16 July 1995 between the Company and one of its employees, the Company undertook to issue 3% of its issued share capital to the employee. Under the terms of the agreement the issue was to be made to a trustee for par value in cash. Subsequent to 31 December 1995 the Company issued 1,175 shares, constituting 0.5% of the issued and fully paid share capital of the Company, at par value.

37

Port Two
Accountants' Report
BRTM RUVANCED COMMUNICATIONS LIMITED

## (t) Reserves

|  Profit and loss account
$000  |   |
| --- | --- |
|  As at 1 January 1993 | 780  |
|  Retained profit for the financial year | 782  |
|  Exchange differences | —  |
|  Goodwill | —  |
|  As at 31 December 1993 | 1,562  |
|  Retained profit for the financial year | 757  |
|  Exchange differences | —  |
|  Goodwill | —  |
|  As at 31 December 1994 | 2,319  |
|  Retained profit for the financial year | 2,446  |
|  Exchange differences | 9  |
|  Goodwill | (77)  |
|  As at 31 December 1995 | 4,697  |

## (u) Reconciliation of movements in shareholders' funds

|  Year ended 31st December | 1993 | 1994 | 1995  |
| --- | --- | --- | --- |
|   |  $000 | $000 | $000  |
|  Profit for the financial year | 949 | 1,055 | 2,646  |
|  Dividends | (167) | (298) | (200)  |
|   | 782 | 757 | 2,446  |
|  Other recognised gains and losses relating to the year (net) | — | — | (68)  |
|  Net addition to shareholders' funds | 782 | 757 | 2,378  |
|  Opening shareholders' funds | 883 | 1,665 | 2,422  |
|  Closing shareholders' funds | 1,665 | 2,422 | 4,800  |

Port Two
Accountants' Report
BRTM ADVANCED COMMUNICATIONS LIMITED

(v) Reconciliation of operating profit to net cash inflow from operating activities

|  Year ended 31st December | 1993
$000 | 1994
$000 | 1995
$000  |
| --- | --- | --- | --- |
|  Operating profit | 920 | 1,172 | 2,556  |
|  Depreciation and amortisation | 73 | 70 | 109  |
|  Gain on disposal of fixed assets and investments | — | (2) | (7)  |
|  Increase/(decrease) in accrued severance pay | 1 | (9) | (15)  |
|  Increase in stocks | (311) | (62) | (148)  |
|  Increase in debtors | (383) | (463) | (792)  |
|  (Increase)/decrease in creditors | 922 | 97 | (384)  |
|  Others | — | 1 | —  |
|  Net cash inflow from operating activities | 1,222 | 804 | 1,319  |

(w) Purchase of subsidiary undertaking

|  Year ended 31st December | 1995
$000  |
| --- | --- |
|  Assets and liabilities of the subsidiary at acquisition: |   |
|  Working capital (excluding cash and cash equivalents) | 258  |
|  Fixed assets | (72)  |
|  Other assets created in the acquisition and written off to retained earnings | (62)  |
|  Long-term liabilities | 7  |
|  Minority interest | (11)  |
|   | 120  |

(x) Sale of shares in subsidiary undertaking

|  Year ended 31st December | 1995
$000  |
| --- | --- |
|  Assets and liabilities of the subsidiary at disposal: |   |
|  Working capital (excluding cash and cash equivalents) | (16)  |
|  Fixed assets | 5  |
|  Gain on disposal of investment | 6  |
|   | (5)  |

Part Two Accountants' Report
BRTM RDVRNCED COMMUNICATIONS LIMITED

## (y) Analysis of cash and cash equivalents

|   | Cash at bank
$000  |
| --- | --- |
|  Balance at 1 January 1993
Net cash inflow/(outflow) | 342
1,260  |
|  Balance at 31 December 1993
Net cash inflow/(outflow) | 1,602
(177)  |
|  Balance at 31 December 1994
Net cash inflow/(outflow) | 1,425
1,342  |
|  Balance at 31 December 1995 | 2,767  |

## (z) Taxes on income

The Company and its Israeli subsidiaries are assessed under the provisions of the Income Tax Law (Inflationary Adjustments) 1985, pursuant to which the results for tax purposes are measured in Israeli currency in real terms in accordance with changes in the Israeli CPI. The Company and its subsidiaries are assessed for tax purposes on an unconsolidated basis.

The Company is an "industrial company" as defined in the Israeli Law for the Encouragement of Industry (Taxes) 1969, and, as such, is entitled to certain tax benefits, mainly increased depreciation rates, the right to claim public issue expenses and the amortisation of patents and other intangible property rights as a deduction for tax purposes.

The production facilities of the Company have been granted "approved enterprise" status with respect to an investment programme under the Law for the Encouragement of Capital Investments 1959, as amended. Under this law, income attributable to the enterprise is fully exempt from tax for eight years, commencing in the first year in which the enterprise generates taxable income. (The expiry date of the period of benefits is limited to the earlier of twelve years from commencement of production or fourteen years from the date of the approval.) The period of benefits commenced in 1992.

As of the date of this report, the Company had not submitted the final performance report on the investment programme, and accordingly, the investment had not received final approval. The Company finalised the investment programme during 1995 and such report will be submitted shortly.

In the event of a distribution of a cash dividend out of tax exempt income, the Company will be liable to corporate tax at a rate of 25% in respect of the amount distributed.

In 1995, 1994 and 1993 the Company proposed dividends to its shareholders and consequently incurred tax of US$ 66,000, US$ 99,000 and US$ 56,000 respectively.

Income derived from sources other than the "approved enterprise" is taxable at the regular corporate tax rate of 37% in 1995. The corporate tax rate will be 36% in 1996.

---

Port Two® Accountants' Report
BRTM ADVANCED COMMUNICATIONS LIMITED

## 7. Other Matters

The financial information contained in this report does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985, as amended.

Yours faithfully

EDO Stoy Hayward
Chartered Accountants and Registered Auditors

Almagor &amp; Co
Certified Public Accountants (Israel)

Port Three Estimate for the first half of 1996
BATM ADVANCED COMMUNICATIONS LIMITED

The Directors estimate that the Group's profit on ordinary activities before taxation for the six months ending 30 June 1996 will be not less than $1,450,000. This estimate has been made after due and careful enquiry by the Company.

## Basis of calculation of forecast

The Directors' estimate of profit before taxation for the six months ending 30 June 1996 has been prepared on a basis consistent with the accounting policies normally adopted by the Group.

|  **BDO** | **BDO Stoy Hayward**
Chartered Accountants
ALMAGOR & Co. CPA (ISR) | 8 Baker Street London W1M 1DA
7 Abba Hillel Rd. P.O. Box 3600
Zip 52134, Ramat-Gan, Israel  |
| --- | --- | --- |

The Directors
BATM Advanced Communications Limited
9 Basel Street
PO Box 4048
49130 Petach-Tikva
Israel

The Directors
Shore Capital &amp; Corporate Limited
1 Maddox Street
London
W1R 9WA
3 July 1996

Dear Sirs

## BATM Advanced Communications Limited: Document to be dated 3 July 1996

We have reviewed the accounting policies and calculations adopted in arriving at the profit forecast of BATM Advanced Communications Limited ("BATM") and its subsidiary companies (together "the Group") for the six months ending 30 June 1996, which are included in the document to be dated 3 July 1996 and for which the Directors of BATM are solely responsible.

The profit estimate of the Group includes the results shown by the unaudited management accounts of the Group for the four months ended 30 April 1996 and estimates for the remainder of the period.

In our opinion the estimate, so far as the accounting policies and calculations are concerned, has been properly compiled on the basis stated and is presented on a basis consistent with the accounting policies normally adopted by the Group.

Yours faithfully

BDO Stoy Hayward
Almagor &amp; Co.
Chartered Accountants and Registered Auditors
Certified Public Accountants (Israel)

42

Part Four
Statutory and General Information
BATM ADVANCED COMMUNICATIONS LIMITED

## 1. The Company

1.1 BATM was incorporated in Israel under the Ordinance with registered number 51-165160-6 on 26 January 1992 as a private company with the name B.A.T.M. (1992) Ltd. On 1 May 1996, BATM changed its name to its current name and on 12 June 1996 BATM became a public company with registered number 52-004281-3.

1.2 The liability of the members of the Company is limited.

1.3 BATM's registered offices and headquarters are located at 9 Basel Street, Petach-Tikva, 49510 Israel. BATM's plant is located in IND Park P.O.Box 203 Yokneam, Elite 20692, Israel. BATM's business address in the United Kingdom is located in the offices of BATM's subsidiary, BATM (UK) at 1 City Business Centre, Basin Road, Chichester Road, West Sussex, PO19 2DU.

## 2. The Company's share capital

2.1 BATM was incorporated with an authorised share capital of NIS 16,600 consisting of 16,000 ordinary shares of NIS 1.00 each and 600 management shares of NIS 1.00 each.

2.2 Pursuant to the Israel Registrar of Companies Permit dated 19 May 1992, BATM's authorised share capital was increased by NIS 250,000 by the creation of 250,000 ordinary shares of NIS 1.00 each and pursuant to a permit of the Israel Registrar of Companies dated 22 December 1993, BATM's authorised share capital was increased to NIS 5,000,000 by the creation of 4,733,400 ordinary shares of NIS 1.00 each. This increase was effected in preparation for BATM's expected public offering on the Tel-Aviv Stock Exchange Limited which was scheduled to take place in the first half of 1994. Due to market conditions, the offering was not made.

2.3 Pursuant to an agreement dated 16 July 1995, as amended between BATM and one of its senior employees, BATM issued 7,833 ordinary shares of NIS 1.00, which were issued at par as fully paid-up shares of which 1,175 were issued to the employee and the balance was issued to a trustee to be held for transfer to the employee 2 years from the date of the Placing.

In certain circumstances if the employee ceases to work for BATM he will be obliged to pay BATM an amount equal to the then market value of all the shares issued to him.

2.4 Pursuant to a BATM's shareholders' resolution dated 1 October 1995 approved by the Tel-Aviv Yaffo District Court on 21 December 1995, BATM reduced its authorised share capital by NIS 2,200,000 consisting of 2,200,000 ordinary shares of NIS 1.00 each. Following this reduction of capital the authorised share capital of BATM was NIS 2,800,000 divided into 2,799,400 ordinary shares of NIS 1.00 and 600 management shares of NIS 1.00.

2.5 On 11 June 1996, BATM allotted and issued 1,305 ordinary shares of NIS 1.00 each to its plant manager at par. This individual is entitled to participate in the Share Ownership Plan.

2.6 On 12 June 1996, each of BATM's ordinary and management shareholders' meetings resolved to increase the Company's authorised share capital by NIS 7,200,000 consisting of 72,000,000 ordinary shares of NIS 0.10 and to split each of the existing ordinary and management shares of NIS 1.00 par value into ten ordinary and ten management shares respectively of NIS 0.10 each.

2.7 On 12 June 1996, each of BATM's ordinary and management shareholders' meetings resolved to convert all of the management shares into ordinary shares having identical rights to all other existing ordinary shares as described in paragraph 12 below.

43

Part Four: Statutory and General Information
BATM ADVANCED COMMUNICATIONS LIMITED

2.8 On 13 June 1996, the Israel Registrar of Companies approved the increase of BATM's authorised share capital by NIS 7,200,000, as referred to in paragraph 2.6 above.

2.9 On 16 June 1996, BATM issued 10,408 ordinary shares of NIS 0.10 to an ex-employee at par.

2.10 On 23 June 1996, BATM allotted and issued 20,814,464 ordinary shares of NIS 0.10 to its shareholders as bonus shares distributed by the Company from its accrued earnings.

2.11 On 23 June 1996, BATM allotted and issued 1,239,840 ordinary shares at par to the partners of Shachak Peer, Reznick &amp; Co. to be held by them according to the Share Ownership Plan described in paragraph 9 below.

2.12 On 23 June 1996, BATM resolved to adopt the Share Option Scheme as described in paragraph 10 below.

2.13 The Company has granted share options to Mr R Be'ery, proprietor of the Israeli financial advisers to the Company, over 120,000 Ordinary Shares at an option price of 125p per share, exercisable up to 1 July 1999 and Mr Be'ery has agreed to pay the Company US$40,000 by 26 July 1996, subject to Admission occurring before such date, on account in respect of the option price of such shares. Such share options will be included within the maximum permissible aggregate number of unissued shares over which options may be granted under the Share Option Scheme referred to in paragraph 10 below.

2.14 The authorised and issued share capital of BATM at the date of this document and following completion of the Placing will be as follows:

|   | Authorised |   | Issued | Fully  |
| --- | --- | --- | --- | --- |
|   |  Number | NIS | Number | paid NIS  |
|  Current | 100,000,000 | 10,000,000 | 24,656,112 | 2,465,611.20  |
|  Proposed | 100,000,000 | 10,000,000 | 31,056,112 | 3,105,611.20  |

2.15 The Company has agreed to issue warrants to Shore Capital Group plc upon completion of the Placing. The warrants will give Shore Capital Group plc the right to subscribe for 246,561 Ordinary Shares at the warrant price of 125p per Ordinary Share until 1 July 1999.

2.16 The Placing Shares will be in registered form.

2.17 Except as disclosed in this document:

2.17.1 no share capital of BATM has been issued or is proposed to be issued, fully or partly, paid for either for cash or for consideration other than cash;

2.17.2 no commission, discount, brokerage or other special term has been granted by the Company, or is now proposed in connection with the issue or sale of any of its share capital;

2.17.3 no share capital of the Company is under option or is agreed, conditionally or unconditionally, to be put under option.

2.18 The Company does not have in issue any securities not representing share capital and there are no outstanding convertible securities issued by the Company.

## 3. The Group

3.1 The business of the Company and its principal activity is to manufacture and sell products used in local and wide area networks.

Port Four
Statutory and General Information
BRTM RDVRNCED COMMUNICATIONS LIMITED

3.2 The following are subsidiaries or associated companies of the Company:

|  Company | Registered office | Date and Country of incorporation | Activity | Issued share capital | Percentage of shares owned by the Company  |
| --- | --- | --- | --- | --- | --- |
|  B.A.T.M (UK) Limited | 12 North Pallant, Chichester, West Sussex PO19 1TQ | 21 April 1994 UK | marketing support | 2,000 ordinary shares of £1 each | 100  |
|  Bat-Net Communication Limited | P.O. Box 4048 Kiryat Areye Petach-Tikva | 3 March 1994 Israel | distributor | 100 ordinary shares of 1 NIS each | 85  |
|  B.T.T. Beres Communication Technologies Limited | P.O. Box 4048 Kiryat Areye Petach-Tikva | 3 March 1994 Israel | importer and distributor | 140 ordinary shares of 1 NIS each | 50  |
|  B.A.T.M. Real Estate (1994) Ltd | P.O. Box 4048 Kiryat Areye Petach-Tikva | 14 December 1994 Israel | to hold real estate | 100 ordinary shares of 1 NIS each | 100  |
|  Advanced Communication Networks Inc. | 1445 Koll Circle, Suite 102, Saint Jose, California | 11 March 1996 State of California | sale of data communications network equipment | 2,000 common stock of $1 each | 50  |

## 4. Substantial Shareholders

Except for the interests of the Directors which are set out in paragraph 5, the Directors are not aware of any holdings of Ordinary Shares representing 3 per cent. or more of the nominal value of the Company's share capital or of any person who, directly or indirectly, jointly or severally, exercises or could exercise control over the Company.

## 5. Directors' interests

5.1 The interests of the Directors and their immediate families and of persons connected with them within the meaning of section 1 of the Securities Law 5728.1968 of Israel in the share capital of the Company as at the date of this document, which have been notified to the Company, and as they are expected to be immediately following completion of the Placing, all of which are beneficial, are as follows:

Port Four
Statutory and General Information
BRTM: RDVRNCED COMMUNICATIONS LIMITED

|   | Number of Ordinary Shares both before and after the Placing | Percentage of issued share capital after the Placing  |
| --- | --- | --- |
|  G. Beres
(and immediate family) | 11,475,090 | 36.72  |
|  Dr Z. Marom | 11,025,090 | 35.2  |
|  D Goldman will subscribe for 80,000 Placing Shares.  |   |   |

Except as disclosed in this paragraph, none of the Directors nor any member of their respective immediate families nor any person connected with them within the meaning of section 1 of the Securities Law 5728-1968 of Israel is interested in any share capital of the Company. Details of a voting agreement between Mr Beres and Dr Marom are set out in paragraph 13.8 below.

5.2 Except for the deeds of indemnity, set out in paragraph 13.9 below, no loan or guarantee has been granted or provided by the Company to any Director.

## 6. Directors' service agreements

6.1 (i) Gershon Beres has entered into a contract with the Company for his services, which provides that he will continue to serve as a non-executive director and chairman of the Company for a fee of US$7,500 per annum which will accrue on a monthly basis. Mr Beres will be entitled to receive additional fees at the rate of US$1,000 per day for attendance at any meeting of the Board or any committee of the Board. The agreement is effective from 23 June 1996 and will be for an initial term of two years, subject to earlier termination by the Company on summary notice in certain limited circumstances. Thereafter the agreement is terminable on not less than three month's notice from either party or in certain limited circumstances on summary notice.

(ii) David Goldman has entered into a contract with the Company for his services, which provides that he will serve as a non-executive director of the Company for a fee of US$15,000 per annum which will accrue on a monthly basis. Mr Goldman will be entitled to receive additional fees at the rate of US$2,000 per day in respect of his attendance at any meeting of the Board or any committee of the Board in excess of 4 such meetings per annum. The agreement is effective from 1 July 1996 and is terminable on not less than one month's notice by either party or in certain limited circumstances on summary notice.

(iii) Dr Marom has entered into a service agreement with the Company for his services which provides that he will serve as managing director of the Company for a basic salary of US$120,000 per annum. The agreement is effective from 1 July 1996 for a minimum of 3 years and will continue after this date for 2 year periods unless terminated by notice given 6 months prior to the end of the initial three year term or any renewal period. He will receive a bonus equal to 1.5 per cent. of profits as defined below. If the profits in any year exceed the profits reached in the previous year by 50 per cent. or more, Dr Marom will be entitled to a bonus equal to 2.5 per cent. of the profits and, if the profits exceed the previous year's profits by 100 per cent. or more, he will be entitled to a bonus equal to 3.5 per cent. of the profits.

"profits" mean the consolidated profits before tax, as shown in the audited consolidated profit and loss account of the Company for each relevant year, excluding capital gains.

Part Four: Statutory and General Information
BATM ADVANCED COMMUNICATIONS LIMITED

Additionally Dr. Marom will be entitled to subscribe for an additional 450,000 shares in the Company in accordance with the terms of the Share Option Scheme.

(iv) Jacob Rosen has entered into a service agreement with the Company for his services as deputy managing director of finance (chief financial officer) and will receive a salary of 14,500 NIS (gross) per month. In addition he is entitled to the usual social benefits, which includes a pension, company car and 18 days holiday per year which increases in accordance with tenure. The contract can be terminated in the first two years by either party giving the other one month’s prior notice.

(v) Yaakov Be’ery has entered into a contract with the Company for his services, which provides that he will serve as a non-executive director of the Company for a fee of US$7,500 per annum which will accrue on a monthly basis. Mr Be’ery will be entitled to receive additional fees of US$1,000 per day for attendance at any meeting of the Board or any committee of the Board. The agreement is effective from 23 June 1996 and is terminable on not less than one month’s written notice from either party or in limited circumstances on summary notice.

6.2 According to the Companies Ordinance [new version] 5743 – 1983 (“Ordinance”), officers, including directors, of a company may not be present and may not vote in discussions of the board or the audit committee of the board, if such a committee exists, on the approval of acts or contracts, either between the company and the officer or between the company and another person, in which such officer has a direct or indirect personal interest. “Personal interest” is defined in the Ordinance as including the personal interest of the officer’s relative or the interest of another body corporate in which the officer or his relative is an interested party.

The Ordinance stipulates that the terms of employment of directors must be approved first by the audit committee, then by the board and finally by a shareholders’ meeting. If there is no audit committee, such terms of employment must be approved first by the board and then by a shareholders’ meeting.

6.3 Under the arrangements in force at the date of this document, the aggregate remuneration, including all benefits in kind and social contributions, of the Directors for the financial period ended 31 December 1995 was US$82,000 and for the financial period ending 31 December 1996 is estimated to be US$215,000.

6.4 Except as disclosed in paragraphs 8 and 13 below, none of the Directors has any interest in transactions effected by the Company since its incorporation which are unusual in their nature or conditions which are or were significant to the business of the Company.

6.5 None of the Directors has entered into any arrangement under which he has waived or agreed to waive any future emoluments.

47

Part Four
Statutory and General Information
BATM ADVANCED COMMUNICATIONS LIMITED

## 7. Details of directorships

7.1 The Directors have held the following directorships within 5 years prior to the publication of this prospectus:

G. Beres:
G. Beres Limited; G. Beres Marketing (1983) Limited; B.T.T. - Beres Communication Technologies Limited; Bat-Net Communication Networks Limited; B.A.T.M. Real-Estate (1994) Limited.

Dr Z. Marom:
B.A.T.M. Real-Estate (1994) Limited.

G Beres and Dr Marom are both directors of B.A.T.M. Advanced Technology and Marom Limited which is in the process of a members' voluntary winding up.

D. Goldman:
The SAGE Group plc, Sagesoft Limited, Sky Software Limited, SAGE Finance Limited, SAGE Overseas Limited, Yorkshire Business Forms Limited, Bangquote Limited, Remote Control International Inc, DacEasy Inc, British Accounting Software Developers Association Limited, Business Link Tyneside Limited, Multisoft Financial Systems Limited, Ciel SA, Saari SA, Tyneside Training &amp; Enterprise Council, Sage US Inc.

D. Goldman was a director of Crown Colour Printing Limited and Campbell Graphics Limited, both of which went into creditors' voluntary liquidation on 26 April 1985.

Y. Be'ery:
Neviot Limited

J. Rosen:
None

Except as disclosed above, no Director has:

7.1.1 any unspent convictions;
7.1.2 had a bankruptcy order made against him;
7.1.3 been a director of a company which has been placed in receivership or liquidation whilst he was a director of that company or within the 12 months after he ceased to be a director of that company; or
7.1.4 been publicly criticised by any statutory or regulatory authority.

## 8. Transactions with G.Beres Marketing (1983) Limited

8.1 The following transactions were carried out between BATM, one of its subsidiaries and G.Beres Marketing (1983) Limited a company controlled by G. Beres:

8.1.1 BATM previously purchased goods or products from G.Beres Marketing (1983) Limited.

Part Four
Statutory and General Information
BATM ADVANCED COMMUNICATIONS LIMITED

8.1.2 G.Beres Marketing (1983) Limited was a non-exclusive distributor in Israel for BATM products.

8.1.3 G.Beres Marketing (1983) Limited was previously a supplier to BatNet.

8.1.4 G.Beres Marketing (1983) Limited provides accommodation at its premises for BatNet and BTT as well as for the accounts department of BATM.

8.1.5 BATM previously had a facility in Nesher which it no longer occupies. The lease, prior to termination, was held by G.Beres Marketing (1983) Limited and terminated in October 1994 when BATM moved its operations to Yokneam.

8.1.6 Until June 1994 the offices of BATM were at the premises of G.Beres Marketing (1983) Limited.

8.1.7 BATM presently has a small warehouse in the premises of G.Beres Marketing (1983) Limited.

## 9. Share Ownership Plan

The Company has established an employee share ownership plan ("Plan") the principal terms of which may be summarised as follows:

9.1 A total of 1,239,840 ordinary shares of 0.10 NIS each ("Plan Shares") of the Company have been issued and allotted to the trustee of the Plan ("Trustee") to be held on trust for the full time employees, including any executive director of the Company or any subsidiary, as defined in section 1 of the Israel Securities Law, 5728 1968, ("Eligible Employees"). The Board has the discretion to offer such number of the Plan Shares as it may see fit to any Eligible Employee at a subscription price, which may not be lower than the par value, to be determined by the Board and subject to any performance criteria or conditions required to be fulfilled by the offeree as a condition of transfer of the shares to him or her pursuant to the Plan ("Condition of Release") and any conditions as to the earliest date or dates on which the beneficial ownership of any Plan Shares may be transferred to him or her absolutely ("Date of Release") which may be set by the Board. Any offer to an Eligible Employee is open for acceptance in whole or in part for up to 21 days and must be accompanied by payment of the subscription price.

9.2 The par value of the shares allotted to the Trustee were granted by the Company as an interest free loan to the Trustee ("Loan") except that the outstanding part of the Loan from time to time shall be deemed to increase in direct proportion to and at the time of any increase in the Israeli Consumer price index over the level of such index at the date on which the Plan Shares are issued and allotted to the Trustee.

9.3 Where all or part of the Company's share capital is listed on the London's Stock Exchange's official list or is dealt in on the Alternative Investment Market offers of participation in the Plan cannot be made during the two calendar months immediately preceding the announcement of either the half yearly or annual results of the Company to the London Stock Exchange or at any other time when directors of the Company are prohibited in dealing with the shares under the AIM model code.

9.4 Upon acceptance, shares accepted will be revocably appropriated to the Eligible Employee who has accepted such shares ("Participant") and held by the Trustee until the Date of Release and all the Conditions of Release have both been met. The accepted shares shall rank pari passu in all respects with the other issued shares of the Company, except for any rights attached to the shares by reference to a record date preceding the date on which the shares are so appropriated.

48

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Statutory and General Information
BRTM ADVANCED COMMUNICATIONS LIMITED

9.5 In the event that the Participant ceases to be an Eligible Employee for any reason, commits any material breach of the terms and conditions of his employment with the Company or any subsidiary, commits any act of misconduct or dishonesty during the course of his employment or otherwise acts in a manner which may in the reasonable opinion of the Board damage the Company's reputation or otherwise cause the Company to suffer any loss, the beneficial ownership of any shares held by the Trustee on trust for that person will revert to the trust held for the Eligible Employees as a whole, provided that the relevant Participant shall be entitled to reimbursement of the subscription price, as increased by reference to the rise, if any, in the Israeli consumer price index between the date of appropriation and the date on which the beneficial ownership of the shares reverts to the Eligible Employee.

9.6 The Board may amend the Plan in any respect, except that no amendment may be made to the Plan which would alter to the disadvantage any rights already accrued to a Participant unless his prior written consent is given and no increase may be made in the number of Plan Shares issued and allotted to the Trustee except with the sanction of an ordinary resolution of the Company's shareholders meeting.

## 10. Share Option Scheme

The Company has established a Share Option Scheme, the principal terms of which may be summarised as follows:

10.1 The Share Option Scheme provides for the grant of options and super options at the absolute discretion of the Board to selected employees, directors of the Group or service providers selected by the Board ("Eligible Employees"). The provisions of paragraphs 10.7 and 10.8 do not apply to options granted to service providers.

10.2 Where all or part of the Company's share capital is listed on the London Stock Exchange's Official List or is traded on the Alternative Investment Market, offers of options to Eligible Employees cannot be made during the two calendar months immediately preceding the announcement of either the half yearly or annual results of the Company to the London Stock Exchange.

10.3 An offer of an option must be accepted in writing within 21 days and will otherwise lapse and is personal to the Eligible Employee.

10.4 On the exercise of an option, the amount payable for each share is the value which the Board may in its absolute discretion decide, provided that it is not lower than the par value of the share ("Subscription Price").

10.5 The aggregate number of unissued shares over which options may be granted under the scheme on any date of grant is limited, except as provided in paragraph 10.6, so that:

10.5.1 at any time it must not exceed five per cent. of the ordinary share capital of the Company then in issue, when aggregated with the number of shares issued and remaining issuable in respect of rights granted (other than super options) within the previous ten years under the scheme and any other option scheme (other than a savings related share option scheme) operated by the Company or any associated company including the options granted to R. Be'ery referred to in paragraph 2.13 above;

10.5.2 at any time it must not exceed ten per cent. of the ordinary share capital of the Company then in issue when aggregated with the number of shares issued or remaining issuable in

---

Part Four Statutory and General Information
BATM ADVANCED COMMUNICATIONS LIMITED

## 16. Amendment to the Ordinance

Under the second amendment to the Ordinance, which became effective in 1987 ("Amendment"), Israeli companies in which the public hold shares are required to appoint at least two independent directors ("Independent Directors") who have been approved by a statutory committee consisting of the Chairman of the Israeli Securities Authority, the Chairman of the Tel Aviv Stock Exchange and a member of the Israeli judiciary who acts as chairman of the committee ("Committee"). The Ordinance details certain standards for independence of these directors. The law imposes an obligation on the Independent Directors to report infringements of law and good business practice as well as improper conduct to the chairman of the board of the company and in some cases to the Israel Securities Authority.

The District Court of Tel Aviv ruled on 6 June 1993 that companies registered under the laws of Israel whose shares have been offered to the public outside Israel (such as BATM) are also required to comply with the requirements of the Amendment. However, this judgment was stayed by the Israel Supreme Court in October 1993, pending appeal of the District Court's decision. If the District Court's decision is affirmed by the Supreme Court, BATM will be obliged to designate and apply to the Committee for the approval of 2 Independent Directors and will be obliged to appoint an internal auditor.

## 17. Israeli taxation and Foreign Exchange Regulations

The following is a brief outline of certain Israeli tax laws which apply to the Company and its shareholders. The consequences for any particular investor may differ from those described below by reason of that investor's particular circumstances.

This outline is not intended to replace legal or professional tax advice and is intended only as a general guide. In considering their tax position, potential investors should consult with their own tax adviser as to their own particular tax position in respect of the purchase, ownership and sale of the Company's shares, including effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.

### 17.1 General corporate tax structure

In general, Israeli companies are currently subject to "Company Tax" at the rate of 36 per cent. of taxable income.

### 17.2 Approved enterprises

The Investment Law for the Encouragement of Capital Investments, 5719 1959 ("Investment Law") provides that capital investments in certain production facilities may, upon application to the Investment Centre, be designated as an "approved enterprise" under the Investment Law. In general, the "approved enterprise" status entitles a company to tax benefits or government grants or a combination of them.

Taxable income derived from an "approved enterprise" is subject to company tax at the maximum rate of 25 per cent.. This rate may be further reduced for what is known as a "Foreign Investors' Company" to as low as 10 per cent. Dividends paid out of income derived from an "Approved Enterprise" generally are subject to withholding tax at a rate of 15 per cent, compared to the general rate of 25 per cent.

69

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Statutory and General Information
BATM ADVANCED COMMUNICATIONS LIMITED

The tax benefits are granted for the duration of the "Benefit Period", see below in respect of the "Benefit Period" granted to the Company. The Benefit Period begins in the year in which the "approved enterprise" first generates taxable income. In any event the Benefit Period elapses upon the earlier of:

(a) 12 years from the date on which production or operations are determined by the Investment Centre to have commenced; and

(b) 14 years from the date on which approval from the Investment Centre is granted.

In addition to the reduced company tax rate described above, an "approved enterprise" may be entitled to a grant from the government of Israel for investments in its fixed assets. A company that receives an "approved enterprise" status may, however, elect to forgo any entitlement to the grants otherwise available under the Investment Law and in lieu to participate in an "Alternative Benefit Program" under which it may receive a full tax exemption on its undistributed income during the "Benefit Period".

The Company's manufacturing facility was granted an "approved enterprise" status in 1992 and several subsequent investments relating to the facility were approved by the Investment Centre during the period from 1992 to 1995. The Company elected to participate in the "Alternative Benefit Program" under which it received a full tax exemption on its undistributed income during its "Benefit Period". The Company was granted an eight year Benefit Period which commenced in 1992.

If the Company distributes dividends out of tax-exempt profits of the "approved enterprise", it will be obliged to pay company tax on distributed profits at the rate which would have been applicable had it not elected to participate in the "Alternative Benefit Program" (25 per cent.). In addition, dividends paid out from tax exempt profits will be subject to withholding tax at a rate of 15 per cent.

The tax benefits derived from an "approved enterprise" relate only to taxable income attributable to such "approved enterprise" and are conditional upon the fulfilment of the conditions in the Investment Law, any regulations made under it and the criteria in the certificate of approval granted by the Investment Centre. If the Company fails to comply with these conditions, the tax benefits can be cancelled in whole or in part. To the best of the Company's knowledge and belief, it operates in compliance with all the "approved enterprise" conditions and criteria applicable to it. There can be no assurance, however, that the Company's facility will continue to so operate or that the benefits under the "approved enterprise" will continue or be applicable in the future.

## 17.3 Law for the Encouragement of Industry (Taxes). 5729 - 1969

The Company currently qualifies as an "Industrial Company" within the definition of the Law for the Encouragement of Industry (Taxes), 5729 - 1969 ("Industry Encouragement Law"). Pursuant to the Industry Encouragement Law, an "Industrial Company" is a company which:

(a) is resident in Israel;

(b) at least 90 per cent. of the income of which in any tax year, determined in Israeli currency, exclusive of income from defence loans, capital gains, interest and dividends is derived from an "Industrial Enterprise" owned by it. An "Industrial Enterprise" is defined as an enterprise whose major activity in a given tax year is in industrial production activity.

An Industrial Company is entitled to certain tax benefits such as: depreciation of know-how and patents (over an eight year period), ability under certain conditions to elect to file a consolidated tax return with

66

BATM

Part Four

Statutory and General Information

BATM ADVANCED COMMUNICATIONS LIMITED

additional Industrial Companies and accelerated depreciation rates on machinery, equipment and buildings.

Eligibility for benefits under the Industry Encouragement Law is not subject to receipt of prior approval from any governmental authority. No assurance can be given that the Company will continue to qualify as an "Industrial Company" or that the benefits described above will be available in the future.

## 11.4 Capital Gains Tax

Israeli law imposes a capital gains tax on the sale of capital assets, including the sale of shares in the Company. The law distinguishes between "real gain" and "inflationary surplus". "Real gain" is the excess of the total capital gain over the inflationary surplus, computed on the basis of the increase in the Israeli Consumer Price Index between the date of purchase and the date of sale. Inflationary surplus accumulated until 31 December 1993 is taxed at a rate of 10 per cent. for residents of Israel, reduced to nil taxation for non- residents if calculated according to the exchange rate of the dollar instead of the Consumer Price Index. Real gain is added to ordinary income, which is taxed at the applicable ordinary rates for individuals and 36 per cent. for corporations. Inflationary surplus accumulated from and after 31 December 1993 is exempt from any capital gains tax.

Under current law, the Ordinary Shares are exempt from Israeli capital gains tax so long as:

(a) shares are listed on a stock exchange recognized by the Israeli Ministry of Finance; the Official List or Alternative Investment Market of the London Stock Exchange or which qualify as such
(b) the Company qualifies as an Industrial Company.

There can be no assurance that the Company will maintain such a listing or qualification.

## 17.5 Taxation of Non-Residents

Non-residents of Israel are subject to income tax on income derived from sources in Israel. In general, dividends, other than in the form of bonus shares, are subject to withholding tax at the rate of 25 per cent. reduced to 15 per cent. for dividends distributed out of profits generated by an "approved enterprise". These rates may vary if a different rate is provided in a double taxation treaty between Israel and the shareholder's country of residence. Under the tax treaty between Israel and the United Kingdom, the maximum tax on dividends paid to a holder of Ordinary Shares who is a resident of the United Kingdom will be 15 per cent., subject to various conditions. As previously noted under the Investment Law, however, dividends generated by an "approved enterprise" are taxed at the rate of 15 per cent.

## 17.6 Foreign Exchange Regulations

Non-residents of Israel who subscribe for Ordinary Shares under the Placing in pounds Sterling or other foreign currency will be entitled to convert dividends, if any, paid by the Company, and any amounts payable upon the liquidation or winding up of the Company, as well as the proceeds of any sale in Israel of Ordinary Shares to an Israeli resident, into the currency in which they purchased the Ordinary Shares at the rate of exchange prevailing at the time of conversion, provided certain requirements under the Israeli Currency Law, 5738-1978 ("Currency Law") are met or pursuant to a specific permit obtained by such shareholder under the Currency Law.

Additionally, a non-resident of Israel is entitled to open a non-resident bank account in Israel into which dividends distributed by the Company may be deposited.

Port Four
Statutory and General Information
BRTM R0VRNCED COMMUNICATIONS LIMITED

Israeli residents are eligible to purchase securities outside Israel if they are listed on a foreign stock exchange in any of the countries specified in the regulations promulgated under the Currency Law. Great Britain is included in such regulations. Such investments must be effected through an Israeli commercial bank.

Under applicable currency control regulations, the proceeds of a public offering outside Israel must be transferred to Israel. A special permit from the Controller of Foreign Exchange will be required to retain any part of these funds out of Israel.

## 18. Other information

18.1 The financial year of the Company ends on 31 December.

18.2 There are no significant investments by the Company in progress except as set out in Part Four of this document.

18.3 No exceptional factors have influenced the Company's activities.

18.4 The minimum amount which, in the opinion of the Directors, must be raised under the Placing to provide the sums required in respect of the matters specified in Schedule 1 of the Regulations is £7,000,000, which is intended to be applied as follows:—

|  18.4.1 | the purchase of property | £1,830,000  |
| --- | --- | --- |
|  18.4.2 | preliminary expenses and expenses of the Placing | £620,000  |
|  18.4.3 | repayment of money borrowed in respect of 18.4.1 and 18.4.2 above | —  |
|  18.4.4 | working capital including marketing expenses of geographical expansion | £2,050,000  |
|  18.4.5 | funding for acquisitions | £2,500,000  |

18.5 In the event that the minimum subscription is not achieved, the conditions of the Placing not satisfied or applications are unsuccessful, such funds will be returned to applicants as soon as reasonably practicable.

18.6 The expenses of the Placing are estimated at £660,000, excluding recoverable VAT, of which £423,000 are attributable to the UK and £237,000 to Israeli costs, including success-related fees for preparation of the Company for flotation, and are payable by the Company, leaving estimated maximum net proceeds of £7,340,000.

18.7 BDO Stoy Hayward, Chartered Accountants, have given and not withdrawn their written consent to the issue of this prospectus with the inclusion in it of their report and letter and references to their name in the form and context in which they respectively appear.

18.8 Almagor &amp; Co CPA (ISR), Chartered Accountants, have given and not withdrawn their written consent to the issue of this prospectus with the inclusion in it of their report and letter and references to their name in the form and context in which they respectively appear.

18.9 Shore Capital and Shore Capital and Corporate have given and not withdrawn their written consent to the issue of this prospectus with the inclusion in it of references to their names in the form and context in which they respectively appear.

162

PRT Four
Statutory and General Information
BRTM ADVANCED COMMUNICATIONS LIMITED

18.10 Except as disclosed in this prospectus, there has been no significant change in the financial or trading position of the Company since the end of its last completed financial year.

18.11 It is expected that certificates in respect of the new Ordinary Shares will be despatched by post to shareholders, at their own risk by 16 July 1996.

18.12 The Placing price of 125p per Ordinary Share represents a premium of 123p over the nominal value of NIS 0.10 of each Ordinary Share.

18.13 The financial information relating to the Company contained in this prospectus does not comprise statutory accounts for the purposes of section 240 of the Act.

## 19. Documents available

Copies of the following documents will be available for inspection during normal business hours on any weekdays, Saturdays and public holidays excepted, at the offices of Fladgate Fielder at Heron Place, 3 George Street, London W1H 6AD for 14 days from the date upon which the Ordinary Shares are admitted to trading on AIM:—

(a) the memorandum and articles of association of the Company;

(b) the letter and report from BDO Stoy Hayward and Almagor &amp; Co CPA set out in Part Two and Part Three;

(c) the service agreements referred to in paragraph 6.1 of this Part Four;

(d) the material contracts referred to in paragraph 13 of this Part Four; and

(e) the written consents of BDO Stoy Hayward, Almagor &amp; Co., Shore Capital and Corporate and Shore Capital referred to in paragraph 18 of this Part Four.

3 July 1996

83

- 5 -
# דוחות והודעות שהחברה פרסמה לפי הדין הזר
## בתקופה שלאחר פרסום הדוח התקופתי

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|  COMPANY | INVESTORS | OUR BUSINESS | RESOURCES | NEWS CENTER | CONTACT US  |
| --- | --- | --- | --- | --- | --- |
|  REGULATORY NEWS
PRESS COVERAGE | **Regulatory News**
**Annual Financial Report for 2011**
Apr 30, 2012  |   |   |   |   |
|  **ANNUAL FINANCIAL REPORT - DTR 6.3.5 Disclosure**
Following the release on 27 February 2012 of the Company's Preliminary Results Announcement for the financial year ended 31 December 2011 (the 'Preliminary Announcement'), the Company announces on 30 April 2012 that the 2011 Annual Report and Accounts have been published. These documents have been made publicly available on the BATM website (www.batm.com). The annual report can be found in Investor Relations under Financial reports. Direct link
In compliance with 9.6.1 of the Listing Rules, a copy of the 2011 Annual Report and Accounts will shortly be available for inspection at the UK Listing Authority's National Storage Mechanism website: http://www.hemscott.com/nsm.do.
The primary purpose of this announcement is to inform the market about the publication of the Company's Annual Report and Accounts for the year ended 31 December 2011 (the "2011 Annual Report and Accounts").
The information below, which is extracted from the 2011 Annual Report and Accounts, is included solely for the purpose of complying with DTR 6.3.5 and the requirements it imposes on issuers as to how to make public annual financial reports. It should be read in conjunction with the Company's Preliminary Announcement. Together these constitute the material required by DTR 6.3.4 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full 2011 Annual Report and Accounts. References to page numbers and notes to the accounts set out in the Appendices below refer to page numbers and notes to the accounts in the Company's 2011 Annual Report and Accounts.
The Preliminary Announcement includes an indication of the important events that occurred during the year and a condensed set of the financial statements.
The Company's auditor has reported on the accounts and its reports are unqualified. The Independent Auditor's Report on the Group financial statements is set out in full on page 27 of the 2011 Annual Report and Accounts.  |   |   |   |   |   |
|  **APPENDIX A - DIRECTORS' RESPONSIBILITY STATEMENT**
The 2011 Annual Report and Accounts contain a responsibility statement in compliance with paragraph 4.1.12 of the DTR. The directors' responsibility statement is set out on page 20 of the 2011 Annual Report and Accounts for the Group. This statement is set out below in full and unedited text.
The directors are responsible for preparing the Annual Report, the Remuneration Report and the financial statements in accordance with applicable laws and regulations. The directors are required to prepare financial statements for the Group in accordance with International Financial Reporting Standards (IFRS). Company law requires the directors to prepare such financial statements.
International Accounting Standard 1 requires that financial statements present fairly for each financial year the company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's 'Framework for the Preparation and Presentation of Financial Statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable International Financial Reporting Standards.
Directors are also required to:
- properly select and apply accounting policies;
- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and
- provide additional disclosures when compliance with the specific requirements in IFRS is  |   |   |   |   |   |

http://www.batm.com/index.php?page=news&amp;article=89
29/08/2012

BATM :: Regulatory News
Page 2 of 3

insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a directors' report and directors' remuneration report which comply with the Listing Rules and the Disclosure and Transparency rules.

Legislation in Israel governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm to the best of our knowledge:

1. the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit of the company and the undertakings included in the consolidation taken as a whole; and

2. the management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

## APPENDIX B - RISKS AND UNCERTAINTIES

The principal risks and uncertainties are set out on page 17 of the 2011 Annual Report and Accounts. The full and unedited text relating to these disclosures are set out below:

'The Group has recently entered the Medical and Surveillance sectors. These are new markets in which the Group has relatively little experience. The success of the Group's investments in these sectors is thus uncertain with consequent risk to the amounts invested.

The Group has made acquisitions which do not attain one hundred per cent ownership of the target Companies. As a result certain companies in the group have minority interests, which are usually the local management of the subsidiaries. Relationships with these minority interests are important and carry certain risks.

The Group has several significant indirect sales channels. The loss, or significant scale down, of any one or more of these channels would have a negative impact on the performance of the Group.

The Company has an ongoing process for identifying, evaluating and managing the significant risks faced by the Company that has been in place for 2011 and up to the date of approval of the annual report and financial statements. Principal controls are managed by the executive directors and key employees, including regular review by management and the Board of the operations and the financial statements of the Company.'

- Ends -

Enquiries

BATM Advanced Communications +972 9866 2525
Dr Zvi Marom, Chief Executive
Ofer Bar-Ner, CFO

Threadneedle Communications 020 7653 9850
Josh Royston / Graham Herring

FinnCap 020 7220 0500
Marc Young

Shore Capital 020 7408 4090
Pascal Keane

|  2012 | 2011 |   |
| --- | --- | --- |
|  Aug 22, 2012 | Price Monitoring Extension  |   |
|  Aug 22, 2012 | Second Price Monitoring Extension  |   |
|  Aug 16, 2012 | BATM Interim Results 2012  |   |
|  Aug 08, 2012 | Election of Home State  |   |
|  Aug 05, 2012 | BATM interim results 2012 - Webcast Registration - 16 August 2012 - 9.30am BST
Webcast - 16 August 2012 - 9.30am BST  |   |
|  Jul 24, 2012 | Notice of Results 24-Jul-12  |   |
|  Jul 02, 2012 | Result of AGM - 02 Jul-12  |   |
|  Jul 02, 2012 | AGM Statement 02-Jul-2012  |   |
|  Jun 26, 2012 | Holding(s) in Company  |   |
|  Jun 06, 2012 | Notice of Annual General Meeting  |   |
|  May 16, 2012 | Holding(s) in Company  |   |
|  May 04, 2012 | Holding(s) in Company  |   |
|  May 02, 2012 | CE certification for HCV (Hepatitis C) screening kit  |   |
|  Apr 11, 2012 | Interim Management Statement  |   |
|  Mar 23, 2012 | CE certification for HIV screening kit  |   |

http://www.batm.com/index.php?page=news&amp;article=89
29/08/2012

BATM :: Regulatory News
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|  Mar 16, 2012 | Holding(s) in Company  |
| --- | --- |
|  Mar 06, 2012 | Holding(s) in Company  |
|  Feb 27, 2012 | Final Results 2011  |
|  Feb 27, 2012 | Directorate Change  |
|  Feb 27, 2012 | Holding(s) in Company  |
|  Feb 16, 2012 | Holding(s) in Company  |
|  Feb 13, 2012 | Holding(s) in Company  |
|  Feb 09, 2012 | Holding(s) in Company  |
|  About BATM | Investors | News & Events | BATM Group  |
| --- | --- | --- | --- |
|  Company Profile | Today Stock Quote | Regulatory News | Telecom Division  |
|  BATM Offices | Corporate Governance | Press Coverage | Medical Division  |
|  Management & Board Members | Advisers and Registrars | LinkedIn |   |

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REGULATORY NEWS PRESS COVERAGE

# Regulatory News

## CE certification for HCV (Hepatitis C) screening kit

May 02, 2012

Link: http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11192648

RNS Number : 5067C
BATM Advanced Communications Ltd
02 May 2012

2 May 2012

BATM Advanced Communications Limited

CE certification for HCV (Hepatitis C) screening kit

BATM Advanced Communications Limited ("the Company") (LSE: BVC), a leading designer and producer of broadband data and telecoms systems and medical laboratory equipment, is pleased to announce that its wholly owned subsidiary Adaltis, a manufacturer of medical diagnostics equipment, has received CE certification for its HCV (Hepatitis C) Screening Kit.

The kit is a fourth generation Enzyme Immunoassay (Elisa) kit for the determination of antibodies to Hepatitis's C virus in human plasma or serum. Testing in external, independent labs has shown performance results of 100% for diagnostic sensitivity and 99.5% for diagnostic specificity, clearly marking this screening kit as the top of its class. This level of accuracy will ensure that patients receive reliable diagnoses and that laboratories are spared the significant and needless expense of repeat testing.

The kit enables two different method protocols, one especially developed for the Chinese market and a shorter version for the rest of the world.

This certification follows the Company's announcement of 23 March 2012 that it had received CE certification for its Detect 4 HIV Total Screening Kit.

Initial deliveries of the new kit will start in the second quarter of this year, with an increasing buildup of production through the fourth quarter and into next year.

Dr Zvi Marom, Chief Executive, of BATM commented:

"We're delighted to have received certification for the HCV screening kit which comes just after the clearance for our HIV kit. This is further evidence of the momentum that we are building within our medical division as we continue to add to our portfolio of products."

- Ends -

For further information:

Enquiries

BATM Advanced Communications +972 9866 2527

Ofer Bar-Ner, CFO

http://www.batm.com/index.php?page=news&amp;article=105
29/08/2012

---

BATM :: Regulatory News
Page 2 of 2

Newgate Threadneedle 020 7653 9850
Josh Royston / Graham Herring
finnCap 020 7220 0500
Marc Young / Brian Patient
Shore Capital 020 7408 4090
Pascal Keane

This information is provided by RNS
The company news service from the London Stock Exchange

END

2012 2011
Aug 22, 2012 Price Monitoring Extension
Aug 22, 2012 Second Price Monitoring Extension
Aug 16, 2012 BATM Interim Results 2012
Aug 08, 2012 Election of Home State
Aug 05, 2012 BATM Interim results 2012 - Webcast Registration - 16 August 2012 - 9.30am BST
Webcast - 16 August 2012 - 9.30am BST
Jul 24, 2012 Notice of Results 24-Jul-12
Jul 02, 2012 Result of AGM - 02 Jul-12
Jul 02, 2012 AGM Statement 02-Jul-2012
Jun 26, 2012 Holding(s) in Company
Jun 06, 2012 Notice of Annual General Meeting
May 16, 2012 Holding(s) in Company
May 04, 2012 Holding(s) in Company
Apr 30, 2012 Annual Financial Report for 2011
Apr 11, 2012 Interim Management Statement
Mar 23, 2012 CE certification for HIV screening kit
Mar 22, 2012 Holding(s) in Company
Mar 15, 2012 Holding(s) in Company
Mar 06, 2012 Holding(s) in Company
Feb 27, 2012 Final Results 2011
Feb 27, 2012 Directorate Change
Feb 27, 2012 Holding(s) in Company
Feb 16, 2012 Holding(s) in Company
Feb 13, 2012 Holding(s) in Company
Feb 09, 2012 Holding(s) in Company

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Notice of Annual General Meeting

Jun 06, 2012

File: AGM 2012 Notice Circular.pdf [132.26 KB]

Annual General Meeting of BATM Advanced Communications Ltd. will be held at the offices of finnCap Limited, 60 new Broad street London, EC2M 1JJ, on 2 July 2012 at 11.00 am. to consider, and if thought fit, to pass the following ordinary resolutions AGM 2012 Notice Circular [PDF, 132.26 KB]

2012 2011

Aug 22, 2012 Price Monitoring Extension
Aug 22, 2012 Second Price Monitoring Extension
Aug 16, 2012 BATM Interim Results 2012
Aug 08, 2012 Election of Home State
Aug 05, 2012 BATM interim results 2012 - Webcast Registration - 16 August 2012 - 9.30am BST
Webcast - 16 August 2012 - 9.30am BST
Jul 24, 2012 Notice of Results 24-Jul-12
Jul 02, 2012 Result of AGM - 02 Jul-12
Jul 02, 2012 AGM Statement 02-Jul-2012
Jun 26, 2012 Holding(s) in Company
May 16, 2012 Holding(s) in Company
May 04, 2012 Holding(s) in Company
May 02, 2012 CE certification for HCV (Hepatitis C) screening kit
Apr 30, 2012 Annual Financial Report for 2011
Apr 11, 2012 Interim Management Statement
Mar 23, 2012 CE certification for HIV screening kit
Mar 22, 2012 Holding(s) in Company
Mar 15, 2012 Holding(s) in Company
Mar 06, 2012 Holding(s) in Company
Feb 27, 2012 Final Results 2011
Feb 27, 2012 Directorate Change
Feb 27, 2012 Holding(s) in Company
Feb 16, 2012 Holding(s) in Company
Feb 13, 2012 Holding(s) in Company
Feb 09, 2012 Holding(s) in Company

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http://www.batm.com/index.php?page=news&amp;article=91
29/08/2012

AGM 2012 Notice Circular final.doc
1

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to any aspect of the proposals referred to in this document or as to the action you should take, you should seek your own advice from a stockbroker, solicitor, accountant, or other professional adviser.

If you have sold or otherwise transferred all of your shares, please pass this document together with the accompanying documents to the purchaser or transferee, or to the person who arranged the sale or transfer so they can pass these documents to the person who now holds the shares.

BATM Advanced Communications Ltd.
(incorporated and registered in Israel under number 52-0042813)

NOTICE OF ANNUAL GENERAL MEETING

International H.Q.
BATM Advanced Communications
Neve Ne'eman Industrial Park
4, Ha'harash street
PO Box 7318, Hod Hasahron, 45240 Israel.
52-0042813 – Registered in Israel

# Chairman's letter

4 June 2012

Dear Shareholder

## Annual general meeting

I am pleased to enclose the notice to the annual general meeting of the company to be held at the offices of finnCap Limited, 60 new Broad street London, EC2M 1JJ, on 2 July 2012 at 11.00 am.

## Recommendation

The directors of the company consider that all such proposals to be considered at the extraordinary general meeting are in the best interests of the company and its members as a whole and are most likely to promote the success of the company for the benefit of its members as a whole.

The directors unanimously recommend that you vote in favour of all the proposed resolutions as they intend to do so in respect of their own beneficial holdings to the extent that they have any.

Yours sincerely,

Peter Sheldon

Chairman

AGM 2012 Notice Circular final.doc

# NOTICE OF ANNUAL GENERAL MEETING OF BATM ADVANCED COMMUNICATIONS LTD.

Notice is hereby given that the Annual General Meeting of BATM Advanced Communications Ltd. will be held at the offices of finnCap Limited, at 60 new Broad Street, London on Monday, 2 July 2012 at 11.00 a.m. to consider, and if thought fit, to pass the following ordinary resolutions:

## Ordinary resolutions

1. To receive, consider and adopt the Company's audited annual accounts for the financial year ended 31 December 2011 together with the last directors' report and the auditors' reports on those accounts.
2. To receive, consider and accept the report of the Company's remuneration committee for the financial year ended 31 December 2011 together with the auditors' reports on the auditable part of the remuneration report.
3. To appoint the auditors of the Company (Brightman Almagor Zohar &amp; Co., a member firm of Deloitte Touche Tohmatsu) as external auditors for the 2012 financial year and to authorise the board of directors to fix the auditors' remuneration for such period.
4. Election of directors (Note 1)

To re-elect the directors mentioned in section 4.1- 4.4 below for an additional term until the next Annual General Meeting of the Company:

4.1 Mr. Peter Sheldon
4.2 Dr. Zvi Marom;
4.3 Mr. Ofer Barner.
4.4 Dr. Gideon Chitayat

and to elect the nominee-director mentioned in section 4.5 below as independent external director for a three year term (Note 2):

4.5 Mrs. Elka Nir.

5. To adopt and approve the director's remuneration offered by the company to the nominated external director, as detailed in part 2 of the Appendix to this notice of the AGM.
6. Approval of an incentive package to the company's Chief Financial Officer and director, as detailed in part 3 of the Appendix to this notice of the AGM (Note 3).
7. Any other business.

## Special Business

To consider and, if thought fit, to pass the following resolution as a special resolution (Note 4):

8. That the Company be generally and unconditionally authorised to make market purchases (as defined in Section 693(4) of the Companies Act 2006 (the 'Act')) on the London Stock

AGM 2012 Notice Circular final.doc

Exchange of ordinary shares of NIS 0.01 each in the capital of the Company ("ordinary shares") provided that:

8.1 the maximum aggregate number of ordinary shares hereby authorised to be purchased is 60,000,000 ordinary shares;

8.2 the Company may make a contract to purchase its own shares under the authority hereby conferred prior to the expiry of such authority and may make a purchase of its own shares in pursuance of such contract.

8.3 the minimum price which may be paid for the ordinary shares is their par value and the maximum price (excluding expenses) which may be paid for the ordinary shares is an amount equal to the higher of: (a) 5% above the average of the middle market quotations of an ordinary share as derived from the Daily Official List of the London Stock Exchange Plc for the 5 business days before the purchase is made and (b) the value of an ordinary share calculated on the basis of the higher of the price quoted for the last independent trade and the highest current independent bid for any number of ordinary shares on the trading venue where the purchase is carried out;

8.4 the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting or, if earlier, on 30 June 2013.

Note 1: Details of the current remuneration terms under which the above directors are engaged are contained in the Annual Report.

Note 2: Under the Israeli Companies Law 1999, the term of an external director is three years. Nominees for external directors must be appointed by a special vote of the shareholders' meeting which complies with one of the following conditions: (a) the majority vote in favour of the nominee shall comprise a majority of all the shareholders which were present (in person or by proxy) at the vote who are not a controlling party or having a personal interest in the appointment (and the votes of those abstaining will not be counted); or (b) the aggregate number of those voting against the nominee shall not exceed two percent of the aggregate voting rights in the company. A summary of Mrs. Nir's resume can be found in part 1 of the Appendix. The full resume is available for inspection at the Company's corporate offices during normal business hours.

Note 3: The company's Remuneration &amp; Audit Committee as well as the Board resolved to approve payment of a one-time bonus to the CFO in an amount of USD $25,000 as recognition for his special efforts in a very difficult year while expending extra time in taking care of two material matters that were outside the scope of his normal responsibilities. A summary of his current employment terms are set forth in part 3 of the Appendix.

Note 4: Resolution 8 constitutes special business and is proposed as a special resolution. The special resolution requires a 75% majority of votes to be passed.

The effect of Resolution No.8 is to grant the Company authority to purchase its own ordinary shares, up to a maximum of 60,000,000 ordinary shares, until the Annual General Meeting in 2013 or 30 June 2013 whichever is the earlier. This represents 14.8% of the ordinary shares in issue as at 4 June 2012 (excluding shares held in treasury) and the Company's exercise of this authority is subject to the stated upper and lower limits on the price payable.

AGM 2012 Notice Circular final.doc

Shares purchased may be cancelled or held in treasury, sold for cash or used to meet the Company's obligations under its employee share schemes. The resolution is proposed to ensure the Directors have the flexibility to act in the Company's best interests if the requirement arises. No purchase will be made unless the expected effect will be to increase earnings per share.

No dividends will be paid on, and no voting rights will be exercised in respect of, treasury shares.

Shares held as treasury shares will not automatically be cancelled and will not be taken into account in future calculations of earnings per share (unless they are subsequently resold or transferred out of treasury).

Dated: 4 June 2012

By order of the board

Dr Zvi Marom

Chief Executive Officer

Company number: 52-0042813

Registered office: Neve Ne'eman Industrial Park 4, Ha'harash street

PO Box 7318, Hod Hasahron, 45240 Israel.

1. Any member entitled to attend and vote at the meeting may appoint one or more proxies to attend and on a poll to vote instead of that member. A proxy need not be a member of the Company. The completion of a form of proxy will not prevent a member from attending and voting at the meeting. In order to be valid, proxy forms must be lodged at either Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or at the registered office of the Company in Israel marked for the attention of the CFO not less than 48 hours prior to the meeting. A form of proxy appears on the following page.

2. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company's register of members in respect of the joint holding (the first-named being the most senior).

3. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded.

Where you have appointed a proxy using the hard-copy proxy form, please contact the Company Registrars Capita Registrars.

If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.

AGM 2012 Notice Circular final.doc

4. In the case of holders of depositary interests representing shares in the Company, a form of direction must be completed in order to direct Capita IRG Trustees Limited, the Depositary, to vote on the holder's behalf at the meeting (in person or by proxy) or, if the meeting is adjourned, at the adjourned meeting. In order to be effective, a completed and signed form of direction (and any power of attorney or other authority under which it is signed) must be delivered to Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU by no later than 72 hours before the time fixed for the meeting or any adjourned meeting. A form of direction appears on the penultimate page of this notice.

5. Appointment of a proxy does not preclude you from attending the meeting and voting in person. If you have appointed a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated.

6. Copies of the directors' service contracts with the Company or any of its subsidiary undertakings together with the register of directors' share interests will be available for inspection at the registered office of the Company during normal business hours (weekends and public holidays excepted) from the date of this notice up to and including the date of the Annual General Meeting.

7. As at 11.00 a.m on 4 June 2011, the Company's issued share capital comprised 402,915,820 ordinary shares at 0.01 NIS each. Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company as at 11.00 a.m. on 4 June 2011 is 402,915,820.

8. If you do not have a proxy form or form of direction and believe that you should have one, or if you require additional forms, please contact Capita Registrars on 0871 664 0300 if calling from the UK (calls cost 10p per minute plus network extras) or +44 (0)208 639 3399 if calling from outside the UK.

9. You may not use any electronic address provided either:

9.1 in this notice of annual general meeting; or
9.2 any related documents (including the chairman's letter and proxy form)

to communicate with the Company for any purposes other than those expressly stated.

AGM 2012 Notice Circular final.doc

AGM 2012 Notice Circular final.doc

# Form of proxy
For use at the 2012 Annual General Meeting of BATM Advanced Communications Ltd.

I/We ...
of ...
being a member of the Company hereby appoint .../the Chairman of the meeting to act as my/our proxy and to vote for me/us as indicated below with an "X" at the Annual General Meeting of the Company convened for Monday, 2 July 2012 at 11 a.m.

Date ...
Signed ...

Please indicate how you wish to vote with an "X" in the appropriate box opposite each resolution. If no specific indication as to voting is given the proxy will vote or abstain in his direction as he will on any other matter arising at the meeting.

## ORDINARY RESOLUTIONS

|   | FOR | AGAINST  |
| --- | --- | --- |
|  1. Receipt of directors' report and annual accounts | ☐ | ☐  |
|  2. Acceptance of report of the remuneration committee | ☐ | ☐  |
|  3. Re-appointment of auditors | ☐ | ☐  |
|  4. Election of directors |  |   |
|  4.1 Re-appointment of Peter Sheldon | ☐ | ☐  |
|  4.2 Re-appointment of Dr. Zvi Marom | ☐ | ☐  |
|  4.3 Re-appointment of Ofer Barner | ☐ | ☐  |
|  4.4 Re-appointment of Dr. Gideon Chitayat | ☐ | ☐  |
|  4.5 Appointment of Mrs. Nir as external director | ☐ | ☐  |
|  5. Approval of the remuneration to the new external director | ☐ | ☐  |
|  6. Approval of an incentive package to the company's Chief Financial Officer and his current terms of employment | ☐ | ☐  |

## SPECIAL RESOLUTION

|  8. Approval and authorisation of the Company to purchase its own shares as detailed in Resolution No. 8 | ☐ | ☐  |
| --- | --- | --- |

AGM 2012 Notice Circular final.doc

Notes:

1. This form of proxy to be valid must be deposited with Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or at the registered office of the Company not less than 48 hours before the time fixed for the meeting.
2. In the case of a corporation this proxy should be under its common seal, or if not so required under the hand of an officer duly authorised in writing.
3. In the case of joint holders the signature of any one of them will suffice but the vote of the senior who tenders a vote whether in person or by proxy will be accepted to the exclusion of the votes of the other joint holders and for the purposes seniority shall be determined by the order in which the names stand on the Company's register of members in respect of the joint holding.
4. Any alteration made in the form of proxy should be initialled.

8

---

Form of direction

For use by holders of depositary interests representing shares on a one for one basis in the Issuer Company in respect of the Annual General Meeting of BATM Advanced Communications Limited, convened for Monday 2 July 2012 at 11 a.m.]

I/We ...
of ...

being a holder of depositary interests representing shares in the Issuer Company hereby direct Capita IRG Trustees Limited, the Depositary, to vote for me/us and on my/our behalf in person or by proxy at the Annual General Meeting of the Issuer Company to be held on the above date (and at any adjournment thereof) as directed by an "X" in the appropriate box opposite each resolution. If no indication is given, you will be deemed as instructing the Depository to abstain from voting.

ORDINARY RESOLUTIONS

|   | FOR | AGAINST  |
| --- | --- | --- |
|  1. Receipt of directors' report and annual accounts | ☐ | ☐  |
|  2. Acceptance of report of the remuneration committee | ☐ | ☐  |
|  3. Re-appointment of auditors | ☐ | ☐  |
|  4. Re-election of directors |  |   |
|  4.1 Re-appointment of Peter Sheldon | ☐ | ☐  |
|  4.2 Re-appointment of Dr. Zvi Marom | ☐ | ☐  |
|  4.3 Re-appointment of Ofer Barner | ☐ | ☐  |
|  4.4 Re-appointment of Dr. Gideon Chitayat | ☐ | ☐  |
|  4.5 Appointment of Mrs. Nir as external director | ☐ | ☐  |
|  5. Approval of the remuneration to the new external director | ☐ | ☐  |
|  6. Approval of an incentive package to the company's Chief Financial Officer and his current terms of employment | ☐ | ☐  |
|  SPECIAL RESOLUTION |  |   |
|  8. Approval and authorisation of the Company to purchase its own shares as detailed in Resolution No. 8 | ☐ | ☐  |
|  Signature: ... | Date: ...  |   |

AGM 2012 Notice Circular final.doc

AGM 2012 Notice Circular final.doc

Notes:

1. To be effective, this form of direction and the power of attorney or other authority (if any) under which it is signed, or a notarised or otherwise certified copy of such power of attorney, must be deposited at Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not later than 72 hours before the time appointed for holding the meeting.

2. Any alterations made to this form of direction should be initialled.

3. In the case of a corporation this proxy should be given under its common seal or under the hand of an officer or attorney duly authorised in writing.

4. Please indicate how you wish your votes to be cast by placing "X" in the box provided. On receipt of this form duly signed, you will be deemed to have authorised Capita IRG Trustees Limited to vote, or to abstain from voting, as per your instructions.

10

AGM 2012 Notice Circular final.doc
11

# APPENDIX

## Part 1

### Summary of Resume of the nominated external director

Mrs. Nir holds a BSc degree from the Technion Institute in Haifa in Computer Science (1986) and a diploma in Business Administration from the University of Haifa (1996). She currently holds the position of director (and chairwoman) in several medical companies, two of which are publicly traded on the Tel-Aviv Stock Exchange and is also a venture partner in Giza Venture Capital (in the life sciences field) which manages 600 million USD in its funds. She has over twenty years' experience in leading dynamic cutting edge technology organizations and held senior managerial positions in leading global medical and healthcare corporations including Biosense Webster, Johnson &amp; Johnson, GE Healthcare and Elscint.

## Part 2

### Remuneration offered to the nominee- external director

The remuneration offered to Mrs. Nir, the nominee for external director who has financial expertise is in accordance with the Israeli Companies Regulations (rules concerning remuneration and expenses to external directors), namely an annual fee of NIS 97,500 and a per meeting participation fee of NIS 3,750 linked to the Israeli consumer price index.

## Part 3

### Incentive package to company's CFO

A one time bonus in recognition of his special efforts in 2011 of USD $25,000 gross.

Currently his main employment terms are as follows:

Salary – NIS 50,000 per month gross.

Options to purchase BATM shares at an exercise price of 24.75 pence per share vesting as follows: 750,000 options on 9 June 2013 and 750,000 options on 9 June 2014 provided he is in the employ of the company on the vesting date. If the employee leaves or is terminated in the middle of a year, he will be entitled to the pro rata portion of the relevant year.

If the Medical Division of the company achieves an annual EBIDTA of 10% or more of the approved budget of revenues for that year the CFO is entitled to receive an annual bonus of $50,000 gross for each such year during the financial years 2011, 2012 and 2013.

AI assistant

BATM Advanced Communications Ltd. — Regulatory Filings 2012

6682_rns_2012-09-04_c4a61abc-48ba-4284-ac61-e0252e2a4078.pdf

מסמך רישום

BATM Advanced Communications Ltd.

באטמ תקשורת מתקדמת בע"מ

(להלן: "החברה")

תוכן עניינים

חלק ראשון - כללי

נושא

חלק שני - מסמכים נוספים

חלק ראשון

12. עיקרי הזכויות הנלוות למניות החברה

12.1 אסיפות בעלי המניות

12.1.1 זכויות הצבעה - כל בעל מניה זכאי בכל אסיפת בעלי מניות לקול אחד עבור כל מניה הרשומה על שמו במרשם בעלי המניות.

12.2 הדירקטוריון

12.2.1 מבנה הדירקטוריון - מספר הדירקטורים בחברה לא יעלה על 12 דירקטורים

12.2.2 מינוי והפסקת כהונה - דירקטורים (למעט דירקטורים חיצוניים) נבחרים

12.2.3 הזכויות להשתתף בחלוקת דיבידנד - בעלי המניות זכאים להשתתף בחלוקת

12.2.4 פירוק - במקרה שהחברה תפורק, אזי בכפוף לדין החל ולזכויות בעלים של

12.2.5 התנאים לשינוי הזכויות הנלוות למניות - בהתאם למסמכי ההתאגדות

13. מיסוי הכנסות ממניות החברה

13.1 בגין סכומי דיבידנד הנובעים מרווחים שנצברו בחברה עד שנת 2010 (כולל) יחולו

העברת ניירות ערך מלונדון לישראל: 14.4

14.4.1

14.4.2

14.4.3

14.4.4

14.4.5

העברת ניירות ערך מישראל לאנגליה: 14.5

14.5.1

חלק שני

מצורפים:

אישור הבורסה לניירות ערך בתל אביב בע"מ

לרישום למסחר של המניות

הנדון: אישור לרישום ניירות ערך למסחר בבורסה

ד"ח תקופתי של החברה לשנת 2011 לרבות

Welcome

Contents

Overview

Governance

Financials

Chairman's Statement

Business Review

Principal Activities and Review of the Business

Overview of 2011

Financial Performance

Telecom Division

Medical Division

Registration of Shares in Tel-Aviv

Dividends

Current Trading and Prospects

Financial Statements

Results and Dividends

Directors

Corporate Governance

Compliance with the 2006 FRC Combined Code

Corporate Governance

The Board

Relations with Shareholders

Committees

Audit Committee

Corporate Governance

Nominations Committee

Directors' Remuneration

Accountability and Audit

Auditors

Significant Risks and Uncertainty

Key Performance Indicators

Corporate Strategy

Future Developments

Corporate Governance

Internal Control

Conflicts

Statement of Directors' Responsibilities

Corporate, Social and Environmental Responsibilities

Employment Policies

Employees with Disabilities

Environmental Policies

Ethical Business Practices

BATM Advanced Communications Ltd. Regulatory Filings 2012