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					Clal Insurance Enterprises Holdings Ltd.            Board of Directors Report




  CLAL INSURANCE ENTERPRISES
                      HOLDINGS LTD.



            Condensed Interim Financial

                               Statements

                  at September 30, 2009

                                Unaudited



Part 1 – Board of Directors' Report
Part 2 – Consolidated, interim financial statements




  Translated from the Hebrew original

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Clal Insurance Enterprises Holdings Ltd.            Board of Directors Report




                                Part 1


       Board of Directors' Report




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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report


           Clal Insurance Enterprises Holdings Ltd.
      Board of Directors' Report at September 30, 2009
       The Board of Directors' Report on the state of the corporation's affairs for the
       period ended September 30, 2009, reviews the principal changes in the
       Company's operations during the first nine months of 2009 (the Reporting
       Period). The report is prepared in accordance with the Securities (Periodic and
       Immediate Reports) Regulations, 5730-1970, and taking into account that the
       reader is also in possession of the Company's full Periodic Report for 2008.
       Regarding the description of the subsidiary insurance companies' business which
       is consolidated in the Company's reports, the report was prepared in accordance
       with the Control of Insurance Business (Reporting Details) Regulations, 5758-
       1998

1. Description of the Company

1.1    The Company's shareholders
       The principal shareholders of the Company, whose shares are traded on the Tel
       Aviv Stock Exchange Ltd., are, as far as the Company is aware, at the date of
       publishing the report, I.D.B. Development Company Ltd. (IDB Development)
       which holds approximately 56.2% of the Company's shares, and Bank Hapoalim
       (Bank Hapoalim), which holds approximately 9.7% of its shares.


1.2    The Company's operating segments
       The Company operates in several key areas:
       Long-term savings, non-life insurance in Israel and Europe, health insurance,
       non-life insurance through a subsidiary in the US, and financial services.
       The Group also has other activity that is not included in the operating segments,
       comprising factoring and financial leasing activity, the extending of consumer
       and business credit, the running and managing of long-term care departments at
       retirement homes and hospitals, and the holding of insurance agencies.

       Following are the Company's operating segments:

       Long-term savings
       This segment consists of the Group's activities in the life insurance, pension and
       provident fund branches.
       Products in this sector provide savings solutions for retirement. In addition, most
       of the products in this sector combine insurance cover for a variety of risks, for
       example: Insurance in the event of death, disability, work disability, and critical
       illness.
       Activity in the life insurance sector takes place through Clal Insurance Company
       Ltd. (Clal Insurance). Activity in the pension sector takes place through Clal
       Insurance's holdings in Metavit-Atudot Pension Fund Management Company
       Ltd. (Metavit-Atudot) which manages new pension funds, in Atudot Pension
       Fund for Salaried and Self-employed Workers Ltd. (Old Atudot), which
       manages an old, balanced pension fund, and in C.P.Y. which manages the Israel


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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

       Electric employees' pension fund (regarding C.P.Y., see also par. 2.1.2 below).
       Activity in the provident fund sector takes place through Clal Insurance's
       holdings in Clal Gemel Ltd. (Clal Gemel).

       Non-life insurance activity in Israel and Europe:
       This sector consists of the Group's operations in compulsory motor insurance,
       motor property insurance, property and liabilities insurance, activity through a
       subsidiary in England and through a subsidiary in Romania and other non-life
       insurance products.
       Activity in this sector in Israel, which takes place through Clal Insurance,
       consists of compulsory motor insurance, motor property insurance, household
       insurance, other property insurance, liabilities insurance, accidental insurance
       and financial insurance and guarantees.
       Credit insurance and foreign-trade risks insurance takes place through Clal
       Credit Insurance Ltd. (Clal Credit Insurance), a subsidiary in which Clal
       Insurance has an 80% stake.
       Insurance activity in England takes place through Broadgate Underwriting
       Limited (Broadgate), a subsidiary in England which is a member of the Lloyd's
       Insurance Corporation in London and operates through a syndicate. Broadgate's
       main activity is property insurance and short-term health insurance.
       During the Reporting Period, the Company's operations also included non-life
       insurance activity in Romania, which took place through Clal Romania
       Asigurari-Resigurari S.A. (Clal Romania), a subsidiary in Romania of a Dutch
       company wholly owned by the Company (regarding the sale of Clal Romania,
       see par. 2.1.3 (2) below).

       Health insurance:
       This includes the Group's activity in health insurance in the illness and
       hospitalization branch (comprising: illness and hospitalization, overseas travel
       insurance, dental insurance, insurance for foreigners residing in Israel and
       Israelis residing overseas (regarding insurance for Israelis residing overseas, see
       par. 2.1.4 (2) below), and in the long-term care branch. In this area of activity,
       insurance plans are available for private policyholders as well as those designed
       for groups.
       Activity in this sector takes place mainly through Clal Health Insurance
       Company Ltd. (Clal Health).

       Non-life insurance activity through a subsidiary in the US
       This consists of the activity of Guard Insurance Group Inc. (GIG). GIG is a
       private holding company that owns four wholly owned private insurance
       companies (GIG and the companies it controls, hereinafter: Guard Group or
       Guard), which sells workers' compensation insurance policies in the US for
       accident or illness.

       Financial services:
       This includes the activity of the Clal Finance Group of companies (Clal
       Finance) which operates in the following key areas: (a) investment banking;
       (b) management of investment portfolios in Israel; (c) management of
       investment portfolios overseas; (d) management of mutual funds; (e) financial



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Clal Insurance Enterprises Holdings Ltd.                      Board of Directors Report

       services (mainly the rendering of TASE Member services, market making
       activity in government bonds and in securities and a venture to set up a web-
       based forex trading system); (f) financial products (principally the issue of
       various classes of financial products, including, among others, index products
       and various categories of liability certificates; and (g) nostro investments. Clal
       Finance is a public company traded on the Tel Aviv Stock Exchange Ltd. in
       which the Company has an 81.6% stake.

       The Company also has other activity that is not included in the operating
       segments, including factoring and financial leasing through Clal Factoring Ltd.,
       the extending of consumer credit through Clal Consumer Credit Financing Ltd.,
       the running and management of long-term care departments in retirement homes
       and hospitals through Clal Health Hospitalization Services Ltd., the holding of
       insurance agencies through Clal Agency Holdings Ltd.




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Clal Insurance Enterprises Holdings Ltd.                           Board of Directors Report


2. Developments since the last annual report

2.1       Developments in the corporation's business and significant changes in
          information on the operating segments described in Part 1 of the Periodic
          Report

2.1.1. General

      1. In September 2009, the Company's Board of Directors approved an application to
         institutional investors to raise capital of up to NIS 200 million, against an
         allotment of the Company's ordinary shares. In addition, the Company's Board of
         Directors authorized that NIS 150 million of the aforesaid amount, if and when it
         is raised, will be designated as an injection of capital into Clal Finance, as part of
         an issue of rights in Clal Finance or by way of extending a subordinated debt to
         Clal Finance, or in any other form in an effort to enhance Clal Finance's equity.
         The share allotment as well as the injection of capital, if and when either takes
         place, shall be subject, in part, to obtaining the necessary approvals by law,
         including approval from the relevant government organs and the Tel Aviv Stock
         Exchange. At the Reporting Date, the Company raised NIS 93 million within the
         context of the aforementioned raising of capital, the Company has allotted share
         options, each of which may be exercised for one ordinary share of the Company
         in consideration of an exercise price of NIS 81 per option, and for inclusive
         consideration of NIS 25 million.
      2. In August 2009, Standard & Poor's Maalot Ltd. (Maalot) announced that it would
         lower the Company's rating from AA- to A+ and it ratified the AA rating for the
         subordinated liability notes of Clal Insurance. The rating outlook for the
         Company and Clal Insurance was set as negative. According to Maalot's
         announcement, the Company's rating was lowered, in part, due to the introduction
         of more stringent regulatory requirements for insurance companies which
         increased their capital base and imposed restrictions on the distribution of
         dividends.
      3. In June 2009, Clal Insurance issued liability certificates in the amount of NIS 100
         million through Clalbit Financing Ltd. (Clalbit Financing), a company wholly
         controlled by Clal Insurance. The amount raised accounts for part of the
         shareholders' equity of Clal Insurance, as referred to in the Control of Insurance
         Business (Minimum Shareholders Equity Required of an Insurer) Regulations,
         5758-1998. See Note 8(H)(6) to the Financial Statements.


2.1.2. Long-term savings

         Since 2005, C.P.Y. – a company held by Clal Insurance (90.1%) and by IBI Stock
         Exchange Services in Israel Ltd. (IBI) (9.9%) (IBI together with Clal Insurance,
         hereinafter: the Shareholders), has managed the Israel Electric employees'
         central pension fund. The management agreement is valid until January 31, 2010,
         and it will be renewed for another year unless notice is given 180 days in
         advance. In July the Shareholders and C.P.Y. announced that they would be
         terminating the management agreement on January 31, 2010, which in turn will
         result in a termination of C.P.Y.'s operations.



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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report



2.1.3. Non-life insurance activity in Israel and Europe

   1. In November 2009, the Company's Board of Directors approved an increase in the
      amount of documentary letters of credit, which were issued by banks, in favor of
      Lloyds Insurance Corporation, to guarantee the underwriting commitments of
      Broadgate, in the amount of GBP 9 million. In total, GBP 52 million of
      documentary letters of credit have been issued, as aforementioned, in favor of
      Lloyds.
   2. In July 2009, a transaction was completed between CIE Holdings B.V. (CIE), a
      subsidiary of the Company, and a group of investors for the sale of all the issued
      share capital of Clal Romania, a subsidiary of CIE, in consideration of 500,000
      euro. See Note 8(F) to the Financial Statements.
   3. Subrogation agreement with the National Insurance Institute (NII) – under
      Section 328 of the National Insurance Institute [Combined Version], 5755-1995,
      the NII is entitled to claim from a third party the return of an annuity that was
      paid or may be paid by the NII, if the case also served as the grounds to obligate a
      third party under the Torts Ordinance or CRAV Law (for example, if a worker is
      injured in a road accident that is also a work accident). In 1978 and 1979,
      agreements were signed between the insurance companies in Israel, including
      Aryeh and Clal Insurance, and the NII, designed to arrange the legal relationships
      stemming from the subrogation agreement. Among other things, the agreement
      stipulates the percentage of the sum of the claim by which the NII will be
      indemnified, that the NII will not be entitled to subrogation from an insurer that
      covers the employer of the recipient of an NII annuity, the amount of the claim in
      respect of which the NII is not entitled to subrogation, and more. The agreements
      with Clal Insurance and Aryeh are in force for two years from the date of signing
      them, and they were automatically extended by one more year on each occasion,
      where each party has the right to terminate the agreement by giving 60 days
      advance notice in writing. The NII recently announced that it was canceling this
      agreement, as in its view the agreement will no longer apply to the NII's
      requirements from July 4, 2009, and it invited the insurance companies to
      negotiate and reach a new arrangement. The Israel Insurance Association asked
      the Antitrust Commissioner for permission to conduct such negotiations. The
      Company is reviewing the repercussions of the cancellation of the agreement,
      although at the date of publishing this report, it cannot estimate the repercussions
      of such action, as the Company and the NII are in disagreement over the date on
      which the cancellation is to take effect and on the application of the cancellation
      to accidents that occurred prior to the cancellation date.
   4. Regarding the Compensation for Road Accident Victims Law – see par. 2.3.3.(5)
      below.


2.1.4. Health insurance

   1. In July 2009, at the request of David Shield Life Insurance Agency (2000) Ltd.
      (the Agency), the Tel Aviv District Court issued a temporary injunction
      prohibiting Clal Health and/or any person representing it and/or acting on its
      behalf, from selling a relocation policy, such as the policy included in the
      appendix to the agreement between Clal Health and the Agency, other than


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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

      through the Agency and/or with its agreement, including contacting the holders of
      the Agency's relocation policy, the Agency's suppliers and the health funds in
      Israel on matters pertaining to the relocation policy. The injunction will expire on
      July 28, 2011 or earlier when an arbitration ruling is handed down to the parties.
      The arbitration procedure commenced in October 2009.
      In August 2009, Clal Health filed an application to appeal the ruling in the
      Supreme Court.
   2. In May 2009, Clal Health won a tender published by the Leumit Health Fund
      (Leumit), to choose an insurer for long-term care insurance for customers of
      Leumit. Following the award of the tender, Clal Health became an insurer as part
      of a group long-term care insurance policy for members of Leumit, and this for a
      5-year period with an option for Leumit to extend the agreement for a further 3
      years. This transaction is expected to generate annual premiums of NIS 66 million
      (based on the current number of insured members).


2.1.5. Financial services:

   1. In November 2009, the Board of Directors of Clal Finance approved the
      implementation of a restructuring of the company, in an effort to adapt the
      company's organizational structure to its operations, to create synergy between
      products and services, and to streamline work processes. The change was
      designed to coordinate specialist areas of operation, to focus on the company's
      core activity (including portfolio management, mutual fund management and
      financial products) as well as to bring about savings and greater efficiency. As
      part of the restructuring, changes will be made in three key areas: an investments
      and central trading department will be set up, a sales and marketing department
      will be set up to focus on private-sector activity, and a financing and economics
      department will be established alongside the finance department which will be
      responsible for the planning and implementation of control instruments for
      measurement purposes, directing economic processes to create new
      understandings and financing control.
   2. In October 2009, Clal Finance entered into agreement with AVA Financial Ltd.
      (AVA) and with AVA's principal shareholders to sell Clal Finance's holdings in
      AVA to buyers. For details of the agreement, see Note 9(A) to the Financial
      Statements.
   3. In September 2009, Maalot announced that it would be lowering the rating of
      debentures issued by Clal Finance from A- to BBB+, and that it would remove
      the rating from the Credit Watch Negative watch list. Accordingly, the rating was
      lowered, in part, in view of the continuing erosion of Clal Finance's operating
      profits, which may continue to erode Clal Finance's capital base in the medium
      term.
   4. In March 2009, a transaction was completed in which context Clal Finance sold
      26% of the issued capital of Clal Finance Underwriting Ltd. (Clal Underwriting)
      to Du-Zach Ltd. Subsequent to the sale, Du-Zach Ltd. holds 51% of the issued,
      paid-up capital of Clal Underwriting and Clal Finance holds 49%. See Note 8(D)
      to the Financial Statements.




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Clal Insurance Enterprises Holdings Ltd.                          Board of Directors Report

      5. In May 2009, Midroog Ltd. (Midroog) announced that it would be placing
         debentures issued by Clal Finance, that have an (A2) negative outlook rating, and
         the rating of Clal Finance Batucha's repayment ability, on a watch list. According
         to Midroog's announcement, these ratings were placed on a watch list, in part due
         to Clal Finance's performance in the first quarter of 2009.

2.2       Human capital

      1. On November 19, 2009, the Board of Directors of Clal Insurance appointed Mr.
         Sami Bassat, who currently heads the non-life insurance division at Clal
         Insurance, as head of the Group's overseas business development. The Board of
         Directors of Clal Insurance also approved the appointment of Mr. Yitzhak Klein
         as Deputy CEO and head of the non-life insurance division at Clal Insurance,
         replacing Mr. Bassat.
      2. In September 2009, Mr. Tal Raz replaced Mr. Shuki Abramowitz as CEO of Clal
         Finance.
      3. In August 2009, the Company's Board of Directors decided to approve the
         allotment of 257,000 share options, convertible to Company shares, from the
         2007 share options plan, to the Company's employees and senior executives. For
         further details, see Note 8(Q) to the Financial Statements.



2.3       Restrictions and supervision of the corporation's business

         This chapter will review the laws, regulations, circulars, draft legislation,
         regulations and principal circular published by the Commissioner of Insurance,
         the government or the Knesset, as the case may be, after the publication of the
         Periodic Report for 2008.

2.3.1. General

      1. In November 2009, a circular for insurance agents and advisors was published
         concerning accepting payment or a benefit from a service provider. The circular
         concerns an agreement between an insurance agent and a service provider, the
         purpose of which is to refer a customer in return for payment or some other
         benefit, which conflicts with the agent's fiduciary duty towards the customer and
         with the customer's expectations of the agent. The circular stipulates that an
         insurance agent who is involved in the customer's choice of a service provider
         (loss adjustor, attorney, doctor, surveyor, company that installs computer systems,
         etc.) must act only for the good of the customer and based on professional
         considerations. The circular states that an insurance agent shall not accept any
         direct or indirect payment or benefit, when referring a customer to a service
         provider as noted (the circular thus expands the prohibition which is currently in
         place regarding an insurance agent accepting a commission or other form of
         benefit pertaining to the customer's choice of a loss adjustor, to include other
         service providers as well). Furthermore, the circular prescribes that a financial
         institution shall not offer an insurance agent payment or a benefit, directly or




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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

      indirectly, for referring a customer to the service provider). The circular takes
      effect on its date of publication.
  2. In August 2009, a circular was published concerning "Provisions for Calculating
     the Value of a Financial Institution's Non-Negotiable Assets". The purpose of the
     circular is to establish principles for calculating a financial institution's non-
     negotiable assets and the relevant control processes. The circular sets forth
     detailed rules for calculating the value of negotiable assets, where in order to
     define a negotiable security, a condition must be met regarding the minimum
     volume of trade in the security. The circular also specifies rules for calculating
     the value of non-negotiable assets, detailing each of the classes of non-negotiable
     assets. The circular stipulates and includes a new provision that a financial
     institution may acquire a debt asset that is not registered for trade where the
     volume of the issue is no more than NIS 100 million, or several debt assets issued
     by the same issuer that are not registered on a stock exchange, which amount to
     more than NIS 100 million, only if a market maker has been appointed for the
     debt asset or for several debt assets, as the case may be.
     According to the circular, the financial institution's investment committee must
     ensure that there is an on-going control system and audit system in place for
     calculating the value of the assets and that their assessed value is up to date.
     Pursuant to an amendment to the circular which was published in November
     2009, implementation of some of the provisions of the circular was postponed
     until July 1, 2010 or until the company which won the public tender published by
     the Ministry of Finance for setting up and running a database for individual price
     quotations and interest rates for financial institutions commences operations,
     whichever is later.
  3. In November 2009 an amendment was published to the Control of Financial
     Services (Minimum Equity Required of an Insurer) (Amendment) 5767-2009
     (hereinafter – the Amendment). This Amendment shall become applicable 30
     days after its publication. The amendment added capital requirements for the
     following categories: (a) yield guaranteed life insurance plans against which or
     part of which no designated bonds are held; (b) operating risks; (c) credit risks as
     a percentage of the assets, depending on the degree of risk set for the various
     assets; (d) catastrophe risks in non-life insurance business; (e) risks in respect of
     guarantees; (f) the insurer's holdings in provident fund activity and in provident
     fund and pension fund management companies.
     Within the context of the Amendment, an option was given for variance in the
     method of calculating the capital for expenses for developing information
     systems, to be approved by the Commissioner, and an alleviation was also given
     so that a reserve for tax created on account of the unrecognized assets will be
     deducted from these assets. The Amendment further prescribes that the
     Commissioner may permit an insurer to reduce the capital requirement, by 35% of
     the original difference, on account of the acquisition of provident fund activity or
     a provident fund management company, subject to conditions to be instructed by
     the Commissioner.
     The Amendment eliminates the definition of basic capital, changes the definitions
     of primary and secondary capital, and also adds tertiary capital which constitutes
     an additional layer of shareholders' equity. The definition of secondary and
     tertiary capital is subject to the conditions and rates to be issued by the



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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

     Commissioner. Later, and pursuant to the Commissioner's plans for the future
     adoption of the European Union's directive concerning the guaranteeing of the
     solvency of insurers, Solvency II, in November 2009, a draft circular was
     published for financial institutions – composition of the recognized shareholders'
     equity of an insurer. The draft circular prescribes rules that apply to the structure
     of an insurer's recognized shareholders' equity, as well a framework of principles
     for recognizing the various capital components and classifying them under the
     different layers of capital. The Company is studying the draft regulations and at
     this stage it cannot estimate their repercussions, in part due to a lack of clarity
     regarding the ramifications of the draft circular on the Company's primary and
     secondary capital. The Commissioner and the insurance companies are expected
     to discuss the subject.
     In this instance, the Commissioner published a temporary order whereby during
     the period from the commencement of the regulations until a date to be
     announced by the Commissioner, the definitions, structure and calculation of the
     insurance companies existing capital will remain unchanged.
     According to the Amendment, an insurer will be obligated to increase its
     shareholders' equity in respect of the difference between the capital required
     under the regulations, before and after the Amendment (hereinafter – the
     Difference), which will be calculated at the date of the financial statements
     specified below, and this up to their publication date: At December 31, 2009 at
     least 30% of the Difference, at June 30, 2010 at least 45% of the Difference, at
     December 31, 2010 at least 60% of the Difference, at June 30, 2011 at least 75%
     of the Difference, and at December 2011 the full Difference.
     With regard to the implications of the Amendment on the insurance subsidiaries,
     see Note 6 to the Financial Statements.
  4. In September 2009, the committee to determine parameters for financial
     institutions that extend credit through the acquisition of non-government bonds
     (Hodak Committee Report) published its interim report. The purpose of the
     committee was to recommend the necessary action required for improving
     internal processes relating to investments made by financial institutions in bonds,
     and the scope of the information which the issuing corporation will have to give
     to the financial institutions. Subsequent to the Hodak Committee Report, the
     Finance Ministry published a draft circular concerning investments by financial
     institutions in non-government bonds, the purpose of which is to implement the
     Committee's conclusions. The purpose of the circular is to establish provisions
     which will apply to the financial institutions when they invest in non-government
     bonds, from the stage of reviewing the investment until the final maturity of the
     debt. The provisions of the circular supplement the provisions of credit circulars
     which were published during 2007. The circular prescribes provisions concerning
     the preparation of an analysis of a bond (negotiable and non-negotiable) before it
     is purchased on the primary market, approval to be given by the investment
     committee for acquiring bonds (negotiable and non-negotiable) over and above a
     minimum quantity, the date for obtaining information before the issue of the bond
     (negotiable and non-negotiable), obtaining information before the issue from a
     non-reporting corporation (that issues a non-negotiable bond), obtaining on-going
     and immediate information during the life of the bond from a non-reporting
     corporation (which has issued a non-negotiable bond), contractual conditions and
     minimum financial criteria (for a negotiable and non-negotiable bond),


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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

      contractual conditions and recommended criteria, expenses relating to the issue of
      and trustee for a non-negotiable bond and the classification of bonds.
     The adoption of the draft circular may reduce the demand for credit from financial
     institutions, including from financial institutions that are part of the Group. The
     insurance companies and the Commissioner of Insurance are currently discussing
     the draft circular, and it is still too early to gauge the repercussions that the
     circular will have if and when it is adopted, as it is impossible to estimate what
     details the arrangements will include.


  5. In September 2009, a second draft circular for financial institutions was published
     concerning the policy of compensation (remuneration) by financial institutions.
     The purpose of the circular is to prescribe guidelines regarding the formulation of
     a compensation policy for (a) the senior executives of financial institutions, and -
     (b) senior officers and employees employed by the financial institution's
     investment departments. The draft circular seeks to determine that the
     compensation policy shall be formulated so as to create an incentive for sensible
     risk taking by the financial institution, and the circular lists several principles in
     this context. The policy-making process is also defined (in which the board of
     directors, audit committee and internal auditor are involved). The draft circular
     refers separately to compensation arrangements for employees of the financial
     institution's investment departments.
  6. In September 2009, a circular was published on investigating and settling claims
     and handling requests from the public. The circular is the first of a series of
     measures that the Commissioner intends to introduce to change the way in which
     financial institutions settle claims. The circular prescribes rules concerning the
     method of investigating a claim and of handling complaints from the public,
     including time frames for responding to such claims and complaints, and rules for
     saving information and documents. The circular prescribes detailed rules for the
     method of settling claims and complaints from the public, which constitute the
     recommended service agreement, from which the financial institution may only
     deviate if the new rules that it prescribes are not unreasonably different from
     those set forth in the circular. The draft circular also states that a violation of
     these rules constitutes a breach of contract (the rules are considered part of the
     policy) and an offense against the law (including with regard to monetary
     sanctions). The circular will take effect on January 1, 2011. With respect to
     compulsory insurance, it will take effect on July 1, 2011. The circular applies to
     the following insurance branches: Pension insurance – for disability and death
     risks only; life insurance – for work disability and risk of death only; personal
     accident insurance; illness and hospitalization insurance (excluding dental
     insurance and excluding health insurance for foreign workers and tourists);
     compulsory motor insurance; motor property insurance; comprehensive
     household insurance; overseas travel insurance;
  7. In September 2009, a draft circular for financial institutions was published
     concerning the collection of statistical information incidental to claims settlement.
     The purpose of the circular is to establish an obligation to collect and save
     statistical information on a financial institution's claims and to present them on its
     website, every calendar year, with respect to the year ended, and this for claims
     that have been filed over the last four years. The purpose of the collection and



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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

      publication of the statistical information is, among others, to enhance the control
      and enforcement of the regulatory provisions pertaining to claims settlement and
      to provide potential members and policyholders with an additional tool when
      choosing to enter into agreement with a financial institution. The circular applies
      to insurance branches in respect of which the circular on the investigation and
      settlement of claims and dealing with requests from the public.
  8. In August 2009, an insurance circular was published concerning information to be
     transmitted to holders of group work disability policies and group life insurance
     policies, as well as information to be transmitted to the holders of group health
     insurance policies. The circular specifies the minimum amount of information
     that an insurer must give a policyholder and the dates on which such information
     must be given, so as to enable the policyholder to meet his obligations towards
     the group of insureds and to increase the supervision over the presentation of
     information by the insurer and the date on which the information is presented to
     the policyholder. According to the circular, an insurer shall give the policyholder
     information concerning premiums that have been paid and claims paid. In
     addition, if the insurer and the policyholder have agreed to adjust the premium
     during the policy period, the insurer shall submit to the policyholder the amount
     of each of the variables used to determine the said premium adjustment.
     The circular will apply to group policies for insuring work disability (P.H.I.),
     group life insurance policies, and group health insurance policies – insurance for
     personal accident insurance as well as insurance for illness and hospitalization
     (excluding P.H.I. as part of illness and hospitalization insurance).
     The provisions of the circular shall not apply to claims by virtue of group health
     insurance policies that are designed to provide insurance cover for foreigners
     residing in Israel, nor will they apply to claims emanating from group health
     insurance policies for foreign workers, and this regarding services rendered
     directly by medical service providers and without the insurer's involvement.
  9. In August 2009, a circular was published concerning the operation and control of
     investments by a financial institution. The purpose of the circular is to ensure that
     financial institutions have an organizational infrastructure in place to operate their
     investment assets and to monitor the management of these assets. The
     infrastructure shall define mandatory action and areas of responsibility as well as
     structural segregation aimed at preventing conflicts of interests. The circular
     defines the organizational structure and accountability of the back office and
     control units in the financial institutions and details their various functions.
  10. On August 16, 2009, several provisions that are included in the Enforcement and
      Collection Law (Amendment no. 29), 5769-2009, which was published in
      November 2008 (the Amendment), took effect. These provisions include an
      instruction that extends the powers of the Execution and Enforcement Registrar
      and specifies that, if requested, he may order each of the entities listed in the
      Second Schedule to the Amendment, including insurance and management
      companies, to give him any information in their possession regarding the obligor
      as specified in the Schedule (regarding an insurer – the obligor's rights towards
      the insurer, loans that the obligor received from the insurer and has not yet repaid,
      and any guarantees that are in force that were issued at the obligor's request;
      regarding a management company – the obligor's rights in a provident fund
      managed by the management company and loans that the debtor received from



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      the management company or from the provident fund that it manages and that
      have not yet been repaid), even if this is not on the basis of a letter waiving
      confidentiality and provided that the obligor is a person of means who is evading
      payment of his debts or he is regarded as such.
     This provision is applicable from August 16, 2009 with respect to providing
     information by an insurer and a management company regarding the obligor's
     rights towards the insurer, and the obligor's rights in a provident fund managed by
     a management company, respectively.
     The instruction concerning the handing over of information by an insurer and
     management company with respect to loans and guarantees shall become
     applicable on the date to be determined by the Minister of Justice, approved by
     order of the Knesset Constitution, Law and Justice Committee, no later than three
     years after the law is published, that is: November 16, 2011.
     The Group's financial institutions are preparing to implement the above
     automatically, in conjunction with the Insurance Companies' Clearing Center.
  11. In August 2009, a draft circular was published for financial institutions
      concerning working through a suspense account and the prevention of front
      running. The purpose of this circular is to establish rules regarding the activity
      of financial institutions when using suspense accounts which facilitate the
      management of investments in different investment accounts while at the same
      time not discriminating between the different accounts and preventing front
      running.
  12. In July 2009, a circular was published for financial institutions concerning a
      statement to be issued in advance by financial institutions about their investment
      policy. The circular prescribes that once a year, all financial institutions shall
      publish their projected investment policy for each investment track that they
      manage for the coming calendar year. The information shall be published on the
      institution's website, up to 30 days from the date on which the policy is
      determined and no later than January 31 every year. The investment policy shall
      address specialist and non-specialist investment tracks, it shall address the
      investment channels listed in the circular, and shall define the exposure rates to
      these channels. In addition, relevant benchmark indices shall be prescribed for
      each channel. When specifying the exposure rates, ranges of deviation shall also
      be specified in line with the restrictions detailed in the circular. The circular
      stipulates that where the investment policy has been changed or there is a
      deviation in one or more of the investment channels that exceeds the limits of the
      anticipated rate of exposure, a report must be published within 30 business days
      of the date of the change and members must be informed in the subsequent
      quarterly report, indicating the nature of and reasons for the change. The purpose
      of the publication is to allow savers to monitor, control and evaluate the financial
      institution's performance relative to its declared investment policy and with
      respect to the relevant benchmark indices that it chose to attain.
  13. In July 2009, a clarification was published concerning a director appointed by a
      financial institution. The clarification was published following questions received
      from the financial institutions which raised the issue as to whether, since the
      definition of the means of control in the Control of Financial Services (Insurance)
      Law, 5741-1981, which was also applied to the Control of Financial Services
      (Provident Funds) Law, 5765-2005, prescribes that one of the means of control is



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      the right to appoint a director to a corporation in which the financial institution is
      a principal shareholder, appointing a director who is recommended by a financial
      institution can, under certain circumstances, result in control of the corporation.
      The Commissioner clarified that a financial institution's right to recommend that a
      particular director be appointed by the controlling shareholder of a particular
      company by virtue of a voting agreement to protect the minority interest alone,
      that is – a unilateral voting agreement in which the controlling shareholder alone
      undertakes to support a candidate for the board of directors who is recommended
      by the financial institution without a parallel undertaking by the financial
      institution to vote for the directors recommended by the controlling shareholder,
      shall in itself not be deemed as creating control of the corporation by the financial
      institution.
  14. In July 2009, a draft circular for financial institutions was published concerning
      the rules for publication of a yield. The purpose of the draft circular is to
      establish rules according to which financial institutions will publish their yields,
      and to provide accurate information regarding the yields attained by the financial
      institutions and comparisons between them. The draft includes several changes
      compared with the previous circular concerning publication of a yield by financial
      institutions. The main points of the changes are: (a)only an annual yield must be
      published; (b) whenever the yield for an investment track is published, the
      financial institution must publish an average annual yield for that investment
      track for the last three and five years; (c) whenever the yield for an investment
      track is published, the financial institution must publish a risk index for that
      investment track for a five-year period; (d) the circular applies to a pension
      insurance agent.
  15. In July 2009, Control of Financial Services (Provident Funds) (a Management
      Company's Participation in a General Meeting) Regulations, 5769-2009, were
      published, the provisions of which adopt the recommendations of the
      Commission to Review the Measures Necessary to Increase the Financial
      Institution's Involvement in Israel's Capital Market (Hamdani Commission),
      which completed its work in January 2008.
     Among other things, the regulations prescribe an institutional investor's obligation
     to attend and vote at the general meeting of a corporation in which it has voting
     rights (for a management company – regarding investments performed for the
     provident fund that it manages, for an insurer – regarding investments held
     against performance-based commitments). The voting rights refer to the issues
     listed in the regulations, those instances when the approval of outside
     representatives is required for the vote, and provisions regarding an agreement
     between an institutional investor and a professional entity for the purpose of
     formulating voting recommendations at the meetings. The provisions of the
     regulations will also replace the provisions of Article 41e1 of the Income Tax
     (Rules for the approval and management of provident funds) Regulations, 5724-
     1964, on this subject.
     In addition to the regulations, in June 2009, a circular for financial institutions
     was published concerning increasing the involvement of the financial institutions
     in Israel's capital market, the purpose of which is to regulate other issues,
     including: an institutional investor's obligation to set forth and publish on its
     website, the following subjects: (1) the voting policy regarding proposed
     resolutions on various subjects (as specified in the regulations); (2) its actual vote


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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

     cast, including whether the vote was according to the voting policy of the
     professional entity with which it entered into agreement and details of whether the
     vote was held under circumstances involving a conflict of interests. It was also
     stipulated that a vote cast as recommended by an outside entity is a fitting way of
     dealing with the concern of a vote involving a conflict of interests; (3) the criteria
     regarding the quality of companies' corporate governance, which guide the
     investment committee when decisions are made regarding investments in
     securities. The provisions of the circular shall apply to insurance companies –
     regarding their performance-based commitments, and to management companies
     – with respect to the provident funds and pension funds that they manage, as well
     as to the old pension funds.
  16. In June 2009, a circular was published for financial institutions, whereby the first-
      time implementation of instructions concerning management's responsibility for
      internal control over financial reporting (SOX 404) was postponed for a year.
      Regarding the publication of financial statements for the general public, the first-
      time implementation was postponed from December 31, 2009 to December 31,
      2010. Regarding financial statements that are derived from the financial
      statements and the report to the member or the insured (related reports), first-time
      implementation was postponed from December 31, 2010 to December 31, 2011.
      Moreover, the provisions prescribe milestones for the interim period in
      connection with the completion of documenting the work and control processes,
      verification of the documentation and obtaining the CPA's approval for taking
      such action, and in connection with completing the scope of work regarding the
      related reports.
  17. In June 2009, a circular was published for financial institutions regulating the way
      in which the supervised entities must proceed when investigating complaints from
      the public. The circular prescribes the way in which the insurance companies,
      management companies, insurance agencies, insurance agents, pension advisors
      and pension marketing agents and the Pool (the corporation that manages the
      compulsory insurance database) shall handle complaints from the public that the
      Commissioner of Insurance or his deputy investigates under his legal powers.
      The circular details instructions concerning the way in which such complaints
      must be replied to, the dates for producing the replies, and more. Among other
      things, the circular stipulates that the supervised entity must provide a detailed,
      explanatory response include the documents pertaining to the investigation of the
      complaint. The supervised entity may not, at a later date, raise any allegations
      and/or produce any information and documents that were not included in its reply.
      The circular is applicable from September 2009.
  18. In June 2009, a draft circular for financial institutions was published concerning
      the policy of information technology management by financial institutions. The
      purpose of the circular is to ensure proper management of the technology systems
      that support the financial institutions' core operations, and their support for
      business activity and the provisions of the law. The draft circular contains
      provisions pertaining to the responsibility of the financial institution's various
      organs in policy making and setting strategy relating to information technology,
      in performing on-going oversight and control; in the management of information
      technology; in setting control and oversight mechanisms in place for information
      technology, in establishing work rules and principles for the procurement and
      performance of significant information technology projects; in establishing work



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      rules and principles pertaining to the outsourcing of information technology; and
      in maintaining an appropriate change management system in the financial
      institution's information systems so as to ensure that such changes are
      documented and can be regularly monitored.
     The draft circular also includes provisions pertaining to conforming with the
     compliance and risk-management requirements in the area of information
     technology.
     Implementation of the provisions of the draft circular may require the Company to
     incur expenses and make investments in automation. At this stage, the Company
     is studying the provisions of the circular and its ramifications, and it is unable to
     estimate the repercussions, in part as at this stage it is impossible to estimate the
     details of the arrangements that will be adopted in the circular to be published
     following the discussions taking place between the insurance companies and the
     Commissioner of Insurance.
  19. In May 2009, an insurance circular was published concerning publication of the
      investments that make up the insurance companies nostro portfolio. The circular
      prescribes that each quarter an insurance company shall publish its quarterly asset
      balances, specifying the contribution made by each investment channel to the
      investment income in respect of these commitments, allocated according to non-
      profit sharing life insurance (class 10, 30 and 50 liabilities) together, and non-life
      insurance, capital surpluses and other liabilities (class 40, 60, 70, 80 and 90)
      together. The circular details the various investment channels according to which
      this report must be made.
  20. In May 2009, a draft circular was published for agents and advisors, regulating
      the method of transferring money that is collected from customers to the financial
      institution. The draft adapts and applies the work procedures prescribed in
      Insurance Circular 2004/14 regarding the handling of insurance premiums that are
      paid to an insurer through an insurance agent, any agreement between the
      financial institution and the licensee: pension advisor or insurance agent.
      Accordingly, the financial institution may only enter into agreement with a
      licensee for brokering insurance business in a written agreement, which among
      other thing, shall include provisions concerning the method of transferring the
      deposits. The agreement may contain an instruction that all the insured's deposits
      be transferred directly to the financial institution, and whenever they are
      transferred in this manner, the agreement shall also be a trust contract and the
      licensee will be obligated to transfer the money through a trust account, using one
      of the three alternatives listed in the draft circular. Deposits that are collected by
      a licensee, including investment profit generated by the deposits in the trust
      account, shall be deemed to have been received directly in the insured's account
      with the financial institution. A licensee shall not withhold these amounts, shall
      not deduct from them any amounts to which he is entitled from the financial
      institution, and he shall not make any other use of them other than transferring
      them in full to the financial institution. The licensee shall work to ensure that the
      trust accounts are not in deficit and that they are free of any lien, pledge,
      attachment or third-party right. The licensees shall transfer any profits accrued in
      trust accounts to a financial institution once a quarter. The deposits in pension
      insurance shall be transferred from the trust accounts to the financial institution
      within five business days of their being deposited, and deposits in non-life




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Clal Insurance Enterprises Holdings Ltd.                         Board of Directors Report

      insurance shall be transferred from trust accounts to the financial institution
      within 10 business days of their being deposited.
  21. In April 2009, a circular was published for financial institutions concerning the
      treatment of problematic debts and action that financial institutions must take, and
      this subsequent to a draft circular on this subject from February 2009. The
      circular stipulates that in view of the financial crisis in the bonds and loan market,
      financial institutions (pension funds, provident funds and insurance companies)
      must take independent and joint action, particularly by virtue of the fiduciary
      obligation that they have towards the savers, to collect, or in the appropriate
      instances, to work towards achieving debt arrangements, allowing borrowers to
      meet their undertakings towards the financial institutions. The circular includes
      rules obligating the financial institutions to work actively to collect payment for
      investments in corporate bonds and for loans that they issued. The circular also
      aims to define the minimum action that a financial institution must take to
      regularly monitor and control the debt that it manages, so as to evaluate and
      review the state of the debt in the investment asset portfolio that it manages, to
      handle problematic debts and to formulate a decision regarding the measures to be
      taken to collect the debt and participation in a process to settle the debt, as well as
      to define the entities who will be responsible for taking such action.
  22. In March 2009, the Commissioner sent out a letter instructing the managers of
      insurance companies, pension fund management companies and provident fund
      management companies, that from the financial statements for 2008 and up to
      December 30, 2010, an insurance company and a management company may
      only distribute a dividend with the Commissioner's prior approval. The
      Commissioner also stated that, as a rule, dividends may not be distributed if they
      exceed 25% of the profit permitted for allocation.
  23. In March 2009, the Commissioner published a position paper concerning
      measures to be taken in the pension savings market following the global
      economic crisis. In the position paper, the Commissioner lists the main points of
      the measures that the Superintendent of the Capital Market intends to take in view
      of the problems that emerged as a result of the crisis. During 2009, most of the
      aforementioned measures became obligatory provisions of law or are in the
      process of being legislated. The following are among the measures that have not
      yet become provisions, as mentioned:
           Obligation to report on management fees in a quarterly report to savers – a
            detail will be added concerning the management fees that are collected by
            the financial institution during the quarter, in the quarterly report that is
            sent as well as in the personal information that is accessible to the customer
            on the internet.
           Standards will be set for customer service systems – in addition to the draft
            circular concerning the clarification and settlement of claims and the
            handling of claims submitted by the public, instructions will also be issued
            concerning improving the level of service that are not part of the monetary
            requirements, such as providing information, etc.
           Amalgamation and tightening of the investment regulations applicable to
            financial institutions – further quantitative restrictions will be added to
            investments made by financial institutions in the various branches of the
            economy and to investments in a group of borrowers. The restrictions on
            transactions with related parties will be tightened.


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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

           The investment rules that apply to the nostro money of insurance
            companies will be tightened, by emphasizing the rules for preserving
            stability and to ensure the minimum level of capital.

            The Superintendent also set a time frame for the publication of draft
            regulations for the aforementioned measures during the course of 2009.

2.3.2. Life insurance and long-term savings

  1. In November 2009, a draft ruling was published concerning compensation for a
     delay in withdrawing money or in transferring money between provident funds or
     investment tracks. The purpose of the draft ruling is to clarify the rules for
     compensating members in such cases.
     In the event of a delay in withdrawing money from a provident fund, the
     provident fund management company shall pay members interest in arrears in
     respect of the period commencing on the date set for transferring the money and
     up to the actual date of payment. In addition, if the yields in the fund declined
     during the delay period, the provident fund will pay the member the amounts
     which he had in his credit on the date when the provident fund should have paid,
     were it not for the delay. If the total yields during the delay period rose and the
     member accumulated a profit, the provident fund shall pay the accrued amount up
     to the actual date of payment.
     If there is a delay in transferring money between provident funds or between
     investment tracks during the period after the Control of Financial Services
     (Provident Funds) (Transfer of Money Between Provident Funds) Regulations,
     5768-2008 (Portability Regulations) took effect, the provident fund management
     company shall pay the members interest in arrears in respect of the period
     commencing on the date set for transferring the money and up to the actual date
     of payment. The ruling further stipulates that the provident fund shall transfer the
     amount accrued in the member's account up to the actual date of the transfer,
     regardless of whether the yields in the provident fund increased or decreased.
     Insofar as the difference between the yield in the receiving fund and the yield in
     the transferring fund is higher than the interest in arrears, the management entity
     of the transferring provident fund must pay the management entity of the
     receiving fund the said differences, less any interest in arrears that was paid. This
     also applies if the yields declined. If the difference between the yields in the
     receiving and transferring funds is positive, the receiving entity shall credit the
     member's account with the positive difference between the yield in the receiving
     fund and the yield in the transferring fund.
      In the event of a delay in transferring money between provident funds or
      investment tracks during the period before the Portability Regulations take effect,
      the provident fund management company shall pay the member interest in arrears
      for the period commencing on the date set for transferring the money and up to
      the actual date of payment. It is further stipulated that if the yield in the
      transferring fund is lower than that in the receiving fund, the member shall
      receive compensation equal to the interest in arrears or the difference in the
      yields, whichever is higher. If the yield in the transferring fund during the period
      of delay is higher than the yield in the receiving fund for the same period, then in




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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

      addition to the interest in arrears, the provident fund will pay the amount accrued
      up to the actual date of payment.
     The draft ruling stipulates that the financial institution shall not collect
     management fees on account of money that it managed during the period of delay.
     According to the draft ruling, the provident funds must apply the provisions in the
     draft with respect to applications from members received by the funds from
     January 1, 2007, regarding the withdrawal or transfer of money. The draft ruling
     prescribes operative provisions for handling withdrawal instructions that were
     dealt with late and where members did not receive payments according to the
     draft ruling. The Company is studying the provisions of the draft ruling and
     reviewing its repercussions. At this stage the Company is unable to estimate the
     implications of the draft ruling.
  2. In October 2009, a second draft circular for financial institutions concerning the
     coding of pension savings products was published. The purpose of the draft is to
     create a uniform coding method for the different pension savings products to
     allow a single-value identification for financial institutions and the different
     pension savings products. Accordingly, a financial institution must specify the
     pension product code, as specified in the draft circular, in any report, including
     reports to members, to other financial institutions, to employers, arrangement
     managers, insurance agents or pension advisors and in any other publication
     including on the financial institution's website.
  3. In October 2009, a draft circular for financial institutions was published
     concerning the collection of statistical information incidental to the handling of
     requests to withdraw and transfer money. The purpose of the draft circular is to
     prescribe the obligation to collect, save and report statistical data relative to the
     time period for handling applications to withdraw money and for receiving old-
     age pension that were sent to a financial institution or its representative, and to
     present such data on the financial institution's website in each calendar year for
     the preceding year and for the last four years. The statistical information is to be
     collected and published to facilitate the publication of indices which will indicate
     how efficient the financial institutions are in handling such claims. These indices
     will provide another tool for potential members when choosing to reach
     agreement with a financial institution. If accepted, the draft circular will apply to
     financial institutions from January 2010. This does not include the requirement to
     present the information on the website for the last four years. In this instance,
     March 2014 is the scheduled date, and until then only data pertaining to the
     previous year will be presented.
  4. In September 2009, Control of Financial Services (Provident Funds) (Individual
     Retirement Accounts) Regulations, 5770-2009, were published, regulating the
     principles for introducing IRA funds in Israel. The proposed format is based on
     the following principles: approval to run a personally managed provident fund
     (IRA) will be granted to the management company of the provident fund or to the
     insurance company; most of the investment restrictions that apply to ordinary
     provident funds will be eliminated; savers will have full discretion regarding the
     manner of investing their money, and they may choose one of the following
     methods or a combination of the two: (a) the saver will manage his own
     investment portfolio and he will choose the specific assets; (b) the saver will be
     entitled to choose any portfolio manager to manage the investment portfolio,
     subject to the policy to be prescribed by the saver; the financial institution shall


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      bear responsibility for compliance with the provisions of the Provident Funds
      Law and subsequent regulations and provisions; management fees will be
      collected from provident fund assets and will be limited to a rate of no more than
      2% a year (if the money is invested through a portfolio manager, the portfolio
      manager's entire fee and the refund of expenses for which the member is liable
      under the agreement between the member and the portfolio manager will be paid
      from the management fees). An IRA may manage (1) money in a study fund, (2)
      liquid money belonging to a self-employed member or liquid money that belongs
      to a salaried employee who has self-employed status. An annuity provident fund
      may not be managed as an IRA. According to the regulations, distribution fees
      and commissions shall not be paid for an IRA. The regulations shall also apply to
      an investment track in a multi-track provident fund in which individually
      managed investments may be made (that is – where the saver manages the
      portfolio himself or through a portfolio manager with whom the member has an
      agreement), and such an investment track shall be considered an Individual
      Retirement Account. The Group's financial institutions are reviewing the
      economic and operational implications of introducing IRA funds.
     In November 2009, the Commissioner issued regulations arranging the procedure
     for setting up an IRA.
  5. In September 2009, a draft circular was published for financial institutions
     concerning a procedure for locating members and beneficiaries as well as draft
     Control of Financial Services (Provident Funds) (Locating Members and
     Beneficiaries) Regulations, 5769-2009. The draft circular and the draft
     regulations are designed to regulate maintaining regular, on-going contact with all
     the insureds and members whose money is managed by the financial institutions,
     by creating a mechanism for locating members with whom contact has been lost,
     for locating beneficiaries after the member has died, and for informing the
     members and beneficiaries that they are entitled to money. The drafts prescribe
     provisions concerning action that a management company must take to locate and
     inform the members and beneficiaries that they are entitled to money. Such
     action includes contacting the member as specified in the regulations, and the
     member will be advised to contact the financial institution and that if he fails to
     do so, the money registered in his name will be transferred to the Administrator
     General. The draft regulations prescribe rules for transferring money to the
     Administrator General and rules for the financial institution after money has been
     transferred to the Administrator General. The draft circular prescribes control,
     oversight and reporting rules to ensure the proper, continuous implementation of
     the draft regulations. Among other things, the draft regulations prescribe that the
     financial institution must limit and restrict the authorizations issued for
     performing transactions in the accounts of members with whom contact has been
     lost, and in the accounts of deceased members. The draft regulations further
     stipulate that each quarter, the financial institution must publish on its website a
     user interface enabling members with whom contact has been lost to contact the
     institution using an ID number, and to check such members have any assets in the
     financial institution. The draft regulations prescribe provisions for the collection
     of management fees during the period in which there was no contact with the
     member, and they also stipulate that six months after contact with the member has
     been lost, the financial institution may collect an annual management fee of 0.1%




                                           1-   21
Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

      of all the assets in the member's account, and this excluding a sectoral provident
      fund and an old fund.
     The aforementioned draft regulations will take effect 60 days after publication of
     the regulations, excluding the provisions for setting up an interface and
     publication on the website, which will take effect six months after the
     commencement date and excluding the provisions pertaining to the establishment
     of work procedures and restricting the authorizations, which will take effect
     within a month of the commencement date.
  6. In September 2009, draft Control of Financial Services (Provident Funds)
     (Distribution fees) (Amendment) Regulations, 5769-2009, were submitted to the
     Knesset Finance Committee. The draft regulations propose that the provisions in
     the regulations should also be applied to an insurer regarding an insurance fund
     that it manages, and that the same rate of distribution fees should be set for paying
     pension advisors in respect of the distribution of provident, pension and life
     assurance products. Accordingly, no distribution fee will be paid for amounts
     that a customer has to his credit in a provident fund, the source of which is
     payments deposited in a guaranteed-yield insurance fund up to December 31,
     1991 (24 Tevet 5752). If accepted, the draft regulations will obligate the
     insurance companies entering into distribution agreements with pension advisors,
     including banks, to also pay a distribution fee to such advisors for insurance
     products that are pension savings products, and it will allow the pension advisors
     to distribute a variety of long-term savings products without any concern for bias
     between the different classes of product.
  7. In August 2009, a draft circular was issued concerning the adapting of the annual
     and quarterly reports sent to members and insureds to Amendment no. 3 and to
     the cancellation of capital gains tax. The purpose of the draft circular is to adapt
     and revise the annual and quarterly reports sent to members and insureds to the
     Control of Financial Services (Provident Funds ) (Amendment no. 3) Law, 5768-
     2008, which stipulates that from January 1, 2008, any money deposited in a
     pension savings plan will be directed to annuity, and to the Economic Efficiency
     (Legislative Amendments for implementing the Economic Plan for the years 2009
     and 2010) Law, 5769-2009 (the Efficiency Law), which took effect on July 1,
     2009, and eliminated capital gains in respect of interest and profit accrued in a
     pension provident fund, including in insurance funds for pension. If accepted, the
     draft circular will in future apply to all the provident fund management companies
     and to all the insurance companies operating in the life insurance sector, from the
     reports for 2009.
  8. In July 2009, the Efficiency Law was published in the Official Gazette.
     Following are the main points of the amendments relevant to long-term savings:
           Pursuant to the Efficiency Law, Section 2 of the Control of Financial
            Services (Provident Funds) Law, 5765-2005 was amended so that a
            provident fund management company shall no longer manage more than
            one provident fund for each of the classes of provident funds listed below:
            an old fund, a new general fund, a new comprehensive fund, provident fund
            that does not pay an annuity, pension provident fund, personal severance
            pay fund, central provident fund for sick pay, central provident fund that
            participates in a budgetary pension, central severance pay fund, any other
            type of provident fund defined by the minister. The aforementioned shall



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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

            not apply to an IRA, a provident fund that guarantees its members a fixed
            or minimum yield, central annuity fund and a provident fund whose articles
            restrict enrollment to a particular sector of the public. The amendment shall
            apply from January 1, 2011. With the approval of the Knesset Labor,
            Social Welfare and Health Committee, the minister will prescribe
            provisions concerning non-application of the instruction to a management
            company that meets the conditions prescribed or provisions concerning
            application of the instruction with the set changes. Subsequent to the
            aforementioned amendment, Clal Gemel Ltd. will have to prepare to
            implement a restructuring in order to merge the funds that it manages. The
            merging of the funds will require, among other things, deployment vis-à-vis
            the various entities that run the funds for the company as well as vis-à-vis
            the entities that market the company's provident funds and which render
            these services to some of the funds. The Company is still studying the
            provisions and implications of the law.
           Pursuant to the Efficiency Law, the Income Tax Ordinance [New Version]
            was amended so that from July 1, 2009, capital gains tax was abolished on
            deposits made in capital provident funds during the period 2003-2007.
            The purpose of the amendment is to reduce operating costs in view of the
            fact that leaving capital gains on capital provident funds in force would
            obligate the management entities to continue to save the history of deposits
            made from 2003-2007, for the purpose of calculating the capital gains tax
            when the money is withdrawn in future. The capital gains tax was
            abolished in view of the fact that from 2008, and in view of Amendment
            no. 3 to the Provident Funds Law, the capital provident funds were
            abolished and all new deposits must now be paid into annuity provident
            funds, so that the rate of accrual to which capital gains applies will be
            reduced over time, relative to the total pension accrual, most of which is
            designated for annuity. The company is preparing to update its computer
            systems so that the capital gains tax from payments made to members in
            provident funds will be cancelled.
           Under the Efficiency Law, the Income Tax Ordinance was amended and a
            temporary order was prescribed for two years (from August 1, 2009 until
            August 8, 2011), allowing a provident fund to continue to benefit from the
            exemption it received on tax from income that it does not control and/or in
            which it has no significant holding, even when, following a debt
            arrangement transaction, the provident fund gains the means of control,
            directly or indirectly, of a body of persons, and provided that such control
            is obtained at a date that falls during the period commencing August 1,
            2009 and ends two years after this date, and it is obtained as a substitute for
            all of part of the debt that the body of persons owes the provident fund,
            from before the onset of the aforesaid period. This exemption applies only
            with respect to the provident fund's passive revenues stemming from its
            holding and it is contingent on meeting the conditions that the Minister of
            Finance prescribes in the order, to be approved by the Knesset Finance
            Committee, for the purpose of restricting the provident funds ability to
            direct the activity of the body of persons, and provisions concerning a
            reduction of the rates of holding in that body of persons must also be met




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Clal Insurance Enterprises Holdings Ltd.                        Board of Directors Report

            with the defined period. The amendment will become applicable on the
            application date for the regulations to be set by the Minister of Finance.
  9. In July 2009, an amendment was published to a provident circular concerning an
     employer's signature on application documents to a provident fund. The
     amendment cancels the instruction obligating the fund to ensure that a member–
     salaried employee's application documents must be signed by the employer, and
     this in view of Section 20(a) to the Control of Financial Services (Provident
     Funds) Law, 5765-2005, which allows all employees to choose the provident fund
     in which they wish to save, giving freedom of choice to the employee and
     breaking the employee's dependence on the employer's decision regarding the
     choice of provident fund.
  10. In July 2009, the Capital Market, Insurance and Savings Department sent a letter
      to the managers of financial institutions, president of the Insurance Agents
      Bureau, and bank managers. Accordingly, and in an effort to streamline the work
      processes relating to the transfer of information and money between the relevant
      entities in the pension savings market, the division intends to establish a clearing
      house for pension savings as a further stage in regulating the transfer of
      information in Israel's pension savings market. The Capital Market Division is
      working to establish a company, jointly owned by the various operators in the
      market (financial institutions, distributors, and commerce bureaus) which will set
      up the clearing house. When established, the clearing house will provide services
      for payment to all the financial institutions and distributors in the market,
      regardless of whether or not they are part owners of the clearing house. The
      principal functions of the clearing house will be: (1) to transfer information
      between the various entities in the pension savings market, specifically between
      pension advisors, pension agents and financial institutions; (2) to transfer
      information in respect of the various financial institutions; (3) to transfer
      information between employers, distributors and financial institutions; (4) to
      transfer pension savings money. The entities that wish to take part in setting up
      the clearing house and to be its owners were invited to sign a Memorandum of
      Understanding, the text of which was attached to the letter. The Group's financial
      institutions are currently considering whether to take part in setting up the
      clearing house.
  11. In July 2009, draft Control of Financial Services (Provident Funds) (Setting up
      Default Tracks) Regulations, 5769-2009, were published as well as a draft
      circular for financial institutions regarding the adapting of the savings track to the
      member's characteristics. The purpose of the drafts is to change the present
      situation whereby most of the money is managed by the financial institutions on
      general tracks, without taking into account the saver's personal characteristics,
      and instead to adapt the savings to the savers' needs throughout the saving period.
     Accordingly, a financial institution shall set up investment tracks for managing
     members' money which shall form a default option for members enrolling in the
     provident fund. The financial institutions shall establish 2-4 default tracks for
     members who are not yet 55 years of age, one track for members aged 55-60, and
     one investment track for members aged 60+ who have not started to receive an
     annuity. According to the draft circular, the fund may in addition set up specialist
     tracks which are committed to exposure of at least 50% of the value of the track's
     assets, or to no exposure, to a track or particular investment branch. In addition
     to the aforementioned tracks, the draft regulations prescribe that a financial


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Clal Insurance Enterprises Holdings Ltd.                        Board of Directors Report

     institution that manages an annuity-paying provident fund or old fund shall keep
     one account for those already receiving annuities, and one investment track for
     those investments.
      According to the draft circular, by February 1, 2010 a financial institution's board
      of directors shall, at least once every two years, discuss and decide upon a model
      to classify the members of the provident funds that it manages according to the
      relevant characteristics defined, including the member's age, and this will serve as
      the basis for associating the member with the fund's default track.
      The financial institution is obligated to continually check that the default track is
      suited to the saver's needs, and to initiate the transfer of a member and/or inform
      the member of the possibility of being transferred to a different track suited to his
      characteristics. The draft circular also obligates the financial institution to inform
      members who are not on the default track.
      Furthermore, the draft circular specifies dates by which the investment committee
      must set forth an investment policy and an outline for adapting the mix of
      investments. The provisions of the drafts shall not apply to central annuity
      provident funds, an old fund, central provident fund for sick pay, central
      provident fund to participate in budgetary pension, central severance pay
      provident fund, study fund, IRA fund or provident fund that guarantees its
      members a fixed or minimum yield.
     Subsequently, in August 2009, a draft circular was published for financial
     institutions concerning rules for approving investment tracks in pension savings.
     The draft circular sets the rules for the approval of investment tracks in pension
     savings products, and the rules for giving them names, in an effort to improve the
     quality of the investment management in the investment tracks, to reduce the
     financial institutions' operating problems, to improve transparency, and to help the
     individual make educated decisions regarding the pension products or tracks that
     he chooses. According to the draft, the default track must specify the age range
     that it targets. Furthermore, a financial institution shall not manage specialist
     investment tracks unless the tracks differ significantly from one another. A pre-
     condition for managing a specialist investment track is that the investment
     channel in which the track specializes is part of the name of the track and at least
     75% of the track's assets must be exposed to this channel, and provided that in an
     investment track that is not share based, the track's assets will not be invested,
     directly or indirectly in shares or convertible securities, including through
     derivatives. The draft circular will take effect when it is published although a
     financial institution which manages a savings product that is approved for the first
     time before the onset of the circular, shall adapt the investment tracks to the
     provisions of the circular by January 1, 2011.
     If the provisions of the draft circulars are accepted, the Company will be required
     to adapt its products and to make significant computer and operating preparations,
     particularly during the transition period. The Company is studying the said draft
     provisions and at this stage cannot estimate their impact.
  12. In July 2009, a revision of a circular from February 2009 for agents and advisors
      was published concerning provisions for the content of an explanatory document
      and submitting it to the customer. The revision postpones the application of the
      circular to January 2010.




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Clal Insurance Enterprises Holdings Ltd.                      Board of Directors Report

  13. In June 2009, a second draft circular for financial institutions was published
      concerning the capital that management companies are required to hold, as well
      as draft Control of Financial Services (Provident Funds) (Minimum Capital
      Required of a Management Company), 5769-2009 (hereinafter: Draft
      Regulations), and Draft Income Tax (Rules for the Approval and Management of
      Provident Funds) Regulations, 5769-2009. The purpose of the amendment is to
      obligate the management companies to maintain a safety net against operating
      risks and so that, when necessary, this money can be used to inject capital for on-
      going operations to maintain the management companies normal operations.
      According to the draft regulations, the initial shareholders' equity for a
      management company is NIS 10 million. Under the draft circular, the minimum
      equity that a management company must hold shall be no less than the higher of
      the initial capital noted above, or an amount comprising the following: (1) 0.3%
      of the assets under management amounting to no more than NIS 10 billion; (2)
      0.2% of the assets under management that amount to more than NIS 10 billion but
      less than NIS 20 billion; (3) 0.1% of the assets under management amounting to
      more than NIS 20 billion. The draft circular stipulates two possible options for
      holding the minimum required shareholders' equity, where the management
      company may deposit the required amount in a special trust account from which
      money may only be withdrawn with the Superintendent's permission and under
      the conditions specified in the draft circular, or the management company may
      hold the required amount in its accounts, provided that it makes additional capital
      available consisting of the amount of unrecognized assets, plus a capital
      requirement in respect of management companies that are controlled by the
      management companies as defined in the draft circular, and provided that the
      management company holds lien-free assets equal to the minimum amount of
      shareholders' equity required. The option to hold the required minimum capital
      in the management company's accounts is contingent on the management
      company obtaining its license before the publication date of the circular. If
      accepted, the draft circular may apply to all management companies, excluding a
      company that manages a Sectoral fund and a company that manages an old
      pension fund owned by the members. A management company that received its
      license before publication of the circular, and whose shareholders' equity on the
      date of publication is less than the minimum capital required under the circular,
      must increase its equity by at least half the required amount by March 31, 2010,
      and the remainder by December 31, 2010. The Superintendent may extend the
      period. If the draft circular and regulations are accepted, the capital required of
      the Group's management companies will increase substantially compared to the
      existing capital requirements (see Note 6 to the Financial Statements).
  14. In August 2009, a provident circular was published regulating the establishment
      of a risk management and control system by provident fund management
      companies, in addition to a similar system which insurers are already required to
      operate as prescribed in the Control of Financial Services (Insurance) Law, 5751-
      1981, and in the insurance circular published by virtue of this law.
     The circular prescribes that a provident fund management company shall establish
     an independent unit to manage and control risks, to be directed by a risk manager
     who has the relevant experience and expertise for performing these duties. The
     circular adds and stipulates that one risk manager may be appointed for a group of
     financial institutions that are controlled by the same controlling shareholder.



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Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

     According to the circular, the risk manager's duties are to express an opinion to
     the investment committee regarding the existing and potential risks in the
     provident fund's investment assets, to identify the risks and assess their impact
     and the way they are managed, and to submit immediate and periodic reports to
     the general manager, the investment committee and board of directors of the
     management company (the circular stipulates that a periodic report shall also be
     sent to the credit committee).
     The circular further prescribes arrangements that are designed to guarantee that
     the risk manager shall have the tools, resources, and information that he requires
     for performing his duties. In this context, the circular prescribes that the risk
     manager shall have direct, independent access to relevant data and documents,
     that he will receive the appropriate resources for performing his duties, that the
     external auditor (CPA) and internal auditor shall provide him with relevant
     information that they have given to the board of directors or general manager, and
     that the risk manager shall be present at meetings of the investment committee,
     credit committee and board of directors when they discuss the immediate and
     periodic reports that he submits to them.
  15. On June 2009, a circular was published for financial institutions concerning the
      transfer of members' non-cash rights. Pursuant to the circular, members' non-cash
      rights may be transferred only if the total assets transferred on that business day
      from one provident fund to another or from one investment track to another, in a
      multi-track provident fund, are more than NIS 5 million or more than 1% of the
      assets of the transferring fund or the transferring track, whichever is lower. In
      addition, the financial institution's investment committee must establish a detailed
      work procedure of the way and conditions in which it will transfer members' non-
      cash rights.
  16. In August 2009, a circular was published for financial institutions concerning a
      limited, uniform format for financial institutions to transfer information to a
      licensee. The purpose of the circular is to regulate the process of transferring
      information between a financial institution and a licensee for carrying out pension
      advice or pension marketing and for on-going pension advice. The circular
      prescribes rules pertaining to the method by which the financial institution shall
      transfer information to a licensee. Among other things, the circular prescribes
      that information shall be transferred only after the customer has granted a power
      of attorney and that the information shall include the details listed in the circular
      at least. The financial institution shall transfer the information to the licensee
      within 3 business days of receiving the request for the information, and in
      addition, as long as the pension advice agreement and power of attorney are in
      force, the information shall be sent to the licensee regularly every quarter. The
      company must make the necessary automation preparations for implementing the
      circular.
  17. In May 2009, the Commissioner published a draft circular concerning the
      mechanism for collecting management fees, stipulating that a financial institution
      must collect management fees continuously at the end of every month or the end
      of every business day, according to the current rate of management fees agreed
      with the member or the insured, and it prohibits the financial institution from
      using a mechanism based on a refund of management fees at the end of a period
      exceeding a month. The purpose of the draft circular is to prevent the use of
      mechanisms for collecting management fees that are based on a refund of


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Clal Insurance Enterprises Holdings Ltd.                        Board of Directors Report

      management fees at the end of a specific period that do not correctly reflect the
      management fees agreed upon with the member or the insured, and are sometimes
      contingent on the member or the insured remaining in the fund until the end of the
      period. If accepted, the draft circular may apply to the financial institutions from
      October 2009.
   18. In May 2009, the Commissioner published a draft circular extending the scope of
       the annual and quarterly reporting obligations to members and policyholders.
       Among other things, the circular expands the detail given to savers in the annual
       reports regarding the management fees collected by the financial institution,
       including the rate of discount on the management fees and the conditions for
       cancellation, and regarding benefits in the conditions or cost of the insurance
       cover, and the conditions for canceling them. It also expands the scope of the
       information that savers receive in the quarterly reports and in the information
       retrieval service on the internet, in part with respect to the management fees
       collected and the yield rate, in an effort to enable savers to review the conditions
       of their pension savings more comprehensively and to improve their ability to
       negotiate with the financial institutions.
      The obligation to send quarterly reports shall not apply to members /
      policyholders who have not deposited money during the relevant quarter,
      provided that the balance of their accrued savings is less than NIS 50,000. If
      accepted, the draft circular will apply to the financial institutions from the report
      for the first quarter of 2010.


2.3.3. Non-life insurance

   1. In September 2009, the Israel Insurance Association received the text of a
      proposed amendment to the Abatement of Nuisances (Prevention of Noise)
      Regulations, 5753-1992, following the recommendation of a professional
      committee set up by the Ministry of the Environment to prohibit the use of sound
      alarm systems in vehicles and when entering residential areas, due to the ambient
      noise nuisance caused by these alarms. The wording of the amendment was sent
      to the relevant entities in the insurance companies branch for their comments on
      the question of whether these alarms are essential and whether there are any
      convincing arguments against eliminating the alarm systems. The Israel
      Insurance Association submitted its comments on the aforesaid proposed
      amendment, objecting to the proposed amendment. In view of the current status
      of the legislative process and the fact that it is impossible to predict the behavior
      of the "players" in the motor and household insurance market as a result of
      adopting these regulations (if and when they are adopted), it is impossible to
      gauge the implications of the proposed amendment to the regulations.
   2. In October 2008, an insurance circular was published on the use of a database to
      locate fraud in the compulsory motor insurance sector. The Motor Vehicle
      Insurance (Establishing and Managing Databases) Regulations, 5764-2004,
      prescribe that only persons authorized by the insurer may transfer information to a
      database for locating insurance fraud, review information in the database, and
      direct queries pertaining to information in the database. The regulations prescribe
      that all insurers shall appoint one of their senior employees to be responsible for
      the prevention of insurance fraud, and this employee shall be responsible for
      defining the qualifications of the authorized person. The purpose of the circular


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Clal Insurance Enterprises Holdings Ltd.                          Board of Directors Report

      is to detail the criteria for establishing the qualifications of the authorized persons
      who are licensed underwriters, are authorized to settle claims (setting the
      maximum number of such persons), as well as authorized technical personnel, as
      these terms are defined in the regulations and other provisions regarding the
      underwriting process. The circular also stipulates that an insurer may not cancel a
      policy on account of information that could have been obtained from the
      database, excluding where the insurance certificate was issued outside the
      database's operating hours. The provisions of the circular shall apply from
      November 2008. A revised circular published in October 2009 stipulated that the
      provision specifying that a compulsory motor insurance certificate shall not be
      issued for a private and commercial vehicle weighing up to 4 tons and for a
      motorbike ("certificates that require authentication") without performing
      verification through an on-line question submitted to the database during the
      underwriting process, which should have taken effect on November 1, 2009, will
      be postponed so that until February 2010 an insurer must perform verification by
      means of an on-line question gradually, as specified below – (1) in December
      2009 – with respect to at least 10% of the certificates that require authentication;
      (2) from February 2010 – for 100% of the certificates that require authentication.
  3. In September 2009, the Ministry of Justice published a report prepared by a
     public committee which reviewed the Compensation for Road Accident Victims
     Law, 5735-1975, (the Law).
      The committee's report contains recommendations aimed at improving the
      application of the Law and streamlining court hearings. The report also
      recommends that various cases will not be defined as road accidents that confer
      the right to compensation under the Law (for example: a parked vehicle which is
      involved in an accident, an accident resulting from deliberate action, an accident
      in a location which has not been lawfully prepared for motorized traffic), that a
      basic sum will be determined which includes the rates of the components in
      respect of compensation for damage that is not financial damage as well as for
      loss of earning ability in the "lost years" (the period by which the victim's life or
      life expectancy was curtailed), which shall be called "supplementary
      compensation", and may reach a maximum of NIS 290,000. The report also
      recommends that the courts may appoint a second expert advisor to represent
      them in exceptional cases and for special reasons where necessary, when the court
      is not satisfied with the first expert's opinion, and that the Minister of Justice shall
      be empowered to prescribe in the regulations a list of vehicles that are not
      considered a "motorized vehicle" or "vehicle" for the purpose of the law (such as
      heavy engineering equipment or an electric scooter).
     It is worth noting that at this stage these are recommendations only, and there is
     no way of knowing whether they will be accepted and formulated as binding
     legislation.
  4. The prices of compulsory motor insurance in the open market are restricted
     according by the prices for residual insurance (the Pool) set by the Commissioner
     of Insurance according to a mechanism prescribed in Article 5 of the Motor
     Vehicle Insurance (Residual Insurance Arrangement and Mechanism for Setting
     the Price) Regulations, 5761-2001, and are restricted to a maximum of 90% of the
     Pool's price. In September 2009, an insurance circular was published concerning
     updating the price of the residual insurance from November 1, 2009. The circular




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Clal Insurance Enterprises Holdings Ltd.                      Board of Directors Report

      increases the residual insurance rates across the board, thus also increasing the
      price of compulsory motor insurance.
     Concerning insurance for motorbikes, which Clal Insurance does not sell at the
     reporting date, the price for compulsory insurance will be set on a differential
     basis, taking into account information about the driver: age, number of years he
     has held a driving license, and his history of accidents and offenses, so that
     cautious drivers will pay a lower rate than young drivers or those with a history of
     claims.
     The circular is not expected to have any significant impact on the Company's
     performance.
  5. In July 2009, the Economic Efficiency (Legislative Amendments for
     Implementation of the Economic Plan for 2009 and 2010) Law (the Efficiency
     Law), was published in the Official Gazette. The Efficiency Law includes an
     amendment relevant for non-life insurance, regarding responsibility for covering
     the costs of medical expenses for road accident victims who are Israeli residents
     and are entitled to services under the National Health Insurance Law, 5754-1994
     (National Health Insurance Law). Under the situation which prevailed prior to
     the amendment, the insurance companies were required to pay the health funds
     and the hospitals for medical treatment administered to road accident victims.
     According to the amendment, the insurance liability for rendering the medical
     services included in the basket of services listed in the Second Schedule to the
     National Health Insurance Law and in the Medicines Order in the National Health
     Insurance Law, was transferred from the insurance companies to the health funds.
     In order to finance the cost of rendering the services, the insurer will transfer
     payment of a certain percentage of the compulsory insurance premiums collected
     by that insurer in the previous month, for all the policies it issued under the
     insurance ordinance. The rate will be determined by the Minister of Finance.
     The insurance companies will make this payment to Karnit, which will transfer it
     to the National Insurance Institute, which in turn will transfer it to the health
     funds. The insurance companies will continue to be responsible for the other
     medical services that are not listed in the Second Schedule and the Medicines
     Order. The amendment refers to treatment administered from January 1, 2010.
     The insurers' payments, as per the above, will be based on the premiums collected
     by the insurer for motor vehicle insurance policies that are drawn up from January
     1, 2010, onwards.
     The following were specifically excluded from the application of the amendment:
      (1) residents during a waiting period under Section 58 of the National Health
     Insurance Law (during which time they are not entitled to receive services under
     the National Health Insurance Law); (2) soldiers who are not covered by the
     National Health Insurance Law according to Section 55 of the law; and – (3)
     persons entitled to an annuity under Chapter 5 of the National Insurance Law
     [Combined Version], 5755-1995 (work accident victims), and it is not within the
     power of the amendment to detract from the cover to which they are entitled.
     Almost all the provisions of the amendment will become applicable on January 1,
     2010. In October 2009, the Minister of Finance published the "cost of rendering
     the services". In addition, the percentage of the premiums which the insurers will
     have to transfer to the Compensation for Road Accident Victims Fund to finance
     the cost of rending these services was set at 9.4% of the premiums. It should be



                                           1-   30
Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

     noted that this cost is higher than the cost currently paid for the medical services,
     but since at this stage it is impossible to estimate future trends in this branch and
     whether and at what rate the premiums will be increased as a result of this
     amendment, and as discussions are underway between the insurance companies
     and the Finance Ministry in connection with reducing the said rate, at this stage it
     is impossible to estimate the ramifications of the amendment on the Company.
  6. In June 2009, second draft Control of Insurance Business (Conditions of a
     insurance contract for a private vehicle) Regulations, 5746-1986, were published,
     amending the standard policy used in the motor property insurance sector (self
     and third-party insurance). The draft regulations propose including the following
     provisions in the revised regulations: changing the mechanism for calculating the
     premium refund for a policyholder when he cancels the policy, an increased
     deductible where a driver involved in a road accident was under the influence of
     alcohol, repairs to a vehicle that is up to two years old shall be new and original, a
     vehicle that is still under the manufacturer's or importer's warranty shall be
     repaired pursuant to the warranty, the collection of a double deductible for
     damage that is loss of value will be prohibited, collection of a double deductible
     in the event of both self and third-party loss shall be prohibited, regulations
     regarding vehicles that are out of commission, where during the no-use period,
     the insured shall not drive the car and there will be no coverage in respect of
     accidental damage, a uniform formula for reinstatement fees to be specified in the
     policy, and more.
  7. In May 2009, the Israel Loss Adjustors Association, the Israel Consumer Council,
     and the Israel Garage Association filed an appeal to the Supreme Court, in session
     as the High Court of Justice, requesting a decree nisi against the Commissioner of
     Insurance and the Israel Insurance Association. Within the context of the appeal,
     the Supreme Court was asked to issue a decree nisi instructing the Commissioner
     of Insurance to explain why he has not exerted his powers to order an amendment
     of the arrangement prescribed in Insurance Circular 2007-1-8 concerning loss
     adjustment (assessment) in motor insurance (property and third party), preferring
     the position of the advisory committee on loss adjustment for cars that was
     appointed by the Ministry of Transport, the Motor Division of the Ministry of
     Transport and the applicants, and why he has not instructed the cancellation of the
     list of external loss adjustors prescribed in Section 4 of the aforementioned
     circular - which according to the claimants, places each of the parties listed in it
     in a structured conflict of interests – and replaced it with a comprehensive list of
     all the loss adjustors registered in the Loss Adjustors Register, as referred to in
     the Supervision of Goods & Services (Car Assessors) Order, 5740-1980. It is
     worth noting that the aforementioned circular was published subsequent to a
     previous appeal filed to the High Court on this subject – 7721/96 Israel Loss
     Adjustors' Association and others v. the Commissioner of Insurance and
     others, PD 55(3) 625, in which context, instead of substituting the
     Commissioner's discretion, the Court ordered the Commissioner to establish and
     arrangement that corresponds with that mentioned in the court ruling. In a ruling
     from May 3, 2009, the Supreme Court instructed that the case should be
     transferred and heard in the presence of three judges. The Supreme Court also
     instructed the respondents to submit their response to the appeal up to 7 days
     before the date of the scheduled hearing.




                                           1-   31
Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

  8. In April 2009, a draft amendment to a circular on life insurance and structural
     insurance that are incidental to a housing loan, from 2005, was published, the
     subject of which is to regulate the method in which life insurance and structural
     insurance are sold as collateral for a housing loan given at the banks' branches.
     The draft amendment proposed establishing that a corporate agent owned by a
     bank may obtain a license to broker mortgage-related insurance that also includes
     other forms of third-party liability insurance in respect of accidental loss caused
     directly by a defect in the insured apartment, only up to a sum insured of NIS
     100,000.

2.3.4. Health insurance

  1. In October 2009 a draft circular was published concerning group long-term care
     insurance, which revises the provisions of Circular 2004/11, in part regarding
     those instances and conditions where an insurer is required to allow continuity in
     the context of a personal lines policy to a person who had previously been part of
     a group long-term care insurance plan. The draft circular also stipulated that the
     three years required for granting the continuity shall be counted regardless of
     whether the group LTC insurance was with the same insurer or another insurer.
     The draft further states that the insurer must initiate contact with insureds whose
     group policy has terminated or has not been renewed, and offer them a continuing
     policy, even in those instances when the insurer is currently not obligated to
     initiate such contact.
  2. In September 2009, Control of Financial Services (Insurance) (Group Health
     Insurance) Regulations, 5769-2009 were published which establish basic
     principles, the main purpose of which is to protect the affairs of all members of
     group insurance plans and to guarantee reasonable insurance cover. The
     regulations prescribe that the entities entitled to enter into a group health
     insurance contract, with respect to specific groups listed in the draft regulations
     are an employer, a corporation, and subject to obtaining a permit from the
     Commissioner of Insurance, a service provider and a health fund. The regulations
     also list the policyholder's obligations, the method of enrolling in the policy,
     obligations to produce documents and reports for insureds, provisions regarding
     the policy period, prohibition against paying commissions to a person who is not
     an insurance agent and to an insurance agent who is an associate of the
     policyholder or in which the policyholder holds the means of control, a
     prohibition against conditioning membership in the group on joining the
     insurance, and more. The regulations also stipulate that an insurer may refund
     amounts to a policyholder which is a health fund, paid on account of a group LTC
     insurance policy, provided that the refund is no more than 5%. The regulations
     are due to take effect on July 1, 2010 and they will apply to agreements for group
     health insurance which are drawn up or renewed from this date.
  3. In June 2009, an insurance circular was published concerning annual reports to be
     sent to holders of health insurance. This circular is intended to replace the
     provisions of the existing circular on this subject. The reporting format
     prescribed in the circular will apply to an insurer's reports to insureds with health
     insurance policies in which the policy period is more than a year and that were in
     force during all or part of the reporting year, including paid-up policies, and
     excluding policies for overseas travel insurance for medical insurance for foreign



                                           1-   32
Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

      workers. The provisions of the circular shall apply to personal lines insurance and
      collective insurance. The reporting format according to the circular shall apply to
      reports in respect of 2009 onwards.
  4. In March 2009, an insurance circular was published concerning the details of
     insurance compensation in health insurance plans. According to the circular, if an
     insurance plan specifies a maximum amount of indemnity or the payment of
     compensation in respect of an insured event that is not quoted in a monetary value
     ("maximum insurance compensation not at face value"), on its website the insurer
     shall present the face value amount of the maximum insurance compensation for
     each of these insured events. Moreover, the insurer must produce for the insured,
     at his request, and if an insured asks the insurer to clarify his rights on account of
     the insured event, details of the insurance compensation included in the plan,
     according to the format published on the website. The insured's right to receive
     details of the insurance compensation from the insurer, and the further
     possibilities of obtaining information on the details of the insurance
     compensation, shall be specified on the relevant insurance plan's fair disclosure
     form.
      An insurer may change the details of the insurance compensation only in those
      instances specified in the circular.
      The circular allows the insurer to restrict access to the details of the insurance
      compensation to be presented on the website (a) in a group health insurance plan
      where the format set forth in the plan for payment of the maximum insurance
      compensation that is not at face value is different from the payment format
      applicable in personal lines health insurance plans for similar insurance cover that
      is marketed by the insurer; (b) in personal lines health insurance plans that
      include maximum insurance compensation that is not at face value that the insurer
      no longer markets after the onset of the circular.
      The circular shall become applicable on March 1, 2010, however some of the
      provisions are to be implemented immediately. The circular applies to all illness
      and hospitalization insurance, excluding work disability and insurance cover for
      procedures that take place overseas, as well as personal accident insurance.

2.3.5. Finance

  1. In November 2009, the Israel Securities Authority (ISA) approved proposed
     Amendment no. 14 to the Joint Investment Trust Law, 5754-1994. The
     amendment regulates the activity of Exchange-Traded Notes (ETNs), moving
     them from being governed by regulations for reporting according to the Securities
     Law to regulation and control under the Joint Investment Trust Law.
     Accordingly, activity involving ETNs and ETN issuers will be regulated through
     the Joint Investment Trust Law and it will be subject to control by the ISA. An
     ETN will be defined in a manner similar and concurrent to a mutual fund, and
     ETN issuers will be defined as ETN managers (parallel to fund managers).
     These certificates will change their format from the legal status of liability
     certificates to a legal structure which is similar in nature to that of a mutual fund
     in which the right of ownership of the asset will belong to the investors (and not
     to the note manager). Like the fund, ETNs will also be created in an agreement
     between the ETN manager and a trustee, and it shall consist of units each of



                                           1-   33
Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

     which confers an equal right in the ETN's assets. In addition, and unlike a mutual
     fund, an ETN will also include a commitment by the note manager to supplement
     any difference that is formed between the amount to which the bearer of the
     certificate is entitled upon redemption, stemming from the change in the price of
     the tracker asset, and the actual value of the ETN. Unlike mutual funds, the EFN
     manager will be able to withdraw money from the arrangement if the value of the
     assets is higher than the value of the liabilities, based on a mechanism to be
     defined later on.
     Furthermore, the amendment also sets in place a legal infrastructure for regulating
     an Exchange Traded Fund (ETF), which is a new index product, a local version of
     an ETF traded overseas, which will compete with the tracker mutual fund and the
     ETN.
     An ETF is a new financial instrument which combines the characteristics of a
     mutual fund and an ETN and is based, in part, on the American model of the ETF,
     with the relevant adjustments to the characteristics of Israel's capital market. The
     purpose of the regulation in this sector is to establish a legal infrastructure for a
     new instrument which will expand the present range of finance products, allow
     for fair competition between substitute products without any regulatory
     difference, will make competition more effective, and is even expected to provide
     the ETN issuers with an opportunity to become part of the operating activity of
     these funds.
     According to the model proposed by the ISA, the ETF will be a tracker mutual
     fund (a fund whose investment policy is designed to track changes in an index or
     in the value of any benchmark asset), whose units are registered for trade on the
     TASE, and it will be possible to perform transactions in its units only during the
     course of trade, similar to way in which the ETNs are managed. The fund will be
     traded on the relevant market continuously – in shares or bonds.
     It should be clarified that Clal Finance is studying the draft provisions and at this
     stage is unable to estimate their repercussions, including those stemming from the
     change in the legal format to one which is similar in nature to that of a mutual
     fund (if and when the draft proposal is adopted as legislation), on the question of
     the consolidation of the ETN's assets and liabilities which are managed by
     companies in the Clal Finance Group in Clal Finance Group's financial statements
     (and consequently in the Company's reports as well).
  2. On July 13, 2009, the Membership and Surveillance Department of the TASE
     presented to TASE members that are not banks a proposed new model for
     guaranteeing the financial stability of non-bank TASE Members, and asked them
     to comment on the proposed model.. The purpose of the new model is to help
     reflect all the risks inherent in the non-bank members' operations, and to ensure
     that they are able to repay all their short-term commitments. The subsidiary is
     studying the principles of this new model, although it is of the opinion that if and
     when the model is adopted with the wording presented to the consolidated
     company, it will have to increase its shareholders' equity so as to retain its current
     level of activity. The subsidiary's management has conveyed its comments on the
     principles of the model to the TASE. It should be emphasized that the model has
     not yet been approved by the TASE Board of Directors or approved by the ISA,
     Minister of Finance, and Knesset Finance Committee. At this stage, the
     consolidated company has no information about the final structure of the model to



                                           1-   34
Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

      be submitted for approval, and in any event it is unable to estimate what, if any,
      repercussions it will have on the consolidated company.
  3. Pursuant to the proposed memorandum of law that was published on this subject,
     on June 28, 2009, the ministerial committee for legislative affairs approved a
     revised version of the proposed bill to Amendment no. 13 of the Joint Investments
     Trust Law, 5754-1994. Among others, the amendment includes the following
     changes: it increases the trustee's independence of the fund manager, adds a
     requirement to specify termination of the trustee's term of office, it excludes a
     small fund from the requirement that associates may hold no more than 25% of
     the fund, expands the reporting that a trustee must make regarding his oversight
     of the fund, expands the prohibition on receiving perks in connection with
     management of the fund, it allows differential management fees to be collected by
     the fund by way of a refund of management fees to certain unit holders in line
     with pre-defined criteria, it changes the mechanism for liquidating the fund,
     making it more efficient and equitable, it expands the list of unit holders who, due
     to their association with the fund manager, may not have voting rights at the
     general meeting, changes the method of imposing civil fines, and expands the list
     of events about which a copy of the report submitted to the ISA and TASE must
     also be sent to the unit holders.
     In addition, the proposed amendment proposes changing the arrangement for
     offering units in a foreign fund in Israel, and includes changes regarding the
     proposed bill on this subject that was previously approved by the Knesset. The
     amendment seeks to cancel the provision of law which equalized the obligations
     that apply to one who offers units in a foreign fund with the obligations that apply
     by virtue of the law to the fund manager, and instead to create a new arrangement.
      The new arrangement proposes that units in a foreign fund may be offered to the
     public, provided that the ISA permits this, after the conditions prescribed in the
     regulations by the Minister of Finance are met. Among other things, the
     conditions may address the country of origin, the law under which the foreign
     fund was set up or according to which it operates, the supervision of the foreign
     fund, characteristics of the fund or those of the fund manager. It is further
     proposed that the authority to permit an offering of units in a foreign fund shall be
     restricted to units offered under a permit issued by a supervising entity in any
     country. The memorandum also proposes empowering the Minister of Finance to
     establish provisions applicable to a person offering units in a foreign fund to the
     public, including by way of registering a foreign fund's units for trade on the stock
     exchange in Israel.
     The proposed bill contains provisions whereby the fund manager will be obligated
     to hold a tender for entering into agreement for brokerage services, and to
     empower the Minister of Finance to set rules for conducting the tender.
     According to the proposed amendment, the fund manager will be prohibited from
     paying brokerage fees and any other payment from the fund's assets to a company
     associated with the fund manager or the trustee, so that they will not be permitted
     to participate in the tender. The implications of the proposed bill for the company
     in this instance is that the brokerage activity of Clal Mutual Funds in Clal Finance
     Batucha will be restricted.




                                           1-   35
Clal Insurance Enterprises Holdings Ltd.                    Board of Directors Report

     The Company is of the opinion that if and when it is passed, Amendment no. 13
     to the Joint Investments Trust Law, will indirectly affect Clal Mutual Funds, a
     wholly controlled subsidiary, as this amendment may have a broad effect on the
     mutual funds sector and on the companies operating in it. The Company is unable
     to estimate the direct impact of the proposed amendment on Clal Mutual Funds.
     Nevertheless, the Company is of the opinion that opening up the Israeli market to
     competition from foreign mutual funds may adversely affect the activity of Clal
     Mutual Funds and its business performance in this sector.
     The Company is of the opinion that Amendment no. 13 to the Joint Investments
     Trust Law, if and when it is passed, will indirectly affect Clal Brokerage, a
     subsidiary, as the amendment is expected to have a broad effect on the brokerage
     sector and on the companies that operate in it, the Company cannot estimate the
     direct effect of the amendment's provisions on Clal Brokerage. Nevertheless, the
     Company is of the opinion that the prohibition on performing brokerage activity
     through an associate entity will not significantly affect Clal Finance Batucha as
     the amendment will have a broad effect on the brokerage sector and on the
     companies operating in it.
     Information concerning the repercussions of the proposed Amendment no. 13 to
     the Joint Investment Trust Law with respect to the Company's activity also
     contains forward-looking information based on the information that the Company
     has in its possession at the time of the report, and includes the Company's
     estimates at the date of the report. Actual performance may differ substantially
     from the results estimated or inferred from this information, in part for the
     following reasons: legislation that is actually adopted, the behavior of foreign
     mutual funds and changes in the capital market.




                                           1-   36
Clal Insurance Enterprises Holdings Ltd.                      Board of Directors Report

2.4   Developments in the macro-economic environment
2.4.1. Developments in the economy and in employment

      The Bank of Israel's forecasts for growth in2009 assume that the economy will
      not expand this year, and this after positive growth of 4% was recorded in 2008.
      According to figures published by the Central Bureau of Statistics, economic
      activity improved in the third quarter of 2009. Imports of raw materials increased
      by 15.9%, industrial exports rose 6.0%, the export of commodities rose 5.9%,
      turnover in the commercial and services branches increased by 7.7%, industrial
      output rose 1.7%, and retail takings grew 5.9%. On the other hand, there were
      8.1% fewer tourist overnight stays.
      Since the beginning of the year, the state budget has recorded a deficit of NIS
      21.9 billion, compared with the corresponding period last year when a surplus of
      NIS 1.3 billion was recorded. The deficit was caused by a sharp decline in
      revenues from taxes which amounted to NIS 132.5 billion from the beginning of
      the year, compared with NIS 143.2 billion in the corresponding quarter last year.
      The global economic crisis was also reflected in the figures for employment and
      wages in the economy. After unemployment had fallen for several years
      consecutively, the trend was reversed and unemployment increased in recent
      months. A record low of 5.9% in unemployment was recorded in the middle of
      2008, which rose to 7.6% in August 2009. The average wage for a salaried
      employee rose in July by 2.3% compared with the corresponding period last year.

2.4.2. Developments in the capital market

      The sharp fall in prices on the capital markets worldwide, which characterized
      2008, changed and from the beginning of the year share prices have risen
      considerably. Israel's capital market even recorded excellent yields in comparison
      with the capital markets worldwide.


      Following are the main events that affected the capital markets in Israel and
      worldwide during the third quarter of the year:
           In August 2009, the US Federal Reserve announced that it would be
            extending the TALF program for another quarter. The main purpose of the
            program is to restart the credit market for households and small businesses
            as well as the commercial real estate mortgage market, by purchasing a
            trillion dollars worth of consumer credit backed bonds.
           During the quarter, the US banks published a report on the toxic assets in
            their balance sheets: accordingly, 150 banks in the US have toxic assets
            which account for more than 5% of their debts. This could threaten the
            bank's resilience.
           The US government budget deficit is expected to reach USD 1.84 trillion,
            accounting for 12.9% of GDP. The US administration is therefore
            increasing the pace of raising money through government bonds, which this
            year will probably amount to USD 2.5 trillion, compared with USD 0.9
            trillion last year.




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Clal Insurance Enterprises Holdings Ltd.                         Board of Directors Report

             The unemployment rate in the US rose to 9.7% at the end of the third
              quarter of the year.
             During September, the leaders of the G20 countries convened to discuss the
              global crisis on the first anniversary of its outbreak, and they announced
              that despite the economic recovery, at this stage they will not suspend their
              relief plans or their expansionist monetary policy.

     In the third quarter of 2009, commodities prices and the stock markets rose. The
     CRB (leading commodities index) rose by 3.8%. Oil prices rose by 1%, gas prices
     rose by 26%, the price of gold rose 8%, and nickel and copper prices rose by 8%
     and 19% respectively. The price of sugar rose 35% and corn prices fell -14%.
     The interest rate in many countries worldwide is now at record lows. At the end of
     2008, monetary interest in the US was cut to 0%-0.25%. In the euro block,
     interest rates were cut to 1.0%. In the UK, interest rates were lowered to 0.5%.
     In Japan the interest rate remained at 0.1%. The Bank of Israel is the first central
     bank in the world to raise the interest rate, doing so in the fourth quarter to 0.75%.
     The yield to redemption curve for shekel bonds in Israel was mainly affected by
     the Bank of Israel's increase in the interest rate and to expectations of inflation
     (which declined along the length of the curve). Other factors which influenced
     the shekel curve are the strong macro-economic indicators which led to a
     downward revision of forecasts and a decline in US Treasury bonds. During the
     third quarter, the Bank of Israel announced that it would suspend the purchase of
     linked and shekel bonds which it had begun in March this year.
     The gradient of the graph for linked bonds eased in the third quarter of 2009,
     mainly due to an increase in the short section of the curve which was affected by
     lower expectations of inflation.
     During the fourth quarter of 2009, more money was raised in the corporate bonds
     issue market (NIS 12.1 billion, compared with NIS 11.8 billion in the second
     quarter of the year). Nevertheless, most of the capital was raised by a small
     number of highly rated companies.


      Share indices in Israel rose by double digits from the beginning of 2009.

                        Share indices                                   Bond indices
                         Q3             Nine months                      Q3           Nine months
                   2009    2008       2009    2008                 2009    2008     2009    2008
      TA 25        15.40% (18.31%)   %51.98 )27.13%( General       2.52%   )2.91%(   14.10%   0.76%
                                                     Index
      TA 100       15.78% (18.60%)   64.46% )30.38%(               3.95%   )5.32%(   22.69%   6.10%
                                                     linked
      Yeter        14.58% (14.18%)   95.34% )34.42%( Shekel        1.52%   1.43%     2.47%    3.83%
      General
      share        10.32% (17.87%)   56.93% )27.86%( Corporate     2.83%   )6.70%(   28.72%   )4.34%(
      index




     During the third quarter, the CPI rose by 1.3% (applicable index). The known
     index rose 2.4% during the third quarter, and from the beginning of the year by
     3.7%.



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Clal Insurance Enterprises Holdings Ltd.                             Board of Directors Report

     Trade in the dollar was mixed against the major world currencies. During the
     third quarter, the dollar depreciated 6.9% against the Japanese yen, 4.3% against
     the euro, but strengthened 2.9% against the pound sterling. The shekel was
     approximately 7.1% stronger against the pound sterling, 4.1% against the dollar
     and 0.4% against the euro.
     The IMF outlook for growth in global output for 2009 assumes negative growth
     of 1.3%. The dominant economies are also expected to post negative growth, with
     the forecast for the US a 2.5% decline, 4.2% for the euro block, growth in the UK
     is expected to decline by 4.4%. High negative growth is also predicted for Japan
     and Eastern Europe (5.4% and 5.0% respectively). Positive growth is forecast for
     the Asian countries: China 8.5%, India 5.4%, and 2% in the Middle East.


      Following are the nominal yields on the world's share indices for the first nine
      months and third quarter of 2009 and for 2008.

                                                 First nine months                         First nine months
                               Q3 2009                 of 2009             Q3 2008               of 2008
                          In local     In        In local      In    In local     In      In local       In
                         currency shekel        currency shekel      currenc shekel       currenc shekel
                                     terms                   terms       y      terms         y        terms

       Dow Jones          15.0%    10.3%        10.66%    9.38%        (4.4%)    (2.4%)   (18.20%)   27.24%))
       Nasdaq             15.7%    10.9%        34.58%    33.03%       (8.8%)    (6.9%)   (21.13%)   29.84%))
       Nikei - Tokyo       1.8%     4.5%        14.38%    14.37%      (16.5%)   (14.8%)   (26.44%)   (30.67%)
       CAC – Paris        20.9%   20.3%         17.94%    22.68%       (9.1%)   (14.0%)   (28.18%)   (36.55%)
       FTSE - London      20.8%   12.2%         15.78%    26.20%      (12.9%)   (17.9%)   (24.07%)   (38.09%)
       DAX - Frankfurt    18.0%   17.5%         17.98%    22.71%       (9.2%)   (14.1%)   (27.72%)   (36.14%)
       MSCI World         17.9%   13.0%         22.47%    21.05%      (16.6%)   (13.9%)   (25.58%)   (33.80%)




                                           1-   39
Clal Insurance Enterprises Holdings Ltd.                    Board of Directors Report

2.5    Developments in the markets in which the Group operates
2.5.1. Developments in Israel's insurance market

      Total volume of premiums in the market:
      According to the information published in the insurance companies' financial
      statements, during the first six months of 2009 Israel's insurance market (life
      insurance, non-life insurance, and health insurance) earned gross premiums
      totaling NIS 19 billion, compared with NIS 18.5 billion in the corresponding
      period last year, a 4% increase.


      Data on crime in Israel:
      According to figures published by the Israel Insurance Association, there were
      14,362 car thefts in Israel during the period January – August 2009, compared
      with 15,991 car thefts for the corresponding period last year – an 10.2%
      reduction.
      According to figures published by the Central Bureau of Statistics, 7,990
      businesses were broken into during the period January-September 2009,
      compared with 7,656 for the corresponding period last year, a 4% increase.
      21,734 homes were broken into during the Reporting Period, compared with
      24,260 for the corresponding period last year, a 10% decline.


2.5.2. Developments in the long-term savings market

      Volume of premiums in the life insurance market
      According to the information published in the insurance companies' financial
      statements, during the first six months of 2009, Israel's life insurance market
      posted gross profit of NIS 8.9 billion, similar to the corresponding period last
      year.


      Developments in the life insurance market:
      According to information published by the Ministry of Finance, assets in profit-
      sharing policies in the life insurance market totaled NIS 109.4 billion at
      September 30, 2009, compared with NIS 86.1 billion at December 31, 2008 – an
      increase of 27%.
      According to information published by the Association of Life Insurance
      Companies, the volume of premiums in the branch for the first nine months of
      2009 from new on-going sales (excluding one-time premiums) totaled NIS 2,273
      million, a decline of 7.3% compared with the corresponding period last year. Of
      this, premiums in personal lines policies accounted for NIS 432 million (a 9.7%
      decline), premiums in pension insurance for the self employed accounted for NIS
      96 million (a 7.3% decline), and premiums in managers' insurance totaled NIS
      1,745 million (a 6.7% decline).




                                           1-   40
Clal Insurance Enterprises Holdings Ltd.                      Board of Directors Report

      Developments in the new pension funds market:

      According to information published by the Ministry of Finance, assets accrued in
      the new pension funds in the provident funds market totaled NIS 66.1 billion at
      December 31, 2008, compared with NIS 48.9 billion at December 31, 2008 – a
      35%. increase.
      Assets in pension funds owned by insurance companies amounted to NIS 65.4
      billion at September 30,.2009, compared with NIS 48.4 billion at December 31,
      2008, an increase of 35%. The increase was mainly due to the positive yields
      attained by the pension funds.
      Net accrual in the new pension funds during the reporting period was NIS 6.8
      billion.


      Developments in the provident funds market:
      According to information published by the Ministry of Finance, at September 30,
      2009, the provident funds held assets totaling NIS 268.3 billion (of which NIS
      92.6 billion was in the study funds), compared with NIS 220.1 billion at
      December 31, 2008 (of which NIS 72.6 billion was in the study funds) – an
      increase of 22%. Most of the increase in the balance of assets was due to the
      positive yield attained by the funds.
      Assets held by the provident funds owned by the insurance companies totaled NIS
      83.9 billion at September 30, 2009, compared with NIS 69.4 billion at December
      28, 2009..
      Net accrual in the provident funds market for the Reporting Period was positive,
      amounting to NIS 516 million. Of this, the provident funds owned by the
      insurance companies posted negative accrual in the amount of NIS 582 million.


2.5.3. Developments in the finance market

      At the end of June 2009, Israel's mutual funds held assets under management in
      the amount of NIS 124 billion, compared with NIS 117 billion at the end of the
      previous quarter, and NIS 98 billion at the end of 2008. Disregarding the money
      funds, the volume of assets was NIS 107 billion at the end of September,
      compared with NIS 94 billion at the end of the previous quarter, and NIS 68
      billion at the end of 2008. The volume of assets held in the mutual funds
      increased by 27% compared with the end of 2008, when assets in the money
      funds fell 41%.


2.6   Legal proceedings
      On the subject of developments in the status of class actions and claims pending
      against the Company (that are not part of the normal course of business), see Note
      7 to the Financial Statements.




                                           1-   41
Clal Insurance Enterprises Holdings Ltd.                                       Board of Directors Report



3. Financial situation

3.1      Principal data from the financial statements:
3.1.1. Data from the balance sheet
                         NIS millions                             Sept. 30,  Sept.     %         December
                                                                    2009    30, 2008 change         31
                                                                                                   2008
Total assets for yield-dependent contracts in insurance
subsidiaries in Israel                                              27,200    22,139     23%         20,582
Total other finance investments                                     30,775    27,239     13%         26,384
Other assets                                                        11,780    12,349     (5%)        11,888

Total assets                                                        69,755    61,727     13%         58,854


Shareholders’ equity                                                 3,510     3,054     15%          2,744
    Capital attributed to the Company's shareholders                 3,280     2,759     19%          2,475
Liabilities
Liabilities in respect of non-performance based insurance
contracts and investment contracts *                                27,311    25,154      9%         25,978
Performance-based insurance contracts and investment                26,530    21,787     22%         19,475
contracts
Subordinated liability notes                                         1,344     1,080     24%          1,276
Debentures                                                            359       447     (20%)          362
Liabilities for liability certificates, ETNs, reverse
certificates, and complex certificates                               5,494     5,420       1%         4,108
Liabilities to banks and others                                      2,439     1,972     24%          1,763
Other liabilities                                                    2,768     2,813     (1%)         3,148
Total capital and liabilities                                       69,755    61,727     13%         58,854



* The following details liabilities in respect of non-performance based insurance
    contracts and investment contracts
                          NIS millions                            Sept.30,2  Sept.     %         December
                                                                    009     30, 2008 change         31
                                                                                                   2008
Long-term savings                                                    15,464    13,906     11%        14,801
Health insurance                                                      1,540     1,182     30%         1,235
Non-life insurance activity in Israel and Europe                      8,195     8,105       1%        7,889
Non-life insurance through a subsidiary in the US                     2,127     1,974       8%        2,066
Total non-performance-based insurance contracts and                  27,311    25,154       9%       25,978
                     1
investment contracts


        Assets

        At September 30, 2009, total assets amounted to NIS 69,755 million, compared
        with NIS 58,854 million at December 31, 2008.
        The increase in assets during the reporting period was mainly the result of price
        increases in the capital markets that in turn led to an increase in the value of the
        assets for performance-based contracts among consolidated insurance companies
        (profit-sharing policies and profile policies portfolios) and in other financial

1
    After adjustments and offsets



                                                        1-   42
Clal Insurance Enterprises Holdings Ltd.                     Board of Directors Report

     (nostro) investments. Regarding developments in the capital market, see par.
     2.4.2 above.

      Shareholders’ equity

     At September 30, 2009 the Company's total equity amounted to NIS 3,510 million
     (of which NIS 3,280 million was attributed to the shareholders), compared with
     NIS 2,744 million (of which NIS 2,475 million was attributed to the shareholders)
     at December 31, 2008.
     The factors which led to the increase in capital during the Reporting Period
     mainly consisted of profit for the period in the amount of NIS 301 million, an
     increase in a capital fund of available-for-sale assets in the amount of NIS 756
     million on the one hand, and a decline in a translation fund in respect of overseas
     activity in the amount of NIS 14 million on the other. For further details, see the
     report on the inclusive income and the report on changes in shareholders' equity.


      Compliance with the requirements for shareholders' equity by the Group's
      insurance companies, pursuant to the Control of Insurance Business (Minimum
      Solvency Required of an Insurer) Regulations, 5758-1988):
     At September 30, 2009, Clal Insurance (consolidated) had surplus capital of NIS
     969 million, compared with NIS 153 million at the publication date of the
     periodic report for 2008. Clal Health had surplus capital of NIS 91 million at
     September 30, 2009, compared with surplus capital of NIS 8 million at the
     publication date of the periodic report for 2008.
     According to an amendment to the Control of Financial Services (Minimum
     Equity Required of an Insurer) Regulations which was published in November
     (see par. 2.3.1(3) above), the capital held by Clal Insurance at September 30, 2009
     must gradually increase by NIS 1.2 billion over a period of several years.
     According to the amendment and a temporary order which were published, and
     taking into account Clal Insurance's surplus equity at the reporting date, Clal
     Insurance must gradually increase its shareholders equity over several years, as
     noted above, by NIS 0.3 billion. See Note 6 to the Financial Statements.


      Liabilities and equity

     Total capital and liabilities at September 30, 2009 was NIS 69,755 million,
     compared with NIS 58,854 million at December 31 2008. The increase was
     mainly due to an increase in equity of NIS 766 million, to an increase of NIS
     7,055 million in liabilities in respect of insurance contracts and performance-
     based investment contracts, and an increase of NIS 1,333 million in liabilities in
     respect of insurance contracts and investment contracts that are not performance
     based, stemming from price increases on the capital markets, an increase in
     liabilities on account of liability certificates, ETNs, reverse certificates and
     complex certificates in the amount of NIS 1,386 million, and an increase in
     commitments to banking and other corporations in the amount of NIS 676
     million.




                                           1-   43
Clal Insurance Enterprises Holdings Ltd.                                                  Board of Directors Report

3.1.2. Data from the Income Statement
                                                                                  %
                     NIS millions                1-9/2009          1-9/2008                   7-9/2009    7-9/2008       1-12/2008
                                                                                change
      Premiums earned, gross                            7,045           6,758     4%              2,364       2,302           9,051
      Premiums earned in retention                      5,961           5,842     2%              2,024       2,014           7,815
      Profit (loss), net from investments and
      financing income                                  7,533           (835)         #           2,569      (1,042)         (2,834)
      Income from management fees and
      portfolio management                               554             559      (1%)             198          184             721
      Income from commissions                            217             197      10%               73           66             254
      Income from other financial services                85              94     (10%)              46           25             119
      Other income                                        37              37          -             13           17              89
      Payments and changes in liabilities for
      insurance contracts and investment              11,479            3,725    208%             3,931         643           3,405
      contracts in retention
      Commissions, other marketing and
      acquisition expenses                              1,306           1,283     2%               439          420           1,744
      General and administrative expenses                756             783      (3%)             249          288           1,019
      Impairment of intangible assets                     40             108     (63%)              23           86             302
      Other expenses                                     124              72      72%               41           21             106
      Financing expenses                                 227             205      11%               98           92             268
      Company's share in earnings of
      affiliates, net                                     31              11     182%               16               5           15
      Profit (loss) before income tax                    486            (272)         #            156         (281)           (666)
      Taxes on income (tax benefits)                     186             (41)         #             56          (60)           (101)

      Profit (loss) for the period                       301            (231)         #            100         (221)           (565)
      Profit (loss) for the period attributed
      to:

      Shareholders of the Company                        328            )191(         #            117         (193)           (479)

      Minority interest                                  (28)            )40(    (30%)             (17)         (27)            (86)

      Profit (loss) for the period                       301            (231)         #            100         (221)           (565)




3.1.3. Data on premiums in insurance business
           Gross premiums earned, by operating segments:
                                                                                  %
                   NIS millions                 1-9/2009          1-9/2008                   7-9/2009     7-9/2008       1-12/2008
                                                                                change
    Long-term savings:-                         3,156           3,101            2%             1,047        1,044           4,126
        Of this, non-recurring premiums         216             188              15%               93           62             228
    Non-life insurance activity in Israel and
    Europe:                                     2,539           2,547             -               837          833           3,391
    Health insurance:                           759             535              42%              298          237             766
    Non-life insurance through a
    subsidiary in the US                        596             581              3%               185          189             771
                                        2
    Total premiums earned, gross                7,045           6,758            4%             2,364        2,302           9,051




2
    After adjustments and offsets



                                                        1-   44
Clal Insurance Enterprises Holdings Ltd.                                         Board of Directors Report

          Gross premiums and premiums in retention in non-life insurance:
                                                                           %
                   NIS millions               1-9/2009        1-9/2008              7-9/2009   7-9/2008   1-12/2008
                                                                         change
      Motor property insurance in Israel
             Gross premiums                        535             602   (11%)           151       167          726
             Premiums in retention                 526             574   (8%)            150       162          695
      Compulsory motor insurance in Israel
             Gross premiums                        499             503   (1%)            143       137          628
             Premiums in retention                 488             494   (1%)            140       134          616
      Property and other branches in Israel
             Gross premiums                        871             789   10%             284       268        1,051
             Premiums in retention                 393             366   7%              135       126          498
      Other liabilities branches in Israel:
             Gross premiums                        337             287   17%              91        80          359
             Premiums in retention                 202             166   22%              56        51          211
      Non-life insurance in Europe:
             Gross premiums                        460             467   (1%)            135       140          608
             Premiums in retention                 258             342   (25%)            96       127          470
      Non-life insurance through a
      subsidiary in the US
             Gross premiums                        648             635   2%              156       166          770
             Premiums in retention                 614             592   4%              149       157          720

  Total non-life insurance:
          Gross premiums                         3,350           3,282   2%              960       958        4,142
             Premiums in retention               2,482           2,536   (2%)            726       757        3,209


3.2       Dividend
          During the Reporting Period the Company did not distribute any dividends.




                                                  1-     45
 Clal Insurance Enterprises Holdings Ltd.                                          Board of Directors Report


 4. Results of Operations

 4.1      Summary of operations
                                                                                                           For the year
                                             For the nine months ended             For the three months       ended
                                                    September 30                   ended September 30       December
                                                                                                             31, 2008
              NIS millions                                                   %
                                           2009                2008        change 2009          2008
Pre-tax profit (loss) from operating
segments
Profit (loss) from long-term savings              340               (84)     #           115     (107)          (155)
Profit (loss) from non-life insurance in
Israel and Europe *                               142                38    277%           47      (38)            (58)
Profit from health insurance                       93                34    176%           36       18              (2)
Profit from non-life insurance through a
subsidiary in the US                               55                22    149%           16           8           36
Profit (loss) from financial services **          (91)             (167)   (46%)         (40)    (110)          (309)
Total pre-tax profit (loss) from
reportable operating segments                     539              (157)     #           175     (229)          (488)

Pre-tax profit from other activity (not
included in the segments)                          24                15    57%             7           4           13
Net income (losses) from investments               68                 4    1559%          37       (2)            (18)
General and administrative expenses               (17)              (23)   (25%)          (5)      (8)            (38)
Financing expenses                            (124)                (107)   16%           (59)     (45)          (128)
Other pre-tax profit (loss)                        (3)               (3)    3%              -      (1)             (7)
Pre-tax profit (loss)                             486              (272)     #           156     (281)          (666)
Taxes on income (tax benefits)                    186               (41)     #            56      (60)          (101)
Profit (loss) for the period                      301              (231)     #           100     (221)          (565)

Attributable to:

Shareholders of the Company                       328              (191)     #           117     (193)          (479)
Minority interests                                (28)              (40)   (31%)         (17)     (27)            (86)
Profit (loss) for the period                    301        (231)      #             100         (221)         (565)
          * Including a non-recurring expense of NIS 20 million in respect of the sale of Clal Romania in the
             first quarter of 2009.
          ** Including an impairment of intangible assets of NIS 40 million during the Reporting Period and
             NIS 298 million in 2008

         Results of Operations

         Profit for the reporting period was NIS 301 million, of which profit of NIS 328
         million was credited to the Company's shareholders and a loss of NIS 28 million
         was charged to the owners of the minority interest. A loss of NIS 231 million was
         recorded in the corresponding period last year, of which the loss charged to the
         Company's shareholders was NIS 191 million, and the loss to the owners of the
         minority rights was NIS 40 million.


         In the third quarter, the Company's shareholders made a profit of NIS 117 million,
         compared with a loss of NIS 193 million for the corresponding period last year.



                                                         1-   46
Clal Insurance Enterprises Holdings Ltd.                     Board of Directors Report

     Pre-tax loss during the Reporting Period was NIS 486 million, compared with a
     pre-tax loss of NIS 272 million for the corresponding period last year.
     The pre-tax profit during the Reporting Period was NIS 539 million, compared
     with a pre-tax loss of NIS 157 million for the corresponding period last year.
     There was a pre-tax profit of NIS 24 million from activity that was not included in
     the operating segments, compared with NIS 15 million for the corresponding
     period last year.
     General and administrative expenses that were not included in the operating
     segments totaled NIS 17 million for the Reporting Period, compared with NIS 23
     million for the corresponding period last year. Net profit from investments that
     were not included in the operating segments totaled NIS 68 million for the
     Reporting Period, compared with NIS 4 million for the corresponding period last
     year.
     Financing expenses stemming mainly from the subordinated liability notes issued
     by Clal Insurance and from loans raised by the Company, totaled NIS 124 million
     for the Reporting Period, compared with NIS 107 million for the corresponding
     period last year.
     For a description of performance by sector, see par. 4.2 below.




                                           1-   47
Clal Insurance Enterprises Holdings Ltd.                                      Board of Directors Report

4.2     Financial information by operating segment
4.2.1. Long-term savings

        Pre-tax profit from long-term savings during the Reporting Period was NIS 340
        million, compared with a pre-tax loss of NIS 84 million for the corresponding
        period last year. Performance during the Reporting Period was mainly affected
        by profit from the life insurance branch in the amount of NIS 247 million,
        compared with a loss of NIS 182 million for the corresponding period last year. In
        addition, profit from the pension branch increased during the Reporting Period
        compared with the corresponding period last year on the one hand, while profit
        from the provident branch declined.


        Following are explanations on performance in long-term savings:
4.2.1.1.     Performance in the life-insurance branch:
           Summary of life insurance business results:
                                                                      %                                  1-
             NIS millions            1-9/2009       1-9/2008               7-9/2009    7-9/2008
                                                                    change                            12/2008
  Premiums earned, gross                 3,156            3,101       2%       1,047       1,044        4,126
  Net income (losses) from
  investments                            6,684           (1,281)      #        2,213     (1,265)       (3,158)
  Income from management fees             119                 106    12%         46           35          137
  Income from commissions                  35                  54   (35%)        12           16           70
  Increase in liabilities and
  payments for insurance contracts
  and investment contracts in
  retention                              9,026            1,420      535%      3,002       (298)          454
  Commissions, other marketing
  and acquisition expenses                422                 432    (2%)       131         145           574
  General and administrative              143                 155    (8%)        46           59          200
  expenses
  Other expenses                                7              6     17%          3               2         8
  Pre-tax profit (loss)                   247             (182)       #          85        (130)         (253)



        The life insurance branch posted pre-tax profit of NIS 247 million for the
        Reporting Period, compared with a loss of NIS 182 million for the corresponding
        period last year. Profit in the third quarter was NIS 85 million, compared with a
        loss of NIS 130 million in the corresponding period last year. Performance during
        the Reporting Period was principally affected by profits from the investment of
        nostro money.


        Gross premiums earned during the Reporting Period totaled NIS 3,156 million,
        compared with NIS 3,101 million for the corresponding period last year, an
        increase of 2%. Of the total premiums, approximately 93.2% were from on-going
        premiums and the remainder were non-recurring premiums.
        The rate of surrenders of life insurance policies from the average reserve rose
        slightly during the Reporting Period, amounting to 2.3%, compared with 2.15%
        for the corresponding period last year.




                                                    1-   48
Clal Insurance Enterprises Holdings Ltd.                                    Board of Directors Report

         Commission, marketing and other acquisition expenses in the life-insurance
         branch totaled NIS 422 million for the Reporting Period, compared with NIS 432
         million for the corresponding period last year, a decrease of 2%. General and
         administrative expenses during the Reporting Period were NIS 143 million, a
         reduction of 8% compared with the corresponding period last year.


         During the Reporting Period, as in the corresponding period last year, variable
         management fees were not collected on profit-sharing policies. Pursuant to the
         Control of Insurance Business Regulations, in profit-sharing policies that were
         sold from 1991-2003 (Fund J), an insurer may collect fixed management fees plus
         an amount derived as a percentage of the real yield on the investment portfolio,
         after the fixed management fees have been deducted (the Supplement). The
         Supplement is calculated annually on an annual basis in positive or negative
         values. The insurer may only collect a positive supplement, however when
         calculating any positive supplement, any negative supplement that accrued during
         previous periods is deducted. The inability to collect this Supplement affects the
         Company's profits. In view of the price increases on the capital markets, the
         profit-sharing policies recorded high yields during the Reporting Period (see
         details below). Consequently, at the reporting date, the negative supplement (loss
         of potential revenues), to be deducted in the future from any positive supplement,
         if and when it is created, amounted to NIS 97 million, compared with NIS 636
         million at December 31, 2008. At the end of October 2009, the negative
         supplement continued to decline following the positive yields that were attained.

          Details concerning yield rates in profit-sharing policies:

                                                               Policies issued from 1992-2003 (Fund J)

                                                             1-9/2009   1-9/2008    7-9/2009    7-9/2008
    Real yield before payment of management fees             24.84%      )14.75%(    4.94%      )8.66%(
    Real yield after payment of management fees              24.28%     )15.18%(     4.78%      )8.82%(


    Nominal yield before payment of management fees          29.36%     )10.49%(     7.50%      )7.07%(
    Nominal yield after payment of management fees           28.78%     )10.88%(     7.35%      )7.18%(



                                                                                                         3
                                                             Policies issued from 2004 (General track 3)

                                                         1-9/2009       1-9/2008     7-9/2009    7-9/2008
    Real yield before payment of management fees              29.29%     )15.10%(      5.69%     )9.21%(
    Real yield after payment of management fees               28.24%     )15.96%(      5.39%     )9.49%(


    Nominal yield before payment of management fees           33.97%     )10.85%(      8.27%     )7.79%(
    Nominal yield after payment of management fees            32.88%     )11.61%(      7.96%     )7.99%(


3
    The yield after payment of management fees is calculated according to the average management fees in
    the portfolio.




                                                   1-   49
 Clal Insurance Enterprises Holdings Ltd.                                       Board of Directors Report




          Details concerning investment profit credited to holders of profit-sharing policies
          and management fees:



                        NIS millions                        1-9/2009        1-9/2008        7-9/2009       7-9/2008



Nominal investment profit (loss) credited to
                                                               5,317.4       )2,145(         1,636.1       )1,520.1(
policyholders after management fees
                    4
Management fees
                                                                119.1         104.5            46            33.6




4.2.1.2.       Performance in the provident funds branch:
            Summary of activity in the provident funds sector:
                                                                      %
               NIS millions              1-9/2009    1-9/2008                  7-9/2009 7-9/2008           1-12/2008
                                                                    change
 Income from investments, net                  151         154       (2%)              77           154          157
 Income from management fees                   187         193       (3%)              61            62          252
 Payments and changes in liabilities
 for investment contracts gross and in
 retention                                     147         162       (9%)              80           162          190
 Commissions, other marketing and
 acquisition expenses                           26             12   117%               8               6            27
 General and administrative                     60             70   (14%)              17            24             85
 expenses
 Other expenses                                 46             29    59%               17              9            39
 Total profit before taxes                      58             74   (22%)              16            15             68


          At the reporting date, the Group's provident funds held assets under management
          of NIS 30.9 billion, compared with NIS 25.6 billion at December 31, 2008. At
          the reporting date, the Company's provident funds account for 11.5% of the
          provident funds market. The provident funds owned by the Company recorded a
          negative accrual of NIS 660 billion for the Reporting Period.


          Total revenues from management fees during the Reporting Period were NIS 187
          million, a 3% decline compared with the corresponding period last year.
          Revenues from management fees during the third quarter amounted to NIS 61
          million, similar to the corresponding period last year. The provident funds sector
          recorded pre-tax profit of NIS 58 million for the Reporting Period, compared with
          profit of NIS 74 million for the corresponding period last year.


 4
     The management fees are calculated in accordance with the instructions of the Commissioner of
     Insurance, based on the yield and quarterly balances of the Company's average, insurance
     commitments.



                                                     1-   50
Clal Insurance Enterprises Holdings Ltd.                               Board of Directors Report

       The on-going expense in respect of the write-down of the surplus acquisition cost
       attributed to the provident funds acquired in 2007 amounted to NIS 29 million for
       the Reporting Period, compared with NIS 20 million for the corresponding period
       last year. During the Reporting Period, there was a further one-time write down
       of NIS 11.5 million (see Note 2(b) to the Financial Statements). The Group's
       provident funds attained an average, cumulative nominal yield of 26.11% for the
       Reporting Period, of which the Tamar provident fund achieved a yield of 29.35%
       during this period.



4.2.1.3.     Performance in the pension funds branch:
           Summary of activity in the pension funds sector:
                                                               %                 7-
            NIS millions           1-9/2009   1-9/2008                7-9/2009                1-12/2008
                                                             change              9/2008
Income from management fees              98             83    18%           36        30            112
Commissions, other marketing and
acquisition expenses                     29             19    53%           10            6          27
General and administrative
expenses                                 36             34    6%            13        12             48

Total profit before taxes                35             24    46%           14            8          30


       The pension funds sector recorded pre-tax profit of NIS 35 million for the
       Reporting Period, compared with NIS 24 million for the corresponding period last
       year. The result was mainly affected by an increase in management fees, which
       amounted to NIS 98 million for the Reporting Period, compared with NIS 83
       million for the corresponding period last year. The increase in management fees
       was due mainly to an increase in the assets under management.
       At the reporting date, the assets of the Metavit-Atudot Pension Fund totaled NIS
       11 billion, compared with NIS 7.8 billion at December 31, 2008. At the reporting
       date, Metavit-Atudot accounts for 16.6% of the new pension fund market.
       Metavit-Atudot's net accrual for the Reporting Period was NIS 1,232 million,
       compared with NIS 1,115 million for the corresponding period.
       Metavit-Atudot attained an average, cumulative nominal yield in the amount of
       26.46% for the Reporting Period.
       The old pension fund managed by the Group accrued assets under management of
       NIS 4.7 billion at the reporting date. At the reporting date, C.P.Y. has accrued
       assets under management of NIS 18.8 billion.




                                              1-   51
Clal Insurance Enterprises Holdings Ltd.                                    Board of Directors Report


4.2.2. Non-life insurance activity in Israel and Europe:

       Summary of the Note on performance in non-life insurance in Israel and Europe
       (see Note 5(c) to the Financial Statements):
                                                                     %                                  1-
           NIS millions               1-9/2009     1-9/2008               7-9/2009    7-9/2008
                                                                   change                            12/2008
Gross premiums                            2,703         2,647       2%          804        791         3,372
Reinsurance premiums                       835              704     19%         228        191           883
Premiums in retention                     1,868         1,943       28%         577        600         2,489
Net profit from investments and
financing income                           314              163     93%         142         51            67
Income from commissions                    140              105     33%          47         39           138
Payments and changes in liabilities
for insurance contracts and
investment contracts in retention         1,437         1,453       (1%)        540        537         1,877
Commissions, marketing expenses
and purchasing and other expenses          548              582     (6%)        181        194           783
General and administrative expenses         69               76     (9%)         22         23            99
Other expenses                              24                 -     -           8               -             -
Financing (income) expenses                 (1)             (26)   (96%)        (6)          4            (3)
Profit (loss) before income tax            142               38    274%          47        (38)          (58)


       Gross premiums during the Reporting Period totaled NIS 2,703 million, compared
       with NIS 2,647 million for the corresponding period last year. Gross premiums
       for the second quarter totaled NIS 804 million, compared with NIS 791 million
       for the corresponding quarter last year.
       Pre-tax profit of NIS 142 million was recorded in non-life insurance in Israel and
       Europe during the Reporting Period, compared with NIS 38 million for the
       corresponding period last year. As a result of the sale of Clal Romania, the
       Company recorded a capital loss of NIS 22 million (see Note 8(g) to the Financial
       Statements).
       Income from investments in this sector totaled NIS 314 million, compared with
       NIS 163 million for the corresponding period last year.           General and
       administrative expenses totaled NIS 69 million, compared with NIS 76 million for
       the corresponding period last year. Commissions, marketing and acquisition
       expenses totaled NIS 548 million, compared with NIS 582 million for the
       corresponding period last year, a 6% decline.




                                                  1-   52
 Clal Insurance Enterprises Holdings Ltd.                                               Board of Directors Report


         Following is an explanation of performance in the non-life insurance sector in
         Israel and Europe by branches:

 4.2.2.1. Compulsory motor insurance in Israel
             Summary of compulsory motor insurance activity in Israel:
            NIS millions                  1-9/2009    1-9/2008          % change       7-9/2009    7-9/2008    1-12/2008

 Gross premiums                                499              503          (1%)           143         137          628
 Premiums in retention                         488              494          (1%)           140         134          616
 Net profit from investments and
 financing income                              158               76          108%            77          21           18
 Payments and changes in
 liabilities for insurance contracts in
 retention                                     518              513           1%            219         196          624
 Commissions, marketing
 expenses and other purchasing
 expenses                                       56               69          19%             21          26           81
 General and administrative
 expenses                                        6                7          (14%)            2           3            7
 Profit (loss) before income tax                32              (42)          #             (12)        (51)        (78)


         Gross premiums in compulsory motor insurance earned during the Reporting
         Period were NIS 499 million, compared with NIS 503 million for the
         corresponding period last year, a 1% reduction. Pre-tax profit for the Reporting
         Period was NIS 32 million, compared with a loss of NIS 42 million for the
         corresponding period last year, the loss in the third quarter of 2009 was NIS 12
         million, compared with a loss of NIS 51 million in the corresponding quarter last
         year. Performance during the Reporting Period was affected by an increase in
         investment income, the deduction of the amount credited to revalue the balance of
         claims and to accrual, as well as a reduction in the release of three quarters of the
         surpluses for the relevant underwriting year (2006).


 4.2.2.2.      Motor property insurance in Israel
           Summary of the results of motor property insurance activity in Israel:
                                                                               %
              NIS millions                   1-9/2009       1-9/2008                7-9/2009 7-9/2008          1-12/2008
                                                                             change
Gross premiums                                       535               602    (11%)        151          167          726
Premiums in retention                                526               574     (8%)        150          162          695
Net profit from investments and
financing income                                      26                11    136%            9           3            3
Payments and changes in liabilities for
insurance contracts in retention                     397               383     4%          133          133          502
Commissions, marketing expenses and
other purchasing expenses                            120               129     (7%)         41           46          179
General and administrative expenses                   7                 7          -          2           2            9
Profit (loss) before income tax                       2                 22    (91%)           3           1           17


         Gross premiums in motor property insurance earned during the Reporting Period
         were NIS 535 million, compared with NIS 602 million for the corresponding



                                                           1-   53
Clal Insurance Enterprises Holdings Ltd.                                   Board of Directors Report

       period last year. The decline in premiums is due mainly to the failure to renew
       several group transactions and to a decline in the average premium.
       Pre-tax profit from motor property business totaled NIS 2 million for the
       Reporting Period, compared with NIS 22 million for the corresponding period last
       year. Profit in the third quarter of the reporting year was NIS 3 million, compared
       with a loss of NIS 1 million in the corresponding period last year. The loss was
       mainly due to an increase in claims and a decline in the premium earned.
       Income from investments in this sector totaled NIS 26 million, compared with
       NIS 11 million for the corresponding period last year. Total marketing expenses,
       acquisition expenses and general and administrative expenses were NIS 127
       million for the Reporting Period, compared with NIS 136 million for the
       corresponding period last year, a 7% decline.
       Gross claims accounted for 76.0% of gross premiums during the Reporting
       Period, compared with 70.5% for the corresponding period.


4.2.2.3.     Property and other insurance branches in Israel
           Summary of the results of activity in property and other insurance sectors in
           Israel:
                                                                   %
             NIS millions              1-9/2009    1-9/2008      chang 7-9/2009 7-9/2008 1-12/2008
                                                                   e
Gross premiums                              871              789 10%         284      268    1,051
Premiums in retention                       393              366    7%       135      126       498
Net profit from investments and
financing income                              32              14   129%       11        4         3
Income from commissions                       92              90    2%        30       33       120
Payments and changes in liabilities
for insurance contracts in retention        171              196   (52%)      50       64       255
Commissions, marketing expenses
and other purchasing expenses               217              223   (3%)       71       72       304
General and administrative                    18              20   (10%)       6        7        25
expenses
Profit before income tax                    110               38   189%       48       10        37


       Gross premiums in other property insurance branches earned during the Reporting
       Period were NIS 871 million, compared with NIS 789 million for the
       corresponding period last year, a 10% increase. The increase in premiums was
       due to the property loss branches.
       Pre-tax profit from property and other branches totaled NIS 110 million for the
       Reporting Period, compared with NIS 38 million for the corresponding period last
       year. Profit in the third quarter was NIS 48 million, compared with NIS 10
       million in the corresponding period last year.
       The increase in profit was mainly due to a decline in claims in retention, which
       amounted to NIS 94 million compared with NIS 196 million last year. During the
       Reporting Period, claims in retention accounted for 44.3% of premiums in
       retention, compared with 52.8% for the corresponding period last year.
       Income from investments also increased, amounting to NIS 32 million, compared
       with NIS 14 million for the corresponding period last year.



                                                   1-   54
Clal Insurance Enterprises Holdings Ltd.                                     Board of Directors Report



4.2.2.4.    Other liabilities insurance branches in Israel:
         Summary of the results of the activity of the other liabilities insurance sectors in
         Israel:
                                                                     %                                 1-
            NIS millions               1-9/2009       1-9/2008              7-9/2009    7-9/2008
                                                                   change                           12/2008
Gross premiums                              337             287     17%           91          80        359
Premiums in retention                       202             166     22%           56          51        211
Net profit from investments and
financing income                              87             45     93%           40          12         11
Income from commissions                       15             11     36%            7           5         13
Payments and changes in liabilities
for insurance contracts in retention        218             173     26%           91          58        178
Commissions, marketing expenses
and other purchasing expenses                 61             58     5%            23          21         82
General and administrative expenses               4           4      -             1           2          7
Profit (loss) before income tax              (8)            (14)   (43%)          (8)        (10)       (33)



       Gross premiums in other liabilities branches in Israel during the Reporting Period
       totaled NIS 337 million, compared with NIS 287 million for the corresponding
       period last year. The increase in premiums was due to an increase in third-party
       and professional liability branches.
       There was a pre-tax loss of NIS 8 million from other liabilities business during the
       Reporting Period, compared to a loss of NIS 14 million during the corresponding
       period. The loss for the third quarter was NIS 8 million, compared with a loss of
       NIS 10 million in the corresponding period last year. The result during the
       Reporting Period was affected by an increase in premiums and revenues from
       investments on the one hand, and an increase in claims on the other.




                                                  1-   55
Clal Insurance Enterprises Holdings Ltd.                                      Board of Directors Report

4.2.2.5.     Non-life insurance in Europe:
         Summary of the results of non-life insurance activity in Europe:
                                             1-                        %                                       1-
              NIS millions                                1-9/2008             7-9/2009      7-9/2008
                                             9/2009                  change                                 12/2008
Gross premiums                                   460           467    (1%)          135           140           608
Premiums in retention                            258           342   (25%)           96           127           470
Net profit from investments and financing         10            18   (44%)               4          10           32
income
Payments and changes in liabilities for
insurance contracts in retention                 133           187   (29%)           47             87          317
Commissions, marketing expenses and
other purchasing expenses                         94           104   (10%)           25             30          138
General and administrative expenses               34            37    (8%)           10             10           50
Other expenses                                    24             -     -                 8              -         -
Profit (loss) before income tax                       7         34   (79%)           15             12            -


       Non-life insurance activity in Europe consists of Broadgate in England and Clal
       Romania, which was sold in July 2009.
       This operating segment recorded a pre-tax profit of NIS 7 million for the
       Reporting Period. Broadgate's pre-tax profit for the Reporting Period was NIS 39
       million, and the loss in respect of Clal Romania, whose operations were
       terminated, was NIS 32 million. On the subject of Clal Romania, see par. 2.1.3(2)
       above, and Note 8(G) to the Financial Statements.

4.2.3. Non-life insurance activity through a subsidiary in the US
        Summary of the results of non-life insurance through a subsidiary in the US
                                                                       %                                       1-
             NIS millions                   1-9/2009      1-9/2008            7-9/2009       7-9/2008
                                                                     change                                 12/2008
Gross premiums                                   648           635    2%            156           166           770
Premiums in retention                            614           592    4%            149           157           720
Profit (loss), net from investments and
financing income                                  66            21   214%            24           (16)          (1)
Payments and changes in liabilities for
insurance contracts in retention                 370           337    10%           113             85          402
Commissions, marketing expenses and
other purchasing expenses                        109           102    7%             38             33          125
General and administrative expenses               72            72    0%             24             26          117
Profit (loss) before income tax                   55            22   150%            16                 8        36


       Gross premiums in non-life insurance activity in the US during the Reporting
       Period were NIS 648 million, compared with NIS 635 million for the
       corresponding period last year. Gross premiums for the second quarter totaled
       NIS 156 million, compared with NIS 166 million for the corresponding quarter
       last year.
       Pre-tax profit during the Reporting Period totaled NIS 55 million, compared with
       NIS 22 million for the corresponding period last year. Profit in the third quarter
       of 2009 was NIS 16 million, compared with NIS 8 million in the corresponding
       period last year. The increased profit was due mainly to an increase in revenues
       from investments, amounting to NIS 66 million, compared with NIS 21 million
       for the corresponding period last year.


                                                   1-     56
Clal Insurance Enterprises Holdings Ltd.                                      Board of Directors Report


4.2.4. Health insurance:
        Summary of the results of health insurance activity:
                                                                     %
             NIS millions                 1-9/2009       1-9/2008  chang     7-9/2009       7-9/2008       1-12/2008
                                                                     e
Premiums earned, gross                         759             535 42%            298            237             766
Premiums earned in retention                   624             495    26%         250            215             669
Net profit from investments and
financing income                               141              36   292%          53             15               9
Payments and changes in liabilities for
insurance contracts and investment             498             353    41%         197            157             482
contracts in retention
Commissions, marketing expenses
and other purchasing expenses                  161             137    18%          66             55             187
General and administrative expenses             17              14    21%           6              6              21
Profit (loss) before income tax                 93              34   174%          36             18              (2)



       Gross premiums in health insurance earned during the Reporting Period were NIS
       759 million, compared with NIS 535 million for the corresponding period last
       year. Of the gross premiums earned, premiums from illness and hospitalization
       insurance totaled NIS 441 million, compared with NIS 378 million for the
       corresponding period last year. Gross premiums in long-term care insurance
       earned during the Reporting Period were NIS 318 million, compared with NIS
       157 million for the corresponding period last year. The increase in premiums
       from long-term care was the result of the Maccabi Healthcare Services group
       policy.
       Pre-tax profit from health insurance totaled NIS 93 million, compared with NIS
       34 million for the corresponding period last year. The increase in profit was
       mainly due to an increase in income from investments and in gross premiums
       earned on the one hand, and to an increase in purchasing, general and
       administrative expenses on the other.           Pre-tax profit from illness and
       hospitalization transactions totaled NIS 58 million, compared with NIS 53 million
       for the corresponding period last year. Profit from long-term care business was
       NIS 32 million, compared with a loss of NIS 20 million in the corresponding
       period last year. The shift to profit in long-term care insurance can be attributed
       to the Maccabi Healthcare Services group policy.


4.2.5. Financial services:
                                                                       %
             NIS millions                 1-9/2009        1-9/2008          7-9/2009        7-9/2008       1-12/2008
                                                                     change
Net profit from investments and                  59             36    64%           6             10              66
financing income
Income from management fees and
portfolio management                            147            176   (16%)         52             56             220
Income from other financial services             85             94   (10%)         46             25             119
Other income                                         2           -     -                -              -          39
Commissions, marketing expenses
and other purchasing expenses                    14             24   (42%)          5              6              30
General and administrative expenses             266            252    6%           89             82             327
Other expenses                                   27             16    69%           9              6              20




                                                     1-   57
Clal Insurance Enterprises Holdings Ltd.                                Board of Directors Report

                                                                  %
             NIS millions          1-9/2009        1-9/2008            7-9/2009    7-9/2008    1-12/2008
                                                                change
Impairment of intangible assets           40             108    (63%)        23          86          298
Financing expenses                        68              83    (18%)        33          25           91
Profit (loss) before income tax          (91)           (167)   (46%)       (40)       (110)       (309)


       Activity in this sector takes place through Clal Finance. The financial services
       sector recorded a pre-tax loss of NIS 91 million for the Reporting Period,
       compared with pre-tax loss of NIS 167 million for the corresponding period last
       year. There was a loss of NIS 40 million in the third quarter, compared with a loss
       of NIS 110 million in the corresponding period last year. In the third quarter, Clal
       Finance wrote down the value of intangible assets attributed to the overseas
       investment management sector of Clal Finance through a subsidiary, in the overall
       amount of NIS 23 million, and this following an evaluation that it received.
       The loss in the financial services sector was affected, in part, by the decline in
       revenues and a reduction of goodwill in respect of the sale of Clal Underwriting
       (see par. 2.1.5(1) above, and Note 3D(1) to the Financial Statements), and by a
       write-down of goodwill in the amount of NIS 23 million in Clal Finance's
       overseas investment management sector.



5.     Cash flows

       Net cash flows used for on-going activity amounted to NIS 1,079 million during
       the Reporting Period. Net cash flows used for investment activity amounted to
       NIS 194 million. Net cash flows stemming from financing activity amounted to
       NIS 1,609 million. Fluctuating exchange rates helped increase cash balances by
       NIS 2 million.
       The result of all the aforesaid activity is reflected in an increase in cash balances
       and cash equivalents in the amount of NIS 337 million.



6.     Sources of financing

       Regarding the sources of financing, see Note 8(h) to the Financial Statements.



7.     Report concerning exposure to market risks and ways of managing
       them
       Pursuant to the Securities (Periodic and Immediate Reports) Regulations, 5730-
       1970, the report concerning exposure to market risks and the ways of managing
       them refers to the exposure of the Company and its subsidiaries, excluding
       insurers in Israel. During the Reporting Period, there were no significant changes




                                              1-   58
Clal Insurance Enterprises Holdings Ltd.             Board of Directors Report

     in the Company's exposure to market risks and the way they are managed,
     compared with the annual financial statements.




                                           1-   59
                  Clal Insurance Enterprises Holdings Ltd.                                         Board of Directors Report

                  Report on linkage bases at September 30, 2009.



 Linkage bases of assets and liabilities in the consolidated balance sheet (in NIS thousands) at
                                       September 30, 2009
                    Israeli currency                      Foreign currency

                                                                                                                     Insurance
                                                                                                  Other     ETNs     companies
                                                                                                   non-   linked to in Israel and
                                  Index                                                          monetary various        their
                  Unlinked       linked       USD          Euro       GBP           Other         items    indices subsidiaries         Total
Intangible
assets                       -            -           -           -             -            -     790,713            -    1,113,775    1,904,488
Deferred tax
assets                       -            -           -           -             -            -      70,218       2,329        7,827       80,374
DAC
                             -            -           -           -             -            -      71,278                 1,278,066    1,349,344
Fixed assets
                             -            -           -           -             -            -      86,107            -     209,659      295,766
Investments in
affiliates
                     57,064               -     23,997            -             -            -            -           -      29,035      110,096
Investment real
estate for
performance-
based contracts              -            -           -           -             -            -            -           -    1,034,593    1,034,593
Other
investment real
estate                       -            -           -           -             -            -            -           -     525,272      525,272
Reinsurance
assets                       -            -    530,313            -    169,434        1,725               -           -    1,973,846    2,675,318
Current tax
assets                6,852               -      7,133            -             -            -            -           -      40,596       54,581
Debtors and
debt balances       470,440        30,357       99,728      32,873     290,011       (7,767)        12,296       9,637      472,540     1,410,115
Receivable
premiums              2,753               -    326,276            -             -            -            -           -     980,947     1,309,976
Financial
investments for
performance-
based contracts              -            -           -           -             -            -            -           -   24,624,484   24,624,484
Other financial
investments
                    381,290       564,284     2,327,294     17,926           611     18,591          2,482    4,979,140   22,483,750   30,775,368
Cash & cash
equivalents
pledged for the
holders of ETFs
and liabilities              -            -           -           -             -            -            -    974,647             -     974,647
Cash & cash
equivalents for
performance-
based contracts              -            -           -           -             -            -            -           -    1,108,533    1,108,533
Other cash &
cash
equivalents         280,143               -    317,894       7,996         96,277           84            -        825      819,130     1,522,349
Total assets
                   1,198,542      594,641     3,632,635     58,795     556,333       12,633       1,033,094   5,966,578   56,702,053   69,755,304




                                                                      1-   60
                     Clal Insurance Enterprises Holdings Ltd.                               Board of Directors Report


Liabilities in
respect of
insurance
contracts and
non-
performance
based
investment
contracts                     -           -   2,486,267        -    385,172       8,404            -           -   24,431,632   27,311,475
Liabilities in
respect of
insurance
contracts and
performance-
based
investment
contracts                     -           -           -        -             -         -           -           -   26,529,946   26,529,946
Deferred tax
liability                     -           -           -        -             -         -     13,594            -     147,274      160,868
Liabilities for
employee
bonuses, net            34,985            -           -        -             -         -           -           -     111,576      146,563
Subordinated
liability notes               -           -           -        -             -         -           -           -    1,344,246    1,344,246
Bonds


                              -    359,141            -        -             -         -           -           -            -     359,141
Liabilities for
bonds in liability
certificates                  -           -           -        -             -         -           -           -            -            -
Commitment to
shareholders of
subsidiaries for
payments on
account of
shares and put
options                       -      4,762            -        -             -         -     18,290            -            -      23,052
Liabilities
contingent on
the acquisition
of a subsidiary               -           -     83,334         -             -         -           -           -            -      83,334
Accounts
payable and
credit balances        219,814      13,197     263,459    24,527        98,346    5,328            -     40,518     1,652,463    2,317,652
Current tax
liabilities             20,204            -           -        -             -         -           -           -      15,128       35,332
Commitment for
deposit
certificates                  -           -           -        -             -         -           -           -            -            -
Commitment for
liability
certificates,
ETNFs, reverse
certificates and
complex certs.                -           -           -        -             -         -           -   5,494,005            -    5,494,005
Liabilities to
banking and
other corps.          1,196,696    393,921     439,609    23,389         4,173      333            -    381,347             -    2,439,468
Total liabilities
                      1,471,699    771,021    3,272,669   47,916    487,691      14,065      31,884    5,915,870   54,232,267   66,245,082

                      (273,157)   (176,380)    359,966    10,879        68,642   (1,432)   1,001,210     50,708     2,469,766    3,510,222




                                                                   1-   61
Clal Insurance Enterprises Holdings Ltd.                          Board of Directors Report



8.    Disclosure concerning available-for-sale financial assets

     The following details the impairment in respect of available-for-sale financial
     instruments that was charged to shareholders' equity in line with the decline in the
     fair value of the asset relative to its original cost (for capital assets – cost, and for
     debt assets - adjusted amortized cost, hereinafter: the Original Cost), on the date
     of the financial; report, and over the inclusive period in which the fair value of the
     asset is lower than its cost (ignoring the rate of decline at the time of the report).

      Capital instruments:
          NIS thousands         Up to 6       6-9         9-12        More          Total
                                months       months      months      than 12
                                                                     months
        Up to 20%             )3,280)       (18,241)         -          -          (21,521)
        40% - 20%                 -             -            -          -              -
        More than 40%             -             -            -          -              -
        Total                 )3,280)       (18,241)         -          -          (21,521)
        Capital fund in
        credit                                                                     320,328
        Closing balance of capital fund attributed to the
        Company's shareholders                                                     298,807


       Debt instruments:
          NIS thousands        Up to 6       6-9          9-12         More         Total
                               months       months       months      than 12
                                                                     months
        Up to 20%            )14,449)      (4,278)      (4,238)      (22,771)      (45,736)
        40% - 20%             (4,641)         -          (907)       (11,441)      (16,989)
        More than 40%            -            -            -             -             -
        Total                (19,090)      (4,278)      (5,145)      (34,212)      (62,725)
        Capital fund in
        credit                                                                     248,137
        Closing balance of capital fund attributed to the
        Company's shareholders                                                     185,412

       Total capital instruments and debt instruments:
          NIS thousands        Up to 6       6-9          9-12         More      Profits not
                               months       months       months       than 12    yet realized
                                                                      months
        Up to 20%               (17,729)   )22,519)     (4,238)     (22,771)     (67,257)
        40% - 20%                (4,641)   -            (907)       (11,441)     (16,989)
        More than 40%                  -   -            -           -            -
        Total                   (22,370)   )22,519)     (5,145)     (34,212)     (84,246)
        Capital fund in
        credit                                                                       568,465
                                                                                     484,219
        Taxes that were
        credited                                                                   (167,235)
        Closing balance of capital fund attributed to the
        Company's shareholders                                                       316,984




                                           1-   62
Clal Insurance Enterprises Holdings Ltd.                        Board of Directors Report



       The reasons and considerations underlying the assertion that declines in the
       fair value of financial assets are charged directly to shareholders' equity
       and not to profit and loss are as follows:
       When reviewing the impairment of available-for-sale financial assets that are
       capital instruments, the difference between the fair value of the asset and its
       original cost is also examined, addressing the standard deviation of the price of
       the instrument, the period in which the fair value is lower than its original cost,
       and changes in the technology, economic or legal environment, and changes in
       the market environment in which the Company issuing the instrument operates.
       In addition to the above, an impairment of capital instruments of 20% or more at
       the reporting date, or one that continues for more than 9 months (even if at a
       lower rate), is charged to the statement of income.
       When reviewing the impairment of value of available-for-sale financial assets
       that are debt instruments, the following factors are taken into account:
       1.   The intention and financial ability to hold the bond until the redemption
            date; and
       2.   the impairment of value does not meet the criteria described in IAS 39,
            Section 59, detailed below;
            A. Significant financial difficulties on the part of the issuer or the debtor;
            B. Breach of contract, including default or arrears in paying the interest or
               principal;
            C. The lender, for economic or legal reasons pertaining to financial
               difficulties on the part of the borrower, gives the borrower relief , which
               would not have been considered by the lender in other circumstances.
            D. It is expected that the borrower will embark on bankruptcy proceedings
               or some other form of financial restructuring.
            E. There is no active market for the financial asset due to financial
               difficulties.
            F. There is a measurable decline in the estimated future cash flows from a
               group of financial assets, since these assets were first recognized,
               despite the fact that the decline cannot yet be attributed to individual
               financial assets within the group, including
               Negative changes in the state of the payments by the borrowers in the
                group.
               National or local economic conditions which correlate with failings
                with respect to the Group's assets (for example: an increase in the
                unemployment rate in the borrowers' geographical area, a decline in
                real-estate prices with respect to mortgages in the relevant area, a
                decline in oil prices relative to the loan assets for oil producers, or
                negative changes in conditions in this sector that may affect the
                Group's borrowers).




                                           1-   63
Clal Insurance Enterprises Holdings Ltd.                       Board of Directors Report

     The Group regularly takes action to locate problematic and sensitive debts
     through the units engaged in investment management, and the risk management
     department monitors this process, using computerized models as well. The
     findings of these processes are discussed individually by the Company's
     management:
     The Group conducts a one-on-one review of available-for-sale financial assets
     that are debt instruments which suffered significant financial impairment at the
     reporting date, in an effort to estimate specifically whether there are any
     circumstances that require these impairments to be charged to the statement of
     income. The one-on-one review includes addressing all the existing information
     in respect of the debt, including information concerning the external rating of the
     debtor and/or the debt, the external rating outlook, ratings based on models,
     sectoral risk, current repayment status of the debt, collateral, estimated sources for
     making anticipated repayments, and an evaluation of the debtor's business
     activity. Regarding debts for which the Company estimates, on the basis of
     these checks, that there is a strong possibility that the debt will be repaid on
     time, the decline in the fair value are credited directly to shareholders'
     equity.


9.    Disclosure concerning the process for approving the Company's
      financial statements
     The Company's Board of Directors is the organ charged with overall oversight of
     the Company and for approving its financial statements.
     The Company's Board of Directors has appointed a balance sheet committee
     whose members sit on the audit committee. The balance sheet committee
     presents its recommendations in connection with the approval of the financial
     statements to the Board of Directors, before they are approved by the Board.
     The balance sheet committee currently has two members, one – Mr. Amos
     Eran - a director with accounting and financial expertise, and one with
     professional qualifications – Adv. Shula Bandel. The Company's CPA are
     invited to and attend meetings of the Balance Sheet Committee and Board of
     Directors' meetings that discuss and approve the financial statements, and they
     present the principal findings, if there are such, that emerged during the course of
     the audit or the review, as the case may be. The Company's internal auditor is
     also invited to these meetings.
     The Balance Sheet Committee, through detailed presentations prepared by the
     Company's senior officers and other employees, including the Company's CEO
     Mr. Shai Talmon, and Mr. Uri Levy CFO, and the chief accountant Ms. Ronit
     Zalman-Malach, reviews the material issues in the financial reporting, including
     transactions that are not part of the normal course of business, if there were such,
     the material assessments and critical estimates that were applied in the financial
     statements, the reasonability of the data, the accounting policy applied, and the
     changes that took place in this policy, as well as the implementation of the
     principle of fair disclosure in the financial statements and accompanying
     information. The Balance Sheet Committee reviews various aspects of risk
     management and control, those that are reflected in the financial statements (such
     as reporting on financial risks), as well as those that affect the credibility of the



                                           1-   64
Clal Insurance Enterprises Holdings Ltd.                  Board of Directors Report

     financial statements. If necessary, the Balance Sheet Committee requests
     comprehensive reviews of matters of particular significance.
     The financial statements are submitted to members of the Balance Sheet
     Committee and Board of Directors several days before the approval date. The
     Balance Sheet Committee meets prior to the Board of Directors' meeting which
     discusses and approves the Financial Statements.


    The Board of Directors wishes to express its appreciation to the employees,
    managers and agents of the Group's companies for their contribution to the
                            Company's achievements.




      _________________                                     _____________
           A.Kaplan                                           S. Talmon
       Chairman of the Board                                     CEO


                            Tel Aviv, November 19, 2009




                                           1-   65
           Part 2


Consolidated, interim financial
         statements
                                              Translated
                                               from the
                                            Hebrew original




 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.


INTERIM CONSOLIDATED FINANCIAL STATEMENTS


          AS OF SEPTEMBER 30, 2009


                UNAUDITED
                   CLAL INSURANCE ENTERPRISES HOLDINGS LTD.


                 INTERIM CONSOLIDATED FINANCIAL STATEMENTS


                                AS OF SEPTEMBER 30, 2009


                                        UNAUDITED




                                            INDEX




                                                                                   Page

Auditors' Review Report                                                              2

Interim Consolidated Statements of Financial Position                              3-4

Interim Consolidated Statements of Income                                            5

Interim Consolidated Statements of Comprehensive Income (Loss)                       6

Interim Consolidated Statements of Changes in Equity                               7-9

Interim Consolidated Statements of Cash Flows                                     10 - 14

Notes to the Interim Consolidated Financial Statements                           15 - 107

Appendix A - Details of Assets for Yield-dependent Contracts and Other Financial
  Investments of Insurance Subsidiaries in Israel                                108 - 113

Appendix B - Special Purpose Investees in the Finance Segment                    114 - 115


                                       ------------
                                                                                                      Ernst & Young (Israel) Ltd
                                                                                                      3 Aminadav St.
                                                                                                      Tel-Aviv 67067, Israel
                                                                                                      Tel: 972 (3)6232525
                                                                                                      Fax: 972 (3)5622555
                                                                                                      www.ey.com/il
Somech Haikin


                  Auditors' review report to the shareholders of Clal Insurance Enterprises Holdings Ltd.

Introduction
We have reviewed the accompanying condensed financial information of Clal Insurance Enterprises Holdings Ltd. and its
subsidiaries ("the Group"), which comprises the condensed interim consolidated statement of financial position as of
September 30, 2009 and the related condensed interim consolidated statements of income, comprehensive income (loss),
changes in equity and cash flows for the nine and three months then ended. The Company's board of directors and management
are responsible for the preparation and presentation of interim financial information for this period in accordance with IAS 34,
"Interim Financial Reporting" and in accordance with the disclosure requirements as prescribed by the Regulator of Insurance
according to the Supervision of Financial Services (Insurance) Law, 1981, and are responsible for the preparation of this
interim financial information in accordance with Chapter D of the Securities Regulations (Periodic and Immediate Reports),
1970, insofar as those regulations apply to insurance companies. Our responsibility is to express a conclusion on this interim
financial information based on our review.

We did not review the condensed interim financial information of certain subsidiaries, whose assets constitute approximately
0.5% of total consolidated assets as of September 30, 2009, and whose revenues constitute approximately 0.4% and 0.4% of
total consolidated revenues for the nine and three months then ended, respectively. In addition, we did not review the
condensed interim financial information of a certain associate, the investment in which, at equity, amounted to approximately
NIS 27 million as of September 30, 2009, and the Group's share in its earnings amounted to approximately NIS 1.2 million and
NIS 0.4 million for the nine and three months then ended, respectively. The condensed interim financial information of those
companies was reviewed by other auditors, whose review reports have been furnished to us, and our conclusion, insofar as it
relates to the financial information in respect of those companies, is based on the review reports of the other auditors.

Scope of review

We conducted our review in accordance with Review Standard 1 of the Institute of Certified Public Accountants in Israel,
"Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial
information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards in Israel and consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review and the review reports of other auditors, nothing has come to our attention that causes us to believe that
the accompanying interim financial information is not prepared, in all material respects, in accordance with IAS 34 and with
the disclosure requirements as prescribed by the Regulator of Insurance according to the Supervision of Financial Services
(Insurance) Law, 1981.

In addition to the abovementioned, based on our review and the review reports of other auditors, nothing has come to our
attention that causes us to believe that the accompanying interim financial information does not comply, in all material
respects, with the disclosure requirements of Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970,
insofar as those regulations apply to insurance companies.

Without qualifying our above conclusion, we draw attention to Note 7a to the financial statements regarding the exposure to
class actions and the approval of claims as class actions.


  Tel-Aviv, Israel                  SOMEKH CHAIKIN                             KOST FORER GABBAY & KASIERER
 November 19, 2009               Member of KPMG International                      Member of Ernst & Young Global
                                                                      Joint auditors


                                                             -2-
                                                         CLAL INSURANCE ENTERPRISES HOLDINGS LTD.

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


                                                                            September 30,        December 31,
                                                                          2009        *) 2008        2008
                                                                              Unaudited            Audited
ASSETS:                                                                           NIS in thousands
Intangible assets                                                       1,904,488      2,102,223     1,983,440

Deferred tax assets                                                        80,374          70,097     175,030

Deferred acquisition costs                                              1,349,344      1,281,144     1,266,302

Fixed assets                                                              295,766        286,916      307,844

Investments in associates                                                 110,096          72,137      75,904

Investment property for yield-dependent contracts                       1,034,593      1,088,174     1,213,284

Other investment property                                                 525,272        483,176      552,281

Reinsurance assets                                                      2,675,318      2,538,438     2,503,176

Current tax assets                                                         54,581        325,620      261,176

Debtors and receivables                                                 1,410,115      1,652,641    1,551,161 *)

Outstanding premiums                                                    1,309,976      1,176,381     1,041,931

Financial investments for yield-dependent contracts                    24,624,484     20,223,545    18,560,930

Other financial investments:
Quoted debt assets                                                     11,317,573      9,905,738     8,501,547
Unquoted debt assets                                                   15,863,789     15,474,284    15,583,387
Shares                                                                  2,536,358      1,240,928     1,525,640
Others                                                                  1,057,648        618,322       773,774

Total other financial investments                                      30,775,368     27,239,272    26,384,348

 Cash and cash equivalents pledged for holders of liability
  certificates, basket certificates, short certificates, compound
  certificates and certificates of deposit                                974,647      1,344,895      683,269

Cash and cash equivalents for yield-dependent contracts                 1,108,533        430,297      480,751

Other cash and cash equivalents                                         1,522,349      1,412,424     1,812,766

Total assets                                                           69,755,304     61,727,380    58,853,593

 Total assets for yield-dependent contracts                            27,199,654     22,139,447    20,581,699


*)    Reclassified, see Note 2c.


The accompanying notes are an integral part of the interim consolidated financial statements.



                                                          -3-
                                                         CLAL INSURANCE ENTERPRISES HOLDINGS LTD.

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

                                                                           September 30,        December 31,
                                                                         2009        *) 2008        2008
                                                                             Unaudited            Audited
                                                                                 NIS in thousands
EQUITY:
Share capital                                                            140,746         140,701           140,701
Share premium                                                            718,014         712,901           712,901
Capital reserves                                                         388,056         (83,945)          (84,123)
Treasury shares                                                          (11,866)         (7,114)           (6,415)
Retained earnings                                                      2,044,860       1,996,023         1,711,975

Total equity attributable to equity holders of the Company             3,279,810       2,758,566         2,475,039
Minority interests                                                       230,412         295,712        *) 269,183
Total equity                                                           3,510,222       3,054,278         2,744,222
LIABILITIES:
Liabilities in respect of non-yield dependent insurance contracts
  and investment contracts                                            27,311,475      25,154,233        25,978,479
Liabilities in respect of yield-dependent insurance contracts and
  investment contracts                                                26,529,946      21,787,099        19,474,944
 Deferred tax liability                                                  160,868         104,088              15,210
 Liabilities for employee benefits, net                                  146,563         144,506           150,888
 Subordinated deeds                                                    1,344,246       1,080,433         1,275,951
 Debentures                                                              359,141         447,050           361,839
 Liabilities for debentures in liability certificates                           -        368,791           352,581
 Liabilities to shareholders of subsidiaries in respect of payments
  on account of shares and put options                                    23,052          59,472              53,516
 Liabilities contingent on acquisition of subsidiary                      83,334          66,480              79,845
Creditors and payables                                                 2,317,652       1,906,220       *) 2,309,258
Current tax liabilities                                                   35,332          43,478              63,077
Liabilities for deposit certificates                                            -        119,608           121,931
Liabilities for liability certificates, basket certificates, short
  certificates and compound certificates                               5,494,005       5,419,851         4,108,492
Liabilities to banks and others                                        2,439,468       1,971,793       *) 1,763,360
Total liabilities                                                     66,245,082      58,673,102        56,109,371
Total equity and liabilities                                          69,755,304      61,727,380        58,853,593

*)       Reclassified, see Note 2c.

The accompanying notes are an integral part of the interim consolidated financial statements.

      November 19, 2009
     Date of approval of the               A. Kaplan               S. Talmon                        U. Levy
      financial statements            Chairman of the Board      General Manger                      CFO



                                                          -4-
                                                         CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
INTERIM CONSOLIDATED STATEMENTS OF INCOME

                                                  Nine months ended          Three months ended         Year ended
                                                    September 30,              September 30,           December 31,
                                                  2009        *) 2008        2009         *) 2008           2008
                                                                    Unaudited                              Audited
                                                        NIS in thousands (except share and per share data)
Gross premiums earned                            7,045,209         6,757,905    2,364,266   2,301,531        9,050,509
Premiums earned by reinsurers                    1,084,248           915,586      340,271     287,186        1,235,737

Premiums earned on retention                     5,960,961         5,842,319    2,023,995   2,014,345        7,814,772
Investment income (loss), net and financial
  income                                         7,533,233         (835,358)    2,568,622   (1,042,149)   *) (2,834,264)
Income from management fees and portfolio
  management                                      553,801           559,026      197,591      184,170          721,335
Income from commissions                           217,054           196,598       72,552       66,288          254,125
Income from other financial services               84,843            93,785       45,765       24,507          118,856
Other income                                       36,848            36,719       12,916       16,927           88,788

Total income                                    14,386,740         5,893,089    4,921,441   1,264,088        6,163,612
Gross payments and change in liabilities in
 respect of insurance contracts and
 investment contracts                           12,211,340         4,203,073    4,142,150     796,011        4,120,442
Reinsurers' share in payments and in change
 in liabilities in respect of insurance
 contracts                                        (732,703)        (478,008)    (210,780)    (152,741)        (715,477)
Payments and change in liabilities in respect
  of insurance contracts and investment
  contracts on retention                        11,478,637         3,725,065    3,931,370     643,270        3,404,965
Commissions, marketing and other
  acquisition expenses                           1,305,836         1,283,454     439,212      419,853     *) 1,743,970
General and administrative expenses                755,520           783,229     248,635      287,855     *) 1,018,965
Impairment of intangible assets (see
  Note 3d(1))                                      39,842           107,667       23,026       86,067          301,757
Other expenses                                    124,489            71,571       41,397       21,184       *) 106,463
Financial expenses                                227,125           204,615       97,614       91,898       *) 268,376

Total expenses                                  13,931,449         6,175,601    4,781,254   1,550,127        6,844,496

Equity in results of associates, net               31,105            10,681       15,557        5,429           14,781

Income (loss) before taxes on income              486,396          (271,831)     155,744     (280,610)        (666,103)

Taxes on income (tax benefit)                     185,799            (41,322)     55,575      (59,958)        (100,902)

Net income (loss) for the period                  300,597          (230,509)     100,169     (220,652)        (565,201)

Attributable to:
Equity holders of the Company                     328,103          (190,925)     116,871     (193,354)        (479,150)
Minority interests                                (27,506)          (39,584)     (16,702)     (27,298)         (86,051)

Net income (loss) for the period                  300,597          (230,509)     100,169     (220,652)        (565,201)
Earnings (loss) per share attributable to
 equity holders of the Company:
Basic earnings (loss) per share (in NIS)              6.27             (3.63)        2.21        (3.68)           (9.09)
Diluted earnings (loss) per share (in NIS)            6.27             (3.63)        2.21        (3.68)           (9.09)
Number of shares used to calculate
 earnings (loss) per share:
Basic                                              52,723            52,815       52,699       52,800           52,810
Diluted                                            52,723            52,815       52,736       52,800           52,810
*)    Reclassified, see Note 2c.
The accompanying notes are an integral part of the interim consolidated financial statements.


                                                             -5-
                                                      CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



                                              Nine months ended      Three months ended              Year ended
                                                September 30,           September 30,               December 31,
                                                           1)
                                              2009      *) 2008       2009      *) 1) 2008              2008
                                                              Unaudited                               Audited
                                                                 NIS in thousands

Net income (loss) for the period               300,597         (230,509)   100,169      (220,652)     (565,201)

Other comprehensive income (loss):
Foreign currency translation adjustments
 of foreign operation                          (13,527)        (112,585)   (41,467)         9,782      (41,520)

Foreign currency translation adjustments
 carried to profit and loss                      3,817               -        3,817             -            -

Net change in fair value of available-for-
 sale financial assets carried to capital
 reserves                                      755,756         (398,436)   139,648      (297,637)   *) (672,912)

Net change in fair value of available-for-
 sale financial assets carried to the
 income statement                              (31,238)         (22,790)   (21,986)         4,109     *) 14,695

Loss from impairment of available-for-
 sale financial assets carried to the
 income statement                               18,960         104,028        2,361       54,419     *) 254,492

Tax benefit (taxes) in respect of other
 components of comprehensive income
 (loss)                                       (262,848)        114,405     (42,087)       85,566       145,789

Other comprehensive income (loss) for
 the period, net of taxes                      470,920         (315,378)    40,286      (143,761)     (299,456)

Total comprehensive income (loss) for
 the period                                    771,517         (545,887)   140,455      (364,413)     (864,657)

Attributable to:
Equity holders of the Company                  800,141         (483,670)   165,400      (342,106)     (772,073)
Minority interests                             (28,624)         (62,217)   (24,945)      (22,307)      (92,584)

Total comprehensive income (loss) for
 the period                                    771,517         (545,887)   140,455      (364,413)     (864,657)



*)    Reclassified, see Note 2c.

1)    Due to the first-time adoption of IAS 1 (Revised), the presentation format of the financial statements was
      modified, see Note 3a(1).



The accompanying notes are an integral part of the interim consolidated financial statements.


                                                         -6-
                                                                                                                           CLAL INSURANCE ENTERPRISES HOLDINGS LTD.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


                                                                                       Attributable to equity holders of the Company
                                                                                                  Capital
                                                                                                 reserve in
                                                                                                 respect of
                                                                                                 available-
                                                          Share          Share     Translation    for-sale       Capital       Treasury   Retained                   Minority      Total
                                                          capital       premium      reserve        assets       reserve        shares    earnings      Total        interests     equity
                                                                                                                    NIS in thousands
Year ended January 1, 2008 (audited) *)

Balance at January 1, 2008 (audited)                      140,697        712,478      (39,792)         94,779    153,813        (8,814)   2,532,517    3,585,678    **) 327,486   3,913,164
Comprehensive loss for the period                                   -         -       (35,546)     (257,377)           -             -     (479,150)   (772,073) **) (92,584)     (864,657)
Exercise of stock options to senior employees                       4       423             -             -            -             -         (423)          4            -             4
Share-based payments                                                -         -             -             -            -             -       18,768      18,768          850        19,618
Dividend (of NIS 6.80558 per Ordinary share) after
  deducting the Company's share in dividend to
  subsidiaries                                                      -         -             -              -           -             -     (359,737)   (359,737)          (945)   (360,682)
Sale of treasury shares, net                                        -         -             -              -           -         2,399            -       2,399              -       2,399
Acquisition of minority interests                                   -         -             -              -           -             -            -           -        (36,710)    (36,710)
Change in classification terms of liability to external
  shareholders                                                      -         -             -              -           -             -           -              -       71,086      71,086

Balance at December 31, 2008 (audited)                    140,701        712,901      (75,338)     (162,598)     153,813        (6,415)   1,711,975    2,475,039       269,183    2,744,222

Nine months ended September 30, 2009
  (unaudited)
Comprehensive income (loss) for the period                          -         -        (7,544)     479,582             -             -     328,103      800,141        (28,624)    771,517
Share-based payments                                                -         -             -            -             -             -       9,895        9,895           (686)      9,209
Tax benefit from equity instruments granted to
   employees                                                     -             -            -              -         141              -           -          141             -          141
Acquisition of minority interests                                -             -            -              -           -             -            -            -        (9,955)      (9,955)
Dividend to minority in subsidiaries                             -             -            -              -           -             -            -            -          (330)        (330)
Exercise of stock options to senior employees                   45         5,113            -              -           -             -       (5,113)          45             -           45
Issuance of shares to minority in subsidiary                     -             -            -              -           -             -            -            -           824          824
Purchase of treasury shares, net                                 -             -            -              -           -        (5,451)           -       (5,451)            -       (5,451)

Balance at September 30, 2009 (unaudited)                 140,746        718,014      (82,882)     316,984       153,954       (11,866)   2,044,860    3,279,810       230,412    3,510,222

*)     Due to the first-time adoption of IAS 1 (Revised), the presentation format of the financial statements was modified, see Note 3a(1).
**)    Reclassified, see Note 2c.

The accompanying notes are an integral part of the interim consolidated financial statements.

                                                                                                 -7-
                                                                                                                           CLAL INSURANCE ENTERPRISES HOLDINGS LTD.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


                                                                                       Attributable to equity holders of the Company
                                                                                                  Capital
                                                                                                 reserve in
                                                                                                 respect of
                                                                                                 available-
                                                          Share          Share     Translation    for-sale       Capital       Treasury   Retained                  Minority      Total
                                                          capital       premium      reserve        assets       reserve        shares    earnings      Total       interests     equity
                                                                                                                    NIS in thousands

Nine months ended September 30, 2008
  (unaudited) *), **)

Balance at January 1, 2008 (audited)                      140,697        712,478      (39,792)         94,779    153,813        (8,814)   2,532,517    3,585,678      327,486    3,913,164

Comprehensive loss for the period                                   -         -       (90,211)     (202,534)           -             -     (190,925)   (483,670)      (62,217)   (545,887)
Exercise of stock options to senior employees                       4       423             -             -            -             -         (423)          4             -           4
Share-based payments                                                -         -             -             -            -             -       14,591      14,591         1,156      15,747
Dividend (of NIS 6.80558 per Ordinary share) after
  deducting the Company's share in dividend to
  subsidiaries                                                      -         -             -              -           -             -     (359,737)   (359,737)       (1,058)   (360,795)
Acquisition of minority interests                                   -         -             -              -           -             -            -           -       (28,108)    (28,108)
Sale of treasury shares, net                                        -         -             -              -           -         1,700            -       1,700             -       1,700
Change in classification terms of liability to external
  shareholders                                                      -         -             -              -           -             -           -              -      58,453      58,453

Balance at September 30, 2008 (unaudited)                 140,701        712,901     (130,003)     (107,755)     153,813        (7,114)   1,996,023    2,758,566      295,712    3,054,278


*)     Due to the first-time adoption of IAS 1 (Revised), the presentation format of the financial statements was modified, see Note 3a(1).
**)    Reclassified, see Note 2c.


The accompanying notes are an integral part of the interim consolidated financial statements.




                                                                                                 -8-
                                                                                                                             CLAL INSURANCE ENTERPRISES HOLDINGS LTD.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


                                                                                        Attributable to equity holders of the Company
                                                                                                   Capital
                                                                                                  reserve in
                                                                                                  respect of
                                                                                                  available-
                                                          Share          Share      Translation    for-sale       Capital       Treasury   Retained                   Minority      Total
                                                          capital       premium       reserve        assets       reserve        shares    earnings       Total       interests     equity
                                                                                                                     NIS in thousands

Three months ended September 30, 2009
  (unaudited)

Balance at July 1, 2009 (unaudited)                       140,701        712,901       (53,608)     239,181       153,855        (9,710)   1,929,163    3,112,483       255,008    3,367,491
Comprehensive income (loss) for the period                          -          -       (29,274)         77,803          -             -      116,871      165,400       (24,945)     140,455
Share-based payments                                                -          -             -               -           -            -        3,939        3,939           613        4,552
Tax benefit from equity instruments granted to                                                                -
  employees                                                       -             -             -                        99              -            -          99              -          99
Dividend to minority in subsidiaries                             -             -             -               -          -             -            -            -          (264)        (264)
Exercise of stock options to senior employees                   45         5,113             -               -          -             -       (5,113)          45             -           45
Purchase of treasury shares, net                                 -             -             -               -          -        (2,156)           -       (2,156)            -       (2,156)

Balance at September 30, 2009 (unaudited)                 140,746        718,014       (82,882)     316,984       153,954       (11,866)   2,044,860    3,279,810       230,412    3,510,222

Three months ended September 30, 2008
  (unaudited) *)**)

Balance at July 1, 2008 (unaudited)                       140,700        712,732      (134,483)         45,477    153,813        (6,938)   2,185,539    3,096,840      319,329     3,416,169
Comprehensive income (loss) for the period                          -         -          4,480      (153,232)           -             -    (193,354)    (342,106)      (22,307)    (364,413)
Exercise of stock options to senior employees                       1       169              -             -            -             -        (169)           1             -            1
Share-based payments                                                -         -              -             -            -             -       4,007        4,007           828        4,835
Dividend to minority in subsidiaries                                -         -              -             -            -             -           -            -          (484)        (484)
Acquisition of minority interests                                   -         -              -             -            -             -           -            -        (1,752)      (1,752)
Purchase of treasury shares, net                                    -         -              -             -            -          (176)          -         (176)             -        (176)
Change in classification terms of liability to external
  shareholders                                                      -          -             -               -          -             -           -               -         98           98

Balance at September 30, 2008 (unaudited)                 140,701        712,901      (130,003)     (107,755)     153,813        (7,114)   1,996,023    2,758,566      295,712     3,054,278

*)     Due to the first-time adoption of IAS 1 (Revised), the presentation format of the financial statements was modified, see Note 3a(1).
**)    Reclassified, see Note 2c.

The accompanying notes are an integral part of the interim consolidated financial statements.

                                                                                                  -9-
                                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                  Nine months ended         Three months ended         Year ended
                                                                    September 30,               September 30,         December 31,
                                                                  2009        *) 2008        2009        *) 2008          2008
                                                                                    Unaudited                           Audited
                                                     Schedule                           NIS in thousands
Cash flows from operating activities:
Before taxes on income                                  a       (1,050,835)     290,223     (740,672)     783,761       2,277,691
Income tax paid                                                    (29,557)    (144,462)     (80,872)     (62,214)       (172,714)
Net cash provided by (used in) operating
  activities                                                    (1,080,392)     145,761     (821,544)     721,547       2,104,977
Cash flows from investing activities:
Proceeds from sale of fixed assets                                    659         7,665           36        3,793          13,207
Proceeds from the sale of intangible assets                            85           114            -            -             285
Proceeds from sale of investments in investees
  and others                                                               -      2,007            -          307           5,595
Investment in shares and loans net of repayment
  of loans in associates                                            7,824            26        7,824           81              26
Acquisition of newly consolidated subsidiaries
  including guaranteed yield provident funds            b               -        (94,008)           -      16,844         (95,618)
Acquisition of minority interests                       c          (7,351)       (28,472)           -        (894)        (29,423)
Exercise of shares of subsidiary                        d         (30,920)             -      (23,758)          -               -
Payment for acquisition of previously
  consolidated subsidiaries                                       (33,056)            -             -            -              -
Investment in fixed assets                                        (27,884)      (46,755)       (6,272)     (20,779)       (72,274)
Investment in intangible assets                                  (103,713)     (101,766)      (34,273)     (30,845)      (137,747)
Net cash used in investing activities                            (194,356)     (261,189)      (56,443)     (31,493)      (315,949)

Cash flows from financing activities:
Proceeds from exercise of share options                                 45            4            45           1               4
Sale (purchase) of treasury shares, net                             (5,451)       1,700        (2,156)       (176)          2,399
Repayment of loans to minority, net                                 (1,121)           -          (414)       (179)         (1,015)
Decrease in liability for debentures of special
   purpose companies (SPCs)                                         (9,043)      (80,316)          -       (39,655)    *) (125,646)
Net acquisition (redemption) by the public of
   liabilities for liability certificates, short
   certificates, basket certificates and compound
   certificates                                                 1,268,670       199,462      153,036     (795,084)      (1,122,164)
Change in liability of deposit in SPC                             (29,061)     (138,323)           -      (23,878)     *) (150,201)
Issuance of short certificates, compound
   certificates and liability certificates (net of
   issuance expenses)                                             125,259       401,262      125,259            -         401,262
Redemption of investment by subsidiary holders                          -       (42,660)           -            -         (42,660)
Payment on account of shares                                            -        19,329            -       19,329               -
Receipt (repayment) of liabilities to banks and
   others, net                                                    336,954       484,800         (457)      (91,063)       276,053
Liability for put option to external shareholders                     720             -          720             -              -
Repurchase of debentures                                           (7,655)            -            -             -        (54,017)
Issuance of subordinated deeds                                    100,000             -            -             -              -
Costs of issuing subordinated deeds                                  (949)            -            -             -              -
Repayment of subordinated deeds                                   (77,270)            -            -             -        200,000
Interest paid on debentures and subordinated
   deeds                                                          (86,641)       (77,931)      (3,444)     (22,639)       (77,931)
Dividends paid including to minority with put
   option, presented in liabilities                                 (5,847)    (360,795)        (264)        (484)       (363,184)
Net cash provided by (used in) financing
  activities                                                    1,608,610       406,532      272,325     (953,828)     (1,057,100)
Effect of exchange rate fluctuations on balances
  of cash and cash equivalents                                      3,503        (85,494)     (52,924)      1,606       *) (75,522)
Increase (decrease) in cash and cash
  equivalents                                                     337,365       205,610     (658,586)    (262,168)        656,406
Cash and cash equivalents at beginning of
  period                                                e       2,293,517      1,637,111    3,289,468    2,104,889      1,637,111
Cash and cash equivalents at end of period               f      2,630,882      1,842,721    2,630,882    1,842,721      2,293,517

*)     Reclassified, see Note 2c.
The accompanying notes are an integral part of the interim consolidated financial statements.

                                                                  - 10 -
                                                                      CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                           Nine months ended            Three months ended             Year ended
                                                             September 30,                 September 30,              December 31,
                                                          2009          *) 2008         2009         *) 2008              2008
                                                                              Unaudited                                 Audited
                                                                                   NIS in thousands
(a)   Cash flows from operating activities
        before taxes on income: 1), 2)
      Net income (loss) for the period                    300,597          (230,509)        100,169      (220,652)        (565,201)
      Adjustments:
      Equity in earnings of investees accounted
        for at equity                                     (31,105)             (10,681)     (15,557)        (5,429)        (14,781)
      Dividend received from investees                      4,631                9,957        1,764          5,584          10,793
      Change in liabilities in respect of non-yield
        dependent insurance contracts and
        investment contracts                            1,303,226              692,775      729,383       688,593      *) 1,349,709
      Change in liabilities in respect of yield-
        dependent insurance contracts and
        investment contracts                            7,055,002              152,446    2,066,228     (1,085,894)     (2,159,709)
      Change in deferred acquisition costs                (83,428)             (55,321)     (11,243)        (1,456)        (32,573)
      Change in reinsurance assets                       (160,714)             (37,551)       3,146        (35,159)         20,376
      Depreciation of fixed assets                         37,067               36,712       12,629         12,671          46,007
      Amortization of intangible assets                   144,147              133,933       50,895         39,400         176,119
      Impairment of assets                                 39,842              107,667       23,026         86,067         301,757
      Loss (gain) from sale of fixed assets                  (227)                 542           68            605          (3,041)
      Loss (gain) from sale of intangible assets              (45)                 (43)           -              -             452
      Gain from sale of investment in associates
        and other companies                                     -               (1,957)           -          (586)          (4,946)
      Loss from sale of shares in subsidiary               25,203                    -        1,570             -                -
      Impairment (increase in value) of
        investments in associates and others                   (74)             20,952         (289)        1,988            2,046
      Excess of book value over cost of
        acquisition of minority interests                   (2,604)             (7,251)           -          (694)          (8,329)
      Accrued interest and increase in value of
        subordinated deeds                                101,498               96,164       51,857        31,745          109,105
      Increase (decrease) in value of liability
        certificates, short certificates, basket
        certificates and compound certificates              (8,416)             25,134      (14,977)        7,075        *) 35,405
      Increase (decrease) in value of liabilities for
        debentures linked to activities of SPCs            64,495              (61,605)           -         (5,504)      *) (29,435)
      Increase (decrease) in value of certificates of
        deposit linked to SPC activity                     11,650              (29,454)           -         5,357        *) (15,253)
      Accrued interest and increase (decrease) in
        value of liabilities to banks and others           47,637               70,403       86,567        16,246          *) 9,586
      Accrued interest and erosion of loans, net             (516)               2,343          275         2,227              (984)
      Change in fair value of investment property
        for yield-dependent contracts                           -              (10,491)           -             -          (25,435)
      Change in fair value of other investment
        property                                                -               (4,318)           -            60          (12,058)
      Share-based payment transactions                      9,350               15,747        4,651         4,835           19,618
      Loss from issuance of shares in subsidiary              824                    -            -             -                -
      Update of liability for put options to
        external shareholders                               2,595                   -         3,960             -                 -
      Net income (loss) from financial
        investments for yield-dependent
        insurance and investment contracts              (5,090,110)       1,760,729       (1,586,998)     180,680        5,099,473


*)      Reclassified, see Note 2c.
1)      Cash flows from operating activities include net purchases and sales of financial investments and investment property
        arising from the activity of insurance contracts and investment contracts.
2)      Cash flows from operating activities include a dividend and interest received, as specified in Schedule h below.
The accompanying notes are an integral part of the interim consolidated financial statements.




                                                                      - 11 -
                                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                      Nine months ended            Three months ended          Year ended
                                                        September 30,                 September 30,           December 31,
                                                     2009          *) 2008         2009         *) 2008           2008
                                                                         Unaudited                              Audited
                                                                              NIS in thousands
(a)   Cash flows from operating activities
        before taxes on income: 1), 2) (Cont.)

      Net losses (income) from other financial
        investments:
      Quoted debt assets                            (154,114)           23,674        (66,848)     13,782          (43,435)
      Unquoted debt assets                          (653,899)         (877,856)      (258,245)   (401,123)        (895,123)
      Shares                                          (3,398)          191,162        (25,787)     38,502          282,541
      Others                                          38,888            46,099        (14,415)      8,430          224,122
      Taxes on income (tax benefit)                  185,799           (41,322)        55,575     (59,958)        (100,902)
      Financial investments and investment
        property for yield-dependent contracts:
      Purchase of investment property               (119,434)         (239,623)       (61,304)    (78,694)        (349,789)
      Proceeds from sale of investment property      298,125                 -              -           -                -
      Net purchases of financial investments        (968,008)         (880,361)      (679,109)    985,242       (2,556,490)
      Receipts from sale of (investments in)
        available-for-sale financial assets and
        investment property in the insurance
        business:
      Quoted debt assets                           (1,864,166)         (91,876)      (673,893)   (129,813)      *) (40,637)
      Unquoted debt assets                             (8,058)         346,345       (212,952)     22,487       *) 288,107
      Shares                                               63         (336,565)        34,445    (136,792)        (125,974)
      Others                                         (149,241)         (62,814)         6,164     (45,295)        (215,796)
      Purchase of other investment property           (72,366)        (109,743)       (38,414)    (45,997)        (175,527)
      Proceeds from sale of other investment
        property                                      99,375                   -           -              -             -
      Changes in other balance sheet items, net:
      Securities held for trading, net by non
        insurance subsidiaries                     (1,454,560)            233,959    (441,790)   1,468,718      *) 997,725
      Sale of (investment in) liability for
        derivative financial instruments             380,636              (67,216)   132,591       (22,471)       (105,702)
      Change in cash and cash equivalents
        pledged in favor of holders of basket
        certificates and liabilities                (291,378)         (307,552)         3,245    (114,185)         354,074
      Debtors and receivables                        189,967           107,975        (65,169)    172,577          209,437
      Outstanding premiums                          (267,496)         (198,920)        28,783     (31,216)         (43,179)
      Creditors and payables                          (4,026)         (143,511)        34,971    (600,357)         237,111
      Liabilities for employee benefits, net          (4,069)           22,045         (5,644)     12,165           28,427

      Total cash flows from operating activities
        before taxes on income                     (1,050,835)            290,223    (740,672)    783,761        2,277,691


*)      Reclassified, see Note 2c.

1)      Cash flows from operating activities include net purchases and sales of financial investments and investment
        property arising from the activity of insurance contracts and investment contracts.

2)      Cash flows from operating activities include a dividend and interest received, as specified in Schedule h
        below.

The accompanying notes are an integral part of the interim consolidated financial statements.




                                                                 - 12 -
                                                                   CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        Nine months ended            Three months ended          Year ended
                                                          September 30,                 September 30,           December 31,
                                                       2009          *) 2008         2009         *) 2008           2008
                                                                           Unaudited                              Audited
                                                                                NIS in thousands
(b) Initial consolidation of acquired
       companies and guaranteed yield
       provident fund:
      Intangible assets                                       -         (120,281)            -             -      (178,220)
      Fixed assets                                            -             (717)            -             -          (724)
      Debtors and other financial balances                    -          (14,950)            -        (3,909)      (17,667)
      Other financial investments                             -       (1,737,250)            -    (1,737,250)   (1,737,250)
      Liabilities in respect of non-yield dependent
        insurance contracts and investment
        contracts                                             -        1,757,999             -    1,757,999     1,757,999
      Creditors, payables and other financial
        balances                                              -              2,500           -              4       2,642
      Liabilities to banks and others                         -             18,691           -              -      77,602

      Total investment in the acquisition of newly
        consolidated subsidiaries                             -             (94,008)         -       16,844       (95,618)

(c) Acquisition of minority interests in
      subsidiaries:
      Other assets                                            -                (870)         -             -       (1,042)
      Minority interests                                 (9,955)            (34,853)        -         (1,588)     (36,710)
      Excess of book value over the cost of
        acquisition of minority interests (negative
        goodwill)                                         2,604              7,251          -           694         8,329

      Total acquisition of minority interests in
        subsidiaries                                     (7,351)            (28,472)        -          (894)      (29,423)

(d) Sale of shares of subsidiaries:
      Intangible assets                                  2,351                    -     1,509               -            -
      Deferred tax assets                                   (5)                   -         -               -            -
      Deferred acquisition costs                           518                    -       518               -            -
      Fixed assets                                       2,785                    -     1,391               -            -
      Investments in associates                        (15,760)                   -         -               -            -
      Reinsurance assets                                 9,792                    -     9,792               -            -
      Debtors and receivables                           10,197                    -     1,330               -            -
      Outstanding premium                                1,469                    -     1,469               -            -
      Other financial investments                      581,522                    -         -               -            -
      Foreign currency translation reserve of
        foreign operation                                 3,817                   -     3,817               -            -
      Liabilities in respect of non-yield dependent
        insurance and investment contracts              (14,414)                  -    (14,414)             -            -
      Liabilities for employee benefits, net               (256)                  -          -              -            -
      Liabilities due to debentures in liability
        certificates                                   (427,361)                  -         -               -            -
      Liabilities to shareholders in subsidiaries in
        respect of payments on account of shares
        and put options                                 (27,619)                  -    (21,978)             -            -
      Creditors and payables                            (15,913)                  -     (7,303)             -            -
      Liabilities for certificates of deposit          (104,520)                  -          -              -            -
      Liability to banks and others                     (12,320)                  -     21,978              -            -
      Loss from sale of shares of subsidiaries          (25,203)                  -    (21,867)             -            -

      Total sale of shares of subsidiaries              (30,920)                  -    (23,758)             -            -

*)      Reclassified, see Note 2c.
**)     The net cash outflow expensed by the Group in the sale of subsidiaries amounting to approximately
        NIS 30,920 thousand includes a consideration of NIS 10,008 thousand for the sale, as stated in Notes 8d and
        8g, and net of the subsidiaries' cash on the date of sale of NIS 40,928 thousand.
The accompanying notes are an integral part of the interim consolidated financial statements.


                                                                   - 13 -
                                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                       Nine months ended               Three months ended           Year ended
                                                         September 30,                    September 30,            December 31,
                                                      2009           2008              2009          2008              2008
                                                                              Unaudited                              Audited
                                                                                   NIS in thousands

(e) Cash and cash equivalents at beginning of
      period:

     Cash and cash equivalents for yield-
       dependent contracts                            480,751             425,302     1,364,488         430,074         425,302

     Other cash and cash equivalents                 1,812,766       1,211,809        1,924,980       1,674,815       1,211,809

     Balance of cash and cash equivalents at
        beginning of period                          2,293,517       1,637,111        3,289,468       2,104,889       1,637,111

(f) Cash and cash equivalents at end of
      period:

     Cash and cash equivalents for yield-
       dependent contracts                           1,108,533            430,297     1,108,533         430,297         480,751

     Other cash and cash equivalents                 1,522,349       1,412,424        1,522,349       1,412,424       1,812,766

     Balance of cash and cash equivalents at end
        of period                                    2,630,882       1,842,721        2,630,882       1,842,721       2,293,517

(g) Activities not involving cash flows:

     Purchase of insurance portfolio by way of
        exercise of debt security                      11,432                   -             -                -              -
     Purchase of financial instruments against
        receipt of insurance liabilities portfolio
        (Maccabi policyholder's fund)                        -      *) 686,828                -       *) 686,828     *) 686,828
     Investment in other assets against creditors
        and payables                                      557                   -             -                -           618

(h) Details of amounts included in operating
      activities:

     Interest received                               1,447,240       1,075,771         559,814          314,184       1,427,263
     Dividend received                                 164,913         154,776          48,496           25,551         235,832



*)      Reclassified, see Note 2c.

The accompanying notes are an integral part of the interim consolidated financial statements.




                                                                 - 14 -
                                                  CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 1:- REPORTING ENTITY

        Clal Insurance Enterprises Holdings Ltd. ("the Company") is a company domiciled in Israel,
        incorporated in Israel and its official address is 48 Menachem Begin Rd., Building "C" Tel-Aviv
        66140. The interim consolidated financial statements as of September 30, 2009 comprise the financial
        statements of the Company and of its subsidiaries ("the Group") and the Group's interests in associates
        and jointly controlled entities. The Company's securities are listed for trade on the Tel-Aviv Stock
        Exchange. The Company is a direct subsidiary of IDB Development Corporation Ltd. ("IDB
        Development"). The core of control in IDB Development is comprised of Gandan Holdings Ltd.,
        Manor Holdings B.I. Ltd. and Avraham Livnat Ltd., which have signed a voting agreement among
        them. The Company's ultimate parent company is Gandan Holdings Ltd. and Mr. Nochi Dankner is the
        ultimate controlling shareholder.


NOTE 2:- BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

        a.    Statement of compliance with International Financial Reporting Standards:

              The interim consolidated financial statements have been prepared in accordance with IAS 34,
              "Interim Financial Reporting", and in accordance with the disclosure requirements prescribed by
              the Regulator of the Insurance pursuant to the Supervision of Financial Services (Insurance)
              Law, and do not include all the required information for full annual financial statements. They
              should be read in conjunction with the consolidated financial statements as of and for the year
              ended December 31, 2008 ("annual financial statements").

              Furthermore, the interim consolidated financial statements have been prepared in accordance
              with the provisions of Chapter D of the Securities Regulations (Periodic and Immediate
              Reports), 1970, insofar as those regulations apply to insurance companies.

              The interim consolidated financial statements have been approved for publication by the
              Group's Board of Directors on November 19, 2009.

        b.    Use of estimates and judgments:

              The preparation of condensed financial statements in conformity with IFRS requires
              management to make judgments with respect to estimates, valuations and assumptions that
              affect the application of accounting policies and the amounts of assets, liabilities, income and
              expenses. Actual results may differ from these estimates.

              Except as described below, the judgments used by the management in the application of the
              Group's accounting policies and the key assumptions used in evaluations involving uncertainty
              are consistent with those used to prepare the annual consolidated financial statements.

              In the second quarter of 2009, management re-estimated the forecasted cash flows from the
              customer relations assets of provident funds acquired from Discount Bank and Poalim Bank and
              concluded that starting from 2009, there has been a change in the expected rate of utilization of
              the economic benefits of these assets. Accordingly, the pattern of amortizing the balance of
              intangible assets was updated in accordance with the updated expected pattern of the expected
              cash flows.




                                                  - 15 -
                                                  CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 2:- BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (Cont.)

              The new estimate, which was prepared by an outside appraiser, includes several amendments to
              the original forecasts, including:

              1.    An earlier-than-anticipated increase in management fees;
              2.    A decrease in the scope of managed assets due to negative yield;
              3.    Departure of colleagues at higher rates than originally anticipated;
              4.    Additional implications on future forecasts arising from the business environment and
                    changes in regulation, mainly:

                    a)     The scope of assets for which the Company must pay distribution fees to the
                           banking system in view of the Bachar legislation.
                    b)     The consequences of the Mobilization Regulations (Supervision of Financial
                           Services (Provident Funds) (Transfer of Funds between Provident Funds)), 2008.

              The effect of the abovementioned changes on the condensed interim consolidated financial
              statements and on subsequent periods is immaterial.

        c.    Reclassification:

              The reclassifications of data included in the financial statements for the period ended September
              30, 2008 were prepared, among other things, in view of the directives of the Supervision
              Circular of February 16, 2009 regarding the disclosures required in the financial statements of
              insurance companies according to IFRS. The main reclassifications pursuant to the Supervision
              Circular relate to the definition of yield-dependent liabilities based on insurance exposure and
              regarding the reclassification of general and administrative expenses in the income statement to
              indirect claim settlement expenses included in payments and change in liabilities in respect of
              insurance contracts and investment contracts, commissions, marketing and other acquisition
              expenses, operating expenses and grant of financial services and other general and
              administrative expenses.

              Also in the reported period, options issued to underwriters in a subsidiary were reclassified from
              liabilities to banks and others to minority interests in equity as well as other reclassifications.

              These reclassifications had no effect on equity and income attributable to equity holders of the
              Company, other than a change in the Company's policy regarding post-employment employee
              benefits whereby actuarial gains (losses) are carried directly to profit and loss and not to the
              statement of comprehensive income (loss) (see Note 3b).


NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES

        Except as described in paragraph a below, the Group's accounting policies and computation methods
        applied in these interim consolidated financial statements are consistent with those applied in the
        annual financial statements.

        Following is a description of the material changes in accounting policies adopted in these interim
        consolidated financial statements and their effect:




                                                   - 16 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

         a.   First-time adoption of new accounting standards:

              1.    Presentation of financial statements:

                    Starting January 1, 2009, the Group applies IAS 1 (Revised), "Presentation of Financial
                    Statements" ("the Standard"). The Standard allows the disclosure of a single statement of
                    comprehensive income (a combined income statement and statement of other
                    comprehensive income) or the disclosure of two statements - an income statement and a
                    separate statement of comprehensive income (loss). The Group has elected to present the
                    income and expense and other comprehensive income items in two separate statements -
                    an income statement and a statement of comprehensive income. The Group also presents
                    a statement of changes in equity instead of the disclosure in the notes directly following
                    the statement of comprehensive income. The statement presents changes in equity arising
                    from transactions with owners of the parent company as owners (such as dividends,
                    transactions with controlling shareholders, issuance of shares and/or stock options etc.).
                    The Standard is applied retrospectively.

              2.    IFRS 2 (Revised), "Share-based Payment":

                    Pursuant to an amendment to IFRS 2, vesting conditions are the conditions that determine
                    whether the Group accepts the services entitling the other party to share-based payment
                    and they include only service conditions and performance conditions. The settlement of a
                    grant that includes non-vesting conditions, whether by the Company or by the
                    counterparty, will be accounted for by vesting acceleration and not by forfeiture.
                    Conditions that are other than service and performance conditions will be viewed as non-
                    vesting conditions and must therefore be taken into account when estimating the fair
                    value of the instrument granted.

                    This amendment was adopted on January 1, 2009. The initial adoption of the Standard did
                    not have any material effect on the interim consolidated financial statements.

              3.    IAS 23 (Revised), "Borrowing Costs":

                    Starting January 1, 2009, the Group applies IAS 23 (Revised), "Borrowing Costs" ("the
                    Standard"). The Standard applies to qualifying assets whose capitalization period
                    commences on or after January 1, 2009. Borrowing costs incurred up to December 31,
                    2008 were carried to the income statement as incurred.

                    According to the Standard, specific borrowing costs and non-specific borrowing costs
                    which can be directly attributed to the purchase, construction or development of
                    qualifying assets as defined in the Standard were capitalized to these assets during the
                    period required for their completion or construction through the date on which they are
                    ready for their intended use. Non-specific borrowing costs are similarly capitalized to the
                    same investment in qualifying assets or to the portion thereof that is not financed by
                    specific borrowings while using the weighted average rate of costs for the non-
                    specifically capitalized borrowings. Other borrowing costs are recognized in the income
                    statement as incurred.

                    The initial adoption of the Standard did not have an effect on the interim consolidated
                    financial statements.




                                                  - 17 -
                                                CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

             4.   IFRIC 16, "Hedges of a Net Investment in a Foreign Operation":

                  IFRIC 16 prescribes that a risk arising from foreign exchange differences of the
                  presentation currency of a company does not create an exposure to which hedge
                  accounting can be applied, consequently, a hedged risk may be designated only in respect
                  of the company's functional currency. Moreover, the risk arising from foreign exchange
                  differences of the functional currency of any subsidiary may be hedged by any entity
                  within the Group even if that subsidiary is indirectly controlled by another entity within
                  the Group. The Interpretation also prescribes that the hedging instrument may be held by
                  any entity within the Group.

                  The Interpretation was adopted as a prospective change on January 1, 2009. The initial
                  adoption of the Interpretation did not have any material effect on the interim consolidated
                  financial statements.

             5.   IAS 19 (Revised), "Employee Benefits":

                  Starting January 1, 2009, the Group applies IAS 19 (Revised), "Employee Benefits" ("the
                  Standard"), effected in the context of the improvement project for 2008 whereby the
                  classification of employee benefits in the short term or as other long-term benefits is
                  carried out based on the settlement date of the liability. Accordingly, certain benefits were
                  classified as short-term. The adoption of the Standard was retrospective.

                  The initial adoption of the Standard did not have any material effect on the interim
                  consolidated financial statements.

             6.   IAS 28 (Revised), "Investment in Associates":

                  Pursuant to an amendment to IAS 28, the test of impairment of an investment in an
                  associate will be carried out with reference to the entire investment. Accordingly, a
                  recognized impairment loss is not allocated specifically goodwill included in the
                  investment but rather attributed to the investment as a whole. Therefore, the entire
                  impairment loss previously recognized may be reversed to the extent that the relevant
                  conditions pursuant to IAS 36 are satisfied.

                  The initial adoption of the Standard did not have any material effect on the interim
                  consolidated financial statements.

             7.   IAS 32, "Financial Instruments: Presentation":

                  According to this Standard, certain puttable financial instruments as well as liabilities
                  arising from liquidation and instruments obligating the entity to deliver, upon liquidation
                  only, to another party a relative portion of the entity's net assets, provided that certain
                  criteria are met, are classified as equity. The proper disclosure is also required for
                  exercisable instruments classified as equity. The new Standard is effective for annual
                  periods commencing on or after January 1, 2009.

                  The initial adoption of the Standard did not have an effect on the interim consolidated
                  financial statements.




                                                - 18 -
                                                  CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

              8.    Improvements to IFRSs project:

                    Under the improvements to IFRSs project, in May 2008, the IASB issued and ratified 35
                    amendments to the various IFRSs under a variety of accounting issues. The amendments
                    fall into two categories: (1) amendments regarding presentation, recognition and
                    measurement which modify existing IFRSs; and (2) amendments relating to terminology
                    and preparation of IFRSs which are likely to have a minimum effect, if any, on
                    accounting principles. Most of the amendments are effective in the period commencing
                    on or after January 1, 2009.

                    The initial adoption of the amendments did not have an effect on the interim consolidated
                    financial statements.

              9.    IAS 40 (Revised), "Investment Property":

                    Pursuant to the amendment, investment property during the construction and/or
                    development period will be measured in accordance with the provisions of IAS 40
                    whereby an entity that measures its investment property at fair value will measure its
                    investment property under construction as follows:

                    a)     At fair value when the fair value of the investment property under construction can
                           be estimated; and
                    b)     When the fair value cannot be estimated reliably, at cost during the construction
                           period until the earlier of the date of conclusion of construction and the date that
                           the investment property can be measured at fair value reliably.

                    The initial adoption of the Standard did not have an effect on the interim consolidated
                    financial statements.

         b.   Change in accounting policy with respect to the accounting treatment of actuarial gains and
              losses arising from defined benefit plans in conjunction with the change effected in the financial
              statements as of December 31, 2008:

              The Group has changed its accounting policy regarding comparative data as of and for the
              periods ended September 30, 2008 relating to the recognition of actuarial gains and losses
              arising from defined benefit plans to carrying them to profit and loss under salary expenses
              (rather than directly to retained earnings), this in order to provide more relevant and reliable
              information of its operating results. A change in this policy corrects an accounting mismatch in
              respect of the gap created by the carrying of actuarial gains and losses in liabilities for defined
              benefit plans directly to retained earnings and carrying them in insurance policies issued by Clal
              Insurance to profit and loss.

              The change in accounting policy, whose effect on the interim consolidated financial statements
              is immaterial, was effected retrospectively.




                                                   - 19 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

         c.   New accounting standards and interpretations that have not yet been adopted:

              1.    IFRS 3 (Revised 2008), "Business Combinations" and IAS 27 (Revised 2008),
                    "Consolidated and Separate Financial Statements" ("the Standards"):

                    The principal applicable changes prescribed by those Standards are:

                    a)    The definition of a business was elaborated, which will cause more acquisitions to
                          be treated as business combinations.

                    b)    Accounting for deconsolidation transactions at full fair value so that the remaining
                          interest after deconsolidation is revalued on the date of deconsolidation at fair
                          value to the income statement.

                    c)    Accounting for new consolidation transactions at full fair value so that the original
                          investment before the consolidation is revalued on the date of initial consolidation
                          at fair value to the income statement.

                    d)    Minority interests are measured at fair value or at their relative share in the
                          acquiree's identifiable assets and liabilities based on each individual transaction.

                    e)    Accounting for the acquisitions of additional shares or sales of some of the existing
                          shares without ceasing to consolidate the financial statements of the relevant
                          companies that are arty to the transactions such that all the differences from the
                          transactions are carried directly to equity (including differences that were
                          previously carried to profit and loss or goodwill).

                    f)    Directly carrying transactions costs to profit and loss.

                    g)    Measurement of contingent considerations in business combinations at fair value
                          and carrying the changes in estimates relating to contingent considerations as
                          financial liabilities to profit and loss.

                    h)    Not updating goodwill for the utilization of losses carried forward for tax purposes
                          that existed on the date of business acquisition.

                    i)    Allocating comprehensive income among the shareholders even in the event of a
                          capital deficiency of the subsidiary.

                    These Standards apply to annual financial reporting periods commencing on or after July
                    1, 2009. The Standards may be adopted early (solely on a joint basis). The principal
                    changes in these Standards will apply prospectively, namely for transactions from the
                    date of initial adoption.




                                                  - 20 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

             2.   IFRS 5 (Revised), "Non-current Assets Held for Sale and Discontinued Operations" ("the
                  Amendment"):

                  According to the Amendment made in the context of the improvements to IFRSs project
                  for 2008, when the parent company decides to realize part of its holding in a subsidiary so
                  that after the realization it maintains a non-controlling interest, such as rights conferring
                  material influence, all the assets and liabilities attributed to the subsidiary are classified as
                  held for sale and the relevant provisions of the Amendment will apply, such as
                  presentation as a discontinued operation. The Amendment is applied prospectively
                  starting from the financial statements for annual periods commencing on July 1, 2009.
                  Early adoption is permitted provided that an entity also applies IAS 27, as amended in
                  2008, by providing disclosure.

             3.   IFRIC 17, "Distributions of Non-Cash Assets to Owners" ("the Interpretation"):

                  The Interpretation prescribes that a company's obligation to distribute a non-cash asset to
                  owners will be treated as a liability to pay dividends and will be measured at the
                  distributed asset's fair value whereby changes in fair value up to the date of distribution
                  will be carried to equity. Upon the distribution, the difference between the asset's carrying
                  amount and the value of the liability will be carried to the income statement as a separate
                  item. The Interpretation applies to annual periods commencing on July 1, 2009
                  prospectively. Early adoption is permitted provided that an entity also applies IFRS 3
                  (Revised), IAS 27, as amended in 2008, and IFRS 5 as amended in this Interpretation by
                  providing disclosure.

             4.   Improvements to IFRSs in 2009:

                  In April 2009, the IASB issued and ratified 15 amendments to IFRSs under a variety of
                  accounting issues. The amendments apply to periods commencing on or after January 1,
                  2010 with possible early adoption, subject to the conditions stipulated for each
                  amendment.

                  Below are the details of the amendments that might be relevant to the Group and might
                  have an effect on the financial statements:

                  a)    Amendment to IAS 17, "Leases", classification of leases of land and buildings
                        ("the Amendment"): pursuant to the Amendment, the requirement of classifying
                        land as operating lease whenever the ownership is not expected to pass to the lessee
                        at the end of the lease period has been canceled. According to the Amendment, the
                        lease of land should be tested based on the standard criteria of distinguishing
                        between finance leases or operating leases.

                        The land and building components in a lease of land and buildings will also be
                        separately tested for classifying the lease based on the Standard's criteria whereby a
                        significant consideration in the classification of the land is the fact that land
                        generally has an indefinite life.




                                                  - 21 -
                                             CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

                       The Amendment applies to financial statements for annual periods commencing on
                       or after January 1, 2010. Early adoption is permitted by providing disclosure. The
                       Amendment will be adopted retrospectively, namely the classification of leases of
                       land should be examined based on the information available when entering into the
                       lease commitment and if there has been any change in the classification of the
                       lease, the provisions of IAS 17 are to be applied retrospectively from the date of
                       entering into the lease. However, if the entity does not have the information
                       required for the retrospective adoption of the Amendment, it should use the
                       information available when adopting the Amendment and recognize the asset and
                       liability relating to the lease of land classified following the Amendment as a
                       finance lease at fair value on that date. Any differences between the fair value of
                       the asset and the fair value of the liability will be carried to retained earnings.

                       The implication of the Amendment may be the reclassification of leases of lands
                       from the Israel Lands Administration that are not investment properties. The
                       monetary effect is not expected to be material.

                  b)   Amendment to IAS 36, "Impairment of Assets", allocation of goodwill into cash-
                       generating units ("the Amendment"): pursuant to the Amendment to impairment
                       testing, the cash-generating unit to which goodwill is allocated cannot be larger
                       than an operating segment as defined in IFRS 8 prior to the adoption of the
                       aggregation criterion in IFRS 8.12. The Amendment applies to annual periods
                       commencing on or after January 1, 2010. Early adoption is permitted by providing
                       disclosure.

                  c)   Amendment to IAS 39, "Financial Instruments: Recognition and Measurement",
                       exclusion of business combination contracts ("the Amendment"): the Amendment
                       clarifies that only forward contracts signed between the buyer and the seller
                       regarding the sale of purchase of a controlled entity under a future business
                       combination are excluded from the scope of IAS 39 when the forward contract
                       period does not exceed the normal period required for obtaining the approvals for
                       the transaction. The Amendment will be applied prospectively to all contracts that
                       are still valid for annual periods commencing on January 1, 2010. Early adoption is
                       permitted by providing disclosure.

                  d)   Amendment to IFRS 8, "Operating Segments", disclosure of segment assets ("the
                       Amendment"): according to the Amendment, information of total segment assets is
                       only required if such information is regularly reported to the Chief Operating
                       Decision Maker (CODM). The Amendment will apply to annual periods
                       commencing on or after January 1, 2010. Early adoption is permitted by providing
                       disclosure.

                  e)   Amendment to IAS 38, "Intangible Assets", measurement of fair value of
                       intangible asset acquired in a business combination ("the Amendment"): the
                       Amendment provides examples of valuation techniques that are normally used to
                       measure the fair value of intangible assets acquired in a business combination in
                       the absence of an active market. The Amendment will apply to annual periods
                       commencing on or after January 1, 2010. Early adoption is permitted by providing
                       disclosure.




                                              - 22 -
                                                CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

                  f)    Amendment to IFRS 5, "Non-current Assets Held for Sale and Discontinued
                        Operations", disclosure requirements for assets (or disposal groups) that are held
                        for sale or discontinued operations: the Amendment specifies that all the
                        disclosures required in respect of non-current assets (or disposal groups) that are
                        classified as held for sale or discontinued operations are within the scope of IFRS
                        5. Disclosures in other IFRSs apply to such assets only if they require specific
                        disclosures in respect of assets (or disposal groups) held for sale or discontinued
                        operations. The Amendment will apply to annual periods commencing on or after
                        January 1, 2010. Early adoption is permitted by providing disclosure.

                  The Group is evaluating the effects of the adoption of the amendments on its financial
                  statements.

             5.   IFRS 9, "Financial Instruments":

                  In November 2009, the IASB issued IFRS 9, "Financial Instruments" ("the Standard").
                  This Standard represents the first phase in the project for replacing IAS 39, "Financial
                  Instruments: Recognition and Measurement" ("IAS 39") and the disclosure requirements
                  of IAS 39 regarding the classification and measurement of financial assets. According to
                  the Standard there are two main categories of financial asset measurement: amortized cost
                  and fair value. The classification of debt instruments is based on the entity's applied
                  business model for managing financial assets and on the financial asset's contractual cash
                  flow characteristics. According to the Standard, an investment in a debt instrument will
                  be measured at amortized cost if the purpose of the entity's business model is to hold
                  assets in order to collect their contractual cash flows and if the asset's contractual terms
                  create eligibility for cash flows at specific dates representing principal and interest
                  payments only. All the other financial assets will be measured at fair value. In addition,
                  embedded derivatives are no longer separated from hybrid contracts consisting of a host
                  contract that is a financial asset. Instead, the entire hybrid contract will be tested for
                  classification based on the abovementioned criteria.

                  Furthermore, an investment in equity instruments will be measured at fair value when the
                  changes in fair value are carried to profit and loss. Nevertheless, upon initial recognition
                  of an equity instrument that is not held for trading, the Standard permits choosing to
                  present changes in the equity instrument's fair value (excluding dividends) in other
                  comprehensive income and amounts carried to other comprehensive income will not be
                  classified to profit and loss.

                  The Standard's scope excludes financial liabilities.

                  The Standard will be adopted in annual periods commencing on or after January 1, 2013.
                  Early adoption is permitted, subject to providing disclosure and subject to simultaneously
                  adopting the amendments to other IFRSs, as detailed in the addendum to the Standard.
                  Adoption of the Standard will be done retrospectively, except for certain exemptions
                  pursuant to the transition provisions specified in the Standard. Specifically, if an entity
                  chooses to adopt the Standard prior to January 1, 2012, it is not required to restate
                  comparative data.

                  The Company is examining the possible effects of the Standard on its financial
                  statements.




                                                - 23 -
                                                    CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

         d.     Restatement in investees included in the Group's financial statements in the current period:

                1.    In the first quarter of 2009, the interim consolidated financial statements of the Company
                      include another amortization of the goodwill balance in respect of a subsidiary's
                      investment (Clal Finance) in Clal Finance Underwriting Ltd. ("the underwriting
                      company") amounting to approximately NIS 16,816 thousand based on a valuation
                      obtained by Clal Finance at December 31, 2008 according to which the value of the
                      underwriting company equals its equity. The expense attributable to the Company's
                      equity holders totals NIS 13,762 thousand. Given the material effect on the results of Clal
                      Finance, the amendment was reported by it by restating the financial statements for 2008.

                2.    In the first quarter of 2009, the Company's consolidated financial statements include
                      financial expenses totaling approximately NIS 5,306 thousand as well as tax income of
                      approximately NIS 1,861 thousand in the income statement in respect of the discounts
                      granted to buyers of certificates issued by consolidated SPCs which on the date of
                      issuance were carried to deferred acquisition costs. The expense net of tax attributable to
                      the Company's equity holders amounts to NIS 2,819 thousand.


NOTE 4:- CHANGES IN THE CPI AND U.S. DOLLAR AND POUND STERLING EXCHANGE RATES

                                              Consumer Price Index             U.S. dollar      Pound Sterling
                                                           Latest            representative     representative
                                             Index for   published             exchange           exchange
                                            the month      index                  rate               rate
                                                %            %                     %                  %
              For the nine months ended:

              September 30, 2009                 3.42            3.62             (1.16)               9.00
              September 30, 2008                 4.39            5.00            (11.05)             (18.45)

              For the three months ended:

              September 30, 2009                 1.26            2.44             (4.11)               (7.09)
              September 30, 2008                 2.00            2.10              2.06                (5.77)

              For the year ended
               December 31, 2008                 3.80            4.51             (1.14)             (28.04)




                                                    - 24 -
                                                CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 5:- SEGMENT REPORTING

        a.   The Group operates in the following operating segments:

             1.    Long-term savings:

                   The long-term savings segment includes life assurance, accompanying coverage and
                   pension and provident fund management. The segment includes long-term savings (in the
                   framework of various types of insurance policies, pension and provident funds including
                   educational fund), as well as insurance coverage for various risks such as: death,
                   disability, disability income insurance, etc. According to the Regulator's directives, the
                   long-term savings segment is reported between provident funds, pension and life
                   assurance.

             2.    Health insurance segment through a subsidiary:

                   The health insurance segment concentrates all the Group's activities through a subsidiary
                   that operates in the life assurance line of business. The segment includes long-term care
                   insurance, medical expense insurance, surgery, transplants, dental insurance, travel
                   abroad, foreign workers, etc.

             3.    General insurance segment in Israel and Europe:

                   The general insurance segment in Israel and Europe includes the liability and property
                   branches, credit insurance, personal accidents and others. The segment includes the
                   activities of Clal Insurance and Clal Credit Insurance in Israel and the activities of Clal
                   Romania and Broadgate in Europe. As for an agreement to sell Clal Romania, see Note
                   8h. According to the Regulator's directives, the general insurance segment in Israel is
                   detailed according to the lines of motor act, motor casco, other property branches and
                   other liability branches.

                   ●     Motor act insurance in Israel:

                         The motor act insurance line of business focuses on coverage whose acquisition by
                         the owner of the vehicle or the driver is compulsory by law and it provides a
                         coverage for bodily injuries (to the driver of the vehicle, the passengers in the
                         vehicle or to pedestrians), as a result of the use of the motor vehicle.

                        Motor casco insurance in Israel:
                         The motor casco line of business focuses on the coverage of property damage for
                         the insured vehicle and property damages that the insured vehicle will cause to a
                         third party.




                                                 - 25 -
                                                CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 5:- SEGMENT REPORTING (Cont.)

                       The property and other insurance lines of business in Israel:

                        This segment represents other property insurance types that are not vehicles and
                        liabilities and other insurance lines of business (such as guarantees and health -
                        personal accidents).

                       Other liability branches in Israel:

                        The liability branches are intended for the coverage of the policyholders' liabilities
                        for any damage that they will cause to a third party. These lines of business
                        include: third party liability, employers' liability, professional liability and product
                        warranty.

             4.   General insurance through a subsidiary in the U.S.

             5.   Finance - through a subsidiary, Clal Finance.

             6.   Other - includes operating segments that do not comply with the threshold volume for
                  reporting.




                                                - 26 -
                                                                                                                                         CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)
         b.  Operating segments:
                                                                                                                                 b.1 Nine months ended September 30, 2009
                                                                                                                 General insurance segments
                                                                                                                                  General
                                                                                                     Health        General       insurance
                                                                                                   insurance     insurance in    through a                                       Offsetting of   Unallocated
                                                                                     Long-term     through a     Israel and in subsidiary in                                    inter-segment      to the
                                                                                      savings      subsidiary       Europe        the U.S.          Finance        Other          operations      segment        Total
                                                                                                                                                   Unaudited
                                                                                                                                                NIS in thousands
             Gross premiums earned                                                     3,156,089      759,189       2,538,685        596,334                 -             -           (5,088)             -     7,045,209
             Premiums earned by reinsurers                                               144,017      135,106         772,054         33,071                 -             -                -              -     1,084,248

             Premiums earned on retention                                              3,012,072      624,083       1,766,631        563,263                 -             -           (5,088)             -     5,960,961
             Net investment income and financial income                                6,838,338      140,614        314,134          65,574           59,045        76,150           (28,671)        68,049     7,533,233
             Income from management fees and portfolio management                        404,260            -              -               -          147,326         6,356            (4,185)            44       553,801
             Income from commissions                                                      34,573        2,024        139,581           1,561                -        92,463           (53,148)             -       217,054
             Income from other financial services                                              -            -              -               -           84,843             -                 -              -        84,843
             Other income                                                                      -        1,355             97               -            2,467        32,928              (994)           995        36,848

             Total income                                                             10,289,243      768,076       2,220,443        630,398          293,681       207,897           (92,086)        69,088    14,386,740
             Gross payments and change in liabilities in respect of insurance
               contracts                                                               9,272,114      608,758       1,933,973        396,495                 -             -                -              -    12,211,340
             Reinsurers' share in payments and change in liabilities in respect of
               insurance contracts                                                      (98,330)     (111,106)      (496,582)        (26,685)                -             -                -              -     (732,703)

             Payments and change in liabilities in respect of insurance contracts
                on retention                                                           9,173,784      497,652       1,437,391        369,810                -             -                 -              -    11,478,637
             Commissions, marketing and other acquisition expenses                       477,096      161,495         548,325        108,588           13,641        49,839           (53,148)             -     1,305,836
             General and administrative expenses                                         239,159       16,687          69,295         71,547          266,087        88,422           (13,097)        17,420       755,520
             Impairment of intangible assets                                                   -            -               -              -           39,842             -                 -              -        39,842
             Other expenses                                                               53,692            4          24,410          8,472           26,890         5,694                 -          5,327       124,489
             Financial expenses (income)                                                   5,686         (527)         (1,123)        17,283           67,793        40,252           (25,841)       123,602       227,125
             Total expenses                                                            9,949,417      675,311       2,078,298        575,700          414,253       184,207           (92,086)       146,349    13,931,449

             Equity in results of associates, net                                             -             -               -              -           29,981              -                -          1,124       31,105
             Income (loss) before taxes on income                                       339,826        92,765        142,145          54,698           (90,591)      23,690                 -        (76,137)     486,396

             As of September 30, 2009:
             Liabilities for yield-dependent insurance contracts and investment
                contracts                                                             15,463,720     1,540,171      8,194,673      2,127,035                 -              -         (14,124)             -    27,311,475

             Liabilities for non-yield dependent insurance contracts and
                investment contracts                                                  26,228,151      315,918               -              -                 -              -         (14,123)             -    26,529,946

             Total assets                                                             44,187,596     2,547,227      9,526,540      3,229,106         7,585,381     1,221,263          (93,612)     1,551,803    69,755,304
                                                                                                      - 27 -
                                                                                                                                      CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)
                                                                                                                             b.2 Nine months ended September 30, 2008 *)
                                                                                                               General insurance segments
                                                                                                                                General
                                                                                                    Health       General       insurance
                                                                                                  insurance    insurance in    through a                                     Offsetting of   Unallocated
                                                                                    Long-term     through a    Israel and in subsidiary in                                  inter-segment      to the
                                                                                     savings      subsidiary      Europe        the U.S.         Finance        Other         operations      segment       Total
                                                                                                                                                Unaudited
                                                                                                                                             NIS in thousands
            Gross premiums earned                                                    3,100,794      534,855     2,546,543        580,830                -               -        (5,117)             -     6,757,905
            Premiums earned by reinsurers                                              142,066       40,241       692,247         41,032                -               -             -              -       915,586

            Premiums earned on retention                                             2,958,728      494,614     1,854,296        539,798                -               -        (5,117)             -     5,842,319

            Net investment income (loss) and financial income                       (1,129,410)      35,750       163,373         20,787           36,497        66,920         (33,384)          4,109    (835,358)
            Income from management fees and portfolio management                       381,651            -             -              -          175,701        10,076          (8,416)             14     559,026
            Income from commissions                                                     54,204        2,035       104,722          3,339                -        90,527         (58,229)              -     196,598
            Income from other financial services                                             -            -             -              -           93,785             -               -               -      93,785
            Other income                                                                   175        6,807           108              -                -        29,487               -             142      36,719
            Total income                                                             2,265,348      539,206     2,122,499        563,924          305,983       197,010        (105,146)          4,265    5,893,089

            Gross payments and change in liabilities in respect of insurance
              contracts                                                              1,659,345      382,091     1,793,871        367,766                -               -             -              -     4,203,073
            Reinsurers' share in payments and change in liabilities in respect of
              insurance contracts                                                      (76,782)     (29,466)     (341,277)       (30,483)               -               -             -              -     (478,008)
            Payments and change in liabilities in respect of insurance contracts
              on retention                                                           1,582,563      352,625     1,452,594        337,283                -               -             -              -     3,725,065
            Commissions, marketing and other acquisition expenses                     463,518       137,280       582,300        101,854           24,499        32,232         (58,229)             -     1,283,454
            General and administrative expenses                                       260,159        13,895        75,567         72,225          251,538       100,699         (13,951)        23,097       783,229
            Impairment of intangible assets                                                 -             -             -              -          107,667             -               -              -       107,667
            Other expenses                                                             36,892             -             -         12,107           16,360         5,309          (2,423)         3,326        71,571
            Financial expenses (income)                                                  6,122        1,841       (25,699)        18,505           83,108        44,433         (30,543)       106,848      204,615
            Total expenses                                                           2,349,254      505,641     2,084,762        541,974          483,172       182,673        (105,146)       133,271     6,175,601
            Equity in results of associates, net                                            -             -             -              -            9,724          717                -            240       10,681
            Income (loss) before taxes on income                                       (83,906)      33,565        37,737         21,950         (167,465)       15,054               -        (128,766)   (271,831)
            As of September 30, 2008:
            Liabilities for yield-dependent insurance contracts and investment
               contracts                                                            13,906,245    8,104,795             -    -   (13,051)     - 25,154,233
            Liabilities for non-yield dependent insurance contracts and
               investment contracts                                                 21,547,402            -             -    -   (13,051)     - 21,787,099
            *)        Reclassified, see Note 2c.
                                                                                                     - 28 -
                                                                                                                             CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)

                                                                                                                   b.3 Three months ended September 30, 2009
                                                                                                     General insurance segments
                                                                                                                       General
                                                                                          Health       General        insurance                                Offsetting
                                                                                        insurance    insurance in    through a                                  of inter-   Unallocated
                                                                           Long-term    through a     Israel and     subsidiary                                 segment       to the
                                                                            savings     subsidiary    in Europe      in the U.S.       Finance        Other    operations    segment        Total
                                                                                                                                      Unaudited
                                                                                                                                   NIS in thousands
              Gross premiums earned                                        1,046,503     297,727       837,104         184,840               -            -       (1,908)           -     2,364,266
              Premiums earned by reinsurers                                   48,782      48,041       233,858           9,590               -            -            -            -       340,271

              Premiums earned on retention                                  997,721      249,686       603,246         175,250               -            -       (1,908)           -     2,023,995

              Net investment income and financial income                   2,291,376      53,226       141,526          24,150           5,873        31,242     (15,538)      36,767     2,568,622
              Income from management fees and portfolio management           143,324           -             -               -          51,527         2,121         619            -       197,591
              Income from commissions                                         12,144         724        46,685             203               -        29,751     (16,955)           -        72,552
              Income from other financial services                                 -           -             -               -          45,765             -           -            -        45,765
              Other income                                                         -       1,355            21               -               -        11,499           -           41        12,916

              Total income                                                 3,444,565     304,991       791,478         199,603         103,165        74,613     (33,782)      36,808     4,921,441

              Gross payments and change in liabilities in respect of
                insurance contracts                                        3,122,587     227,730       667,116         124,717               -            -           -             -     4,142,150
              Reinsurers' share in payments and change in liabilities in
                respect of insurance contracts                               (40,734)     (31,227)     (127,511)       (11,308)              -            -           -             -     (210,780)
              Payments and change in liabilities in respect of insurance
                contracts on retention                                     3,081,853     196,503       539,605         113,409               -            -           -             -     3,931,370

              Commissions, marketing and other acquisition expenses         148,932       66,496       181,016          37,777           4,705        17,241     (16,955)           -      439,212
              General and administrative expenses                            75,808        5,827        21,922          24,141          88,593        30,017      (2,263)       4,590      248,635
              Impairment of intangible assets                                     -            -             -               -          23,026             -           -            -       23,026
              Other expenses (income)                                        19,825           (3)        7,634           2,716           9,139         2,086           -            -       41,397
              Financial expenses (income)                                     2,908         (139)       (6,137)          5,508          32,962        18,409     (14,564)      58,667       97,614

              Total expenses                                               3,329,326     268,684       744,040         183,551         158,425        67,753     (33,782)      63,257     4,781,254

              Equity in results of associates, net                                -            -             -               -          15,217            -           -           340       15,557

              Income (loss) before taxes on income                          115,239       36,307        47,438          16,052          (40,043)       6,860          -       (26,109)     155,744




                                                                                           - 29 -
                                                                                                                                   CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)
                                                                                                                        b.4 Three months ended September 30, 2008 *)
                                                                                                            General insurance segments
                                                                                                                             General
                                                                                                 Health       General       insurance                                 Offsetting
                                                                                               insurance    insurance in   through a                                   of inter-   Unallocated
                                                                                 Long-term     through a     Israel and    subsidiary                                  segment       to the
                                                                                  savings      subsidiary    in Europe     in the U.S.       Finance        Other     operations    segment         Total
                                                                                                                                            Unaudited
                                                                                                                                         NIS in thousands
            Gross premiums earned                                                1,044,384      236,938       832,879        189,383               -            -        (2,053)           -     2,301,531
            Premiums earned by reinsurers                                           50,031       21,875       202,370         12,910               -            -             -            -       287,186

            Premiums earned on retention                                           994,353      215,063       630,509        176,473               -            -        (2,053)           -     2,014,345

            Net investment income (loss) and financial income                    (1,114,297)     14,629        51,228        (16,324)          9,636        27,528      (12,757)      (1,792)    (1,042,149)
            Income from management fees and portfolio management                    126,621           -             -              -          56,375         3,977       (2,808)           5        184,170
            Income from commissions                                                  15,977         392        39,211            971               -        29,319      (19,582)           -         66,288
            Income from other financial services                                          -           -             -              -          24,507             -            -            -         24,507
            Other income                                                                 51       6,807            26              -             121        10,250            -         (328)        16,927

            Total income                                                            22,705      236,891       720,974        161,120          90,639        71,074      (37,200)      (2,115)    1,264,088

            Gross payments and change in liabilities in respect of
              insurance contracts                                                 (109,258)     176,776       631,228         97,265               -            -            -             -       796,011
            Reinsurers' share in payments and change in liabilities in respect
              of insurance contracts                                               (26,782)      (19,898)      (93,773)      (12,288)              -            -            -             -      (152,741)
            Payments and change in liabilities in respect of insurance
              contracts on retention                                              (136,040)     156,878       537,455         84,977               -            -            -             -       643,270

            Commissions, marketing and other acquisition expenses                  156,475       54,692       194,162         32,994           6,076        (4,964)     (19,582)           -       419,853
            General and administrative expenses                                     94,594        5,520        23,308         26,079          81,826        52,735       (4,653)       8,446       287,855
            Impairment of intangible assets                                              -            -             -              -          86,067             -            -            -        86,067
            Other expenses                                                          11,815            -             -          2,463           6,056           896       (1,155)       1,109        21,184
            Financial expenses                                                       2,889        1,585         3,806          6,129          25,303        18,702      (11,810)      45,294        91,898

            Total expenses                                                         129,733      218,675       758,731        152,642         205,328        67,369      (37,200)      54,849     1,550,127

            Equity in results of associates, net                                         -            -             -              -            4,882          303           -           244         5,429

            Income (loss) before taxes on income                                  (107,028)      18,216        (37,757)        8,478         (109,807)       4,008           -       (56,720)     (280,610)

            *)       Reclassified, see Note 2c.

                                                                                                  - 30 -
                                                                                                                                             CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)
                                                                                                                                            b.5 Year ended December 31, 2008
                                                                                                                              General insurance
                                                                                                                                   segments
                                                                                                                                          General
                                                                                                              Health        General      insurance                                 Offsetting
                                                                                                            insurance     insurance in through a                                    of inter-    Unallocated
                                                                                            Long-term       through a     Israel and in subsidiary                                  segment        to the
                                                                                             savings        subsidiary       Europe      in the U.S.     Finance      Other        operations     segment         Total
                                                                                                                                                         Audited
                                                                                                                                                     NIS in thousands
         Gross premiums earned                                                                4,125,536       766,248       3,390,931      771,050             -               -       (3,256)            -     9,050,509
         Premiums earned by reinsurers                                                          186,378        97,059         899,694       52,606             -               -            -             -     1,235,737
         Premiums earned on retention                                                         3,939,158       669,189       2,491,237      718,444             -               -       (3,256)            -     7,814,772
         Net investment income (loss) and financial income                                 *) (3,006,082)      9,278 *)     *) 67,414         (850)       66,133       87,038         (38,858)      (18,337) *) (2,834,264)
         Income from management fees and portfolio management                                    501,157            -               -            -       220,014       13,029         (13,029)          164        721,335
         Income from commissions                                                                  69,810        2,898        137,641         3,692             -      119,123         (79,039)            -        254,125
         Income from other financial services                                                          -            -               -            -       118,856            -               -             -        118,856
         Other income                                                                                157        6,807             121            -        39,092       42,134          (4,432)        4,909         88,788
         Total income                                                                         1,504,200       688,172       2,696,413      721,286       444,095      261,324       (138,614)       (13,264)    6,163,612

         Gross payments and change in liabilities in respect of insurance contracts             737,294       561,688       2,409,910      411,550             -               -           -              -     4,120,442
         Reinsurers' share in payments and change in liabilities in respect of insurance
           contracts                                                                            (92,979)       (80,119)     (533,039)       (9,340)            -               -           -              -      (715,477)
         Payments and change in liabilities in respect of insurance contracts on
           retention                                                                            644,315       481,569       1,876,871      402,210             -               -           -              -     3,404,965
         Commissions, marketing and other acquisition expenses                                  627,815       187,079      *) 782,781      125,100        30,192     *) 70,042        (79,039)            - *) 1,743,970
         General and administrative expenses                                                    332,259        21,317       *) 98,515      116,975       327,114      109,975         (25,552)      38,362 *) *) 1,018,965
         Impairment of intangible assets                                                              -             -               -            -       298,466         3,291              -             -        301,757
         Other expenses                                                                          48,878           278               -       16,543        19,751         8,474              -       12,539 *) *) 106,463
         Financial expenses (income)                                                           *) 5,866         *) 52       *) (3,273)      24,265        91,053        56,910        (34,023)     127,526 *) *) 268,376
         Total expenses                                                                       1,659,133       690,295       2,754,894      685,093       766,576      248,692       (138,614)       178,427     6,844,496
         Equity in results of associates, net                                                         -              -             -             -        13,657          636              -            488        14,781
         Income (loss) before taxes on income                                                  (154,933)        (2,123)       (58,481)      36,193      (308,824)       13,268             -       (191,203)     (666,103)
         As of December 31, 2008:
         Liabilities for yield-dependent insurance contracts and investment contracts        14,800,700      1,234,987      7,889,098    2,065,790             -               -      (12,096)            -    25,978,479

         Liabilities for non-yield dependent insurance contracts and investment
           contracts                                                                         19,194,401       292,639               -            -             -               -      (12,096)            -    19,474,944

         Total assets                                                                        36,751,564      1,883,200      8,689,010    3,104,689     6,543,280     1,261,709      (229,366)       849,507    58,853,593
        *)        Reclassified, see Note 2c.
                                                                                                            - 31 -
                                                                                                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)
           c.        Additional information regarding the main insurance lines of business, included in the general insurance segment:
                                                                                                                                c.1 Nine months ended September 30, 2009
                                                                                                                        Property          Liabilities                       General
                                                                                                                        and other         and other        General         insurance
                                                                                         Motor         Motor casco     branches in       branches in     insurance in      through a
                                                                                      act in Israel     in Israel        Israel *)         Israel *)        Europe       U.S. subsidiary   Total
                                                                                                                                          Unaudited
                                                                                                                                       NIS in thousands
    Gross premiums                                                                          499,297         535,327          870,985          337,161          459,812           647,618    3,350,200
    Reinsurance premiums                                                                     11,660           8,850          477,956          134,769          201,829            33,386      868,450

    Premiums on retention                                                                    487,637         526,477         393,029           202,392         257,983           614,232    2,481,750
    Change in unearned premium balance, on retention                                        )33,721(        )30,442(          )7,038(         )29,765(              79          )50,969(    )151,856(

    Earned premium on retention                                                             453,916         496,035          385,991          172,627          258,062           563,263    2,329,894
    Net investment income and financial income                                              158,018          26,419           32,136           87,352           10,209            65,574      379,708
    Income from commissions                                                                      -            2,813           92,390           15,115           29,263             1,561      141,142
    Other income                                                                                 -               -                97               -                -                 -            97

    Total income                                                                            611,934         525,267          510,614          275,094          297,534           630,398    2,850,841

    Gross payments and change in liabilities for insurance contracts                        511,474         406,265          416,897          289,572          309,765           396,495    2,330,468
    Reinsurers' share in payments and change in liabilities in respect of insurance
      contracts                                                                               6,247          )9,004(       )245,784(          )71,446(        )176,595(         )26,685(    )523,267(
                                                                                            517,721         397,261          171,113           218,126          133,170          369,810    1,807,201
    Payments and change in liabilities for insurance contracts on retention
    Commissions, marketing and other acquisition expenses                                     56,245        120,490          216,579           61,043           93,968           108,588     656,913
    General and administrative expenses                                                        6,135          6,590            18,306           4,142           34,122            71,547     140,842
    Other expenses                                                                                -              -                 -               -            24,410             8,472      32,882
    Financial expenses (income)                                                                   -           )591(           )5,541(           )185(            5,194            17,283      16,160

    Total expenses                                                                          580,101         523,750          400,457          283,126          290,864           575,700    2,653,998

    Income (loss) before taxes on income                                                      31,833          1,517          110,157           )8,032(            6,670           54,698     196,843

    Liabilities in respect of gross insurance contracts as of September 30, 2009           3,190,755        524,046        1,258,298        2,469,327          752,247         2,127,035   10,321,708

    *)     Property and other branches mainly include results of business property and residential insurance branches which constitute 64% of the premiums in these
           lines of business. Other liability branches mainly include results of third party and professional liability lines of insurance whose activity constitutes 58.4% of
           total premiums in these branches.
                                                                                    - 32 -
                                                                                                                           CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)
                                                                                                                        c.2 Nine months ended September 30, 2008 *)
                                                                                                                   Property        Liabilities                      General
                                                                                                                   and other       and other       General         insurance
                                                                                 Motor           Motor casco      branches in     branches in    insurance in      through a
                                                                              act in Israel       in Israel        Israel **)      Israel **)       Europe       U.S. subsidiary     Total
                                                                                                                                   Unaudited
                                                                                                                                NIS in thousands

    Gross premiums                                                                503,357              601,679       788,786          286,615         466,600          635,249      3,282,286
    Reinsurance premiums                                                            9,025               27,271       422,733          120,285         124,357           43,104        746,775

    Premiums on retention                                                         494,332              574,408       366,053          166,330         342,243          592,145      2,535,511
    Change in unearned premium balance, on retention                              (36,426)             (48,559)        4,625           (9,459)            749          (52,347)      (141,417)

    Earned premium on retention                                                   457,906              525,849       370,678          156,871         342,992          539,798      2,394,094

    Net investment income and financial income                                     75,527               11,297        13,879           44,876          17,794           20,787       184,160
    Income from commissions                                                             -                2,011        90,497           11,437             777            3,339       108,061
    Other income                                                                        -                    -           108                -               -                -           108

    Total income                                                                  533,433              539,157       475,162          213,184         361,563          563,924      2,686,423

    Gross payments and change in liabilities for insurance contracts              517,218              398,152       337,315          218,734         322,452          367,766      2,161,637
    Reinsurers' share in payments and change in liabilities in respect of
      insurance contracts                                                           (3,970)            (14,670)     (141,462)         (45,423)       (135,752)          (30,483)     (371,760)

    Payments and change in liabilities for insurance contracts on retention       513,248              383,482       195,853          173,311         186,700          337,283      1,789,877
    Commissions, marketing and other acquisition expenses                          68,926              128,769       222,897           57,805         103,903          101,854        684,154
    General and administrative expenses                                             7,283                7,022        20,232            4,023          37,007           72,225        147,792
    Other expenses                                                                      -                    -             -                -               -           12,107         12,107
    Financial expenses (income)                                                   (13,656)              (1,885)       (2,045)          (8,113)              -           18,505         (7,194)
    Total expenses                                                                575,801              517,388       436,937          227,026         327,610          541,974      2,626,736
    Income (loss) before taxes on income                                          (42,368)              21,769        38,225          (13,842)         33,953           21,950        59,687
    Liabilities in respect of gross insurance contracts as of September 30,
      2008                                                                      3,157,015              565,068     1,165,583        2,486,562         730,567         1,974,383    10,079,178

    *)      Reclassified, see Note 2c.

    **)     Property and other branches mainly include results of business property and residential insurance branches which constitute 63% of the premiums in these lines of business.
            Other liability branches mainly include results of third party and professional liability lines of insurance whose activity constitutes 57% of total premiums in these branches.


                                                                                              - 33 -
                                                                                                                           CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)

                                                                                                                         c.3 Three months ended September 30, 2009
                                                                                                                   Property        Liabilities                      General
                                                                                                                   and other       and other       General         insurance
                                                                                 Motor           Motor casco      branches in     branches in    insurance in      through a
                                                                              act in Israel       in Israel         Israel *)       Israel *)       Europe       U.S. subsidiary   Total
                                                                                                                                   Unaudited
                                                                                                                                NIS in thousands

    Gross premiums                                                                143,471              151,026       284,060           91,232         134,684         155,749      960,222
    Reinsurance premiums                                                            3,888                  566       149,287           35,446          38,385           6,498      234,070

    Premiums on retention                                                         139,583              150,460       134,773           55,786          96,299         149,251      726,152
    Change in unearned premium balance, on retention                               14,134               17,462        (9,459)           4,208              (0)         25,999       52,344

    Earned premium on retention                                                   153,717              167,922       125,314           59,994          96,299         175,250      778,496

    Net investment income and financial income                                     76,590                9,490        11,473           40,111           3,862          24,150      165,676
    Income from commissions                                                             -                  931        30,151            6,958           8,645             203       46,888
    Other income                                                                        -                    -            21                -               -               -           21

    Total income                                                                  230,307              178,343       166,959          107,063         108,806         199,603      991,081

    Gross payments and change in liabilities for insurance contracts              225,208              134,835       105,038          125,542          76,493         124,717      791,833
    Reinsurers' share in payments and change in liabilities in respect of
      insurance contracts                                                           (6,139)             (1,761)      (55,055)         (34,782)        (29,774)        (11,308)     (138,819)

    Payments and change in liabilities for insurance contracts on retention       219,069              133,074        49,983           90,760          46,719         113,409      653,014
    Commissions, marketing and other acquisition expenses                          21,142               40,931        71,382           22,989          24,572          37,777      218,793
    General and administrative expenses                                             1,949                2,070         6,171            1,249          10,483          24,141       46,063
    Other expenses                                                                      -                    -             -                -           7,634           2,716       10,350
    Financial expenses (income)                                                         -               (1,068)       (8,890)            (357)          4,178           5,508         (629)

    Total expenses                                                                242,160              175,007       118,646          114,641          93,586         183,551      927,591

    Income (loss) before taxes on income                                          (11,853)               3,336        48,313           (7,578)         15,220          16,052       63,490

    *)    Property and other branches mainly include results of business property and residential insurance branches which constitute 58% of the premiums in these
          lines of business. Other liability branches mainly include results of third party and professional liability lines of insurance whose activity constitutes 57% of
          total premiums in these branches.



                                                                                              - 34 -
                                                                                                                           CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)
                                                                                                                        c.4 Three months ended September 30, 2008 *)
                                                                                                                   Property        Liabilities                       General
                                                                                                                   and other       and other       General          insurance
                                                                                 Motor           Motor casco      branches in     branches in    insurance in       through a
                                                                              act in Israel       in Israel        Israel **)      Israel **)       Europe        U.S. subsidiary   Total
                                                                                                                                   Unaudited
                                                                                                                                NIS in thousands

    Gross premiums                                                                137,256              166,669       267,781           79,850         139,712          166,281      957,549
    Reinsurance premiums                                                            2,882                4,873       142,122           28,658          12,886            9,285      200,706

    Premiums on retention                                                         134,374              161,796       125,659           51,192         126,826          156,996      756,843
    Change in unearned premium balance, on retention                               19,219               16,308        (8,591)           3,255             471           19,477       50,139

    Earned premium on retention                                                   153,593              178,104       117,068           54,447         127,297          176,473      806,982

    Net investment income (loss) and financial income                              20,852                3,099         4,395           12,400          10,482          (16,324)      34,904
    Income from commissions                                                             -                1,563        32,531            4,798             319              971       40,182
    Other income                                                                        -                    -            26                -               -                -           26

    Total income                                                                  174,445              182,766       154,020           71,645         138,098          161,120      882,094

    Gross payments and change in liabilities for insurance contracts              204,017              136,831       108,867           76,135         105,378           97,265      728,493
    Reinsurers' share in payments and change in liabilities in respect of
      insurance contracts                                                           (7,994)             (3,989)      (45,247)         (18,095)         (18,448)        (12,288)     (106,061)

    Payments and change in liabilities for insurance contracts on retention       196,023              132,842        63,620           58,040          86,930           84,977      622,432
    Commissions, marketing and other acquisition expenses                          25,885               45,979        71,974           20,768          29,556           32,994      227,156
    General and administrative expenses                                             2,572                2,258         6,823            1,596          10,059           26,079       49,387
    Other expenses                                                                      -                    -             -                -               -            2,463        2,463
    Financial expenses                                                              1,407                  272         1,294              833               -            6,129        9,935

    Total expenses                                                                225,887              181,351       143,711           81,237         126,545          152,642      911,373

    Income (loss) before taxes on income                                          (51,442)               1,415        10,309           (9,592)         11,553            8,478       (29,279)

    *)      Reclassified, see Note 2c.

    *)      Property and other branches mainly include results of business property and residential insurance branches which constitute 60% of the premiums in these lines of business.
            Other liability branches mainly include results of third party and professional liability lines of insurance whose activity constitutes 57% of total premiums in these branches.




                                                                                              - 35 -
                                                                                                                                CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)
                                                                                                                                     c.5 Year ended December 31, 2008
                                                                                                                        Property         Liabilities                       General
                                                                                                                        and other        and other       General          insurance
                                                                                     Motor           Motor casco       branches in      branches in    insurance in       through a
                                                                                  act in Israel       in Israel         Israel **)       Israel **)       Europe        U.S. subsidiary    Total
                                                                                                                                          Audited
                                                                                                                                      NIS in thousands

    Gross premiums                                                                    627,984              726,063      1,051,420            358,712         607,676         769,720      4,141,575
    Reinsurance premiums                                                               12,135               31,563        553,694            147,868         137,266          50,053        932,579

    Premiums on retention                                                             615,849              694,500        497,726            210,844         470,410         719,667      3,208,996
    Change in unearned premium balance, on retention                                   (3,182)               5,436          1,533             (2,321)            442          (1,223)           685

    Earned premium on retention                                                       612,667              699,936        499,259            208,523         470,852         718,444      3,209,681

    Net investment income (loss) and financial income                               *) 17,987              *) 2,897       *) 3,420         *) 10,637          32,473            (850)     *) 66,564
    Income from commissions                                                                 -                 3,726       120,317             12,552           1,046           3,692       141,333
    Other income                                                                            -                     -            121                 -               -               -            121

    Total income                                                                      630,654              706,559        623,117            231,712         504,371         721,286      3,417,699

    Gross payments and change in liabilities for insurance contracts                  625,963              521,808        568,435            175,726         517,978         411,550      2,821,460
    Reinsurers' share in payments and change in liabilities in respect of
      insurance contracts                                                               (1,578)            (19,347)      (313,495)             2,149        (200,768)          (9,340)    (542,379)

    Payments and change in liabilities for insurance contracts on retention           624,385              502,461        254,940            177,875         317,210         402,210      2,279,081

    Commissions, marketing and other acquisition expenses                              80,562              178,798        303,628             82,270         137,523         125,100       907,881
    General and administrative expenses                                                  7,495                8,966        25,173               6,746         50,135         116,975       215,490
    Other expenses                                                                           -                    -              -                  -              -          16,543         16,543
    Financial expenses (income)                                                      *) (3,319)             *) (321)      *) 2,263          *) (1,896)             -          24,265      *) 20,992

    Total expenses                                                                    709,123              689,904        586,004            264,995         504,868         685,093      3,439,987

    Income (loss) before taxes on income                                              (78,469)              16,655         37,113            (33,283)           (497)         36,193        (22,288)

    Liabilities in respect of gross insurance contracts as of December 31, 2008     3,092,289              500,988      1,248,256          2,338,088         709,477       2,065,790      9,954,888

    *)      Reclassified, see Note 2c.
    *)      Property and other branches mainly include results of business property and residential insurance branches which constitute 61% of the premiums in these lines of business.
            Other liability branches mainly include results of third party and professional liability lines of insurance whose activity constitutes 57% of total premiums in these branches.

                                                                                                  - 36 -
                                                                                                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)
        d.       Additional information regarding the long-term savings segment:
                                                   Nine months ended September 30, 2009               Nine months ended September 30, 2008 *)                      Year ended December 31, 2008
                                                                          Life                                                Life                     Provident                    Life
                                              Provident   Pension      insurance      Total       Provident    Pension     insurance      Total           **)        Pension     insurance          Total
                                                                Unaudited                                           Unaudited                                                Audited
                                                                                                                   NIS in thousands
         Gross premiums earned                       -           -     3,156,089     3,156,089             -         -     3,100,794     3,100,794           -             -      4,125,536       4,125,536
         Premiums earned by reinsurers               -           -       144,017       144,017             -         -       142,066       142,066           -             -        186,378         186,378
         Premiums earned on retention                -           -     3,012,072     3,012,072             -         -     2,958,728     2,958,728           -             -      3,939,158       3,939,158
         Net investment income (loss) and
            financial income                   150,756        3,220    6,684,362     6,838,338      154,466      (2,953)   (1,280,923)   (1,129,410)    157,031       (4,880)   *)(3,158,233)   *)(3,006,082)
         Income from management fees           186,986       98,167      119,107       404,260      193,108      82,765       105,778       381,651     252,066      111,607         137,484         501,157
         Income from commission                      -            -       34,573        34,573            -           -        54,204        54,204           -            -          69,810          69,810
         Other income                                -            -            -             -           27         148             -           175           -          157               -             157
         Total income                          337,742     101,387     9,850,114    10,289,243      347,601      79,960    1,837,787     2,265,348      409,097      106,884        988,219       1,504,200
         Gross payments and change in
           liabilities in respect of
           insurance contracts and
           investment contracts                147,419           -     9,124,695     9,272,114      162,191          -     1,497,154     1,659,345      189,996            -        547,298         737,294
         Reinsurers' share in payments and
           change in liabilities in respect
           of insurance contracts                    -           -       (98,330)      (98,330)            -         -       (76,782)      (76,782)          -             -        (92,979)        (92,979)
         Payments and change in
           liabilities in respect of
           insurance contracts and
           investment contracts on
           retention                           147,419           -     9,026,365     9,173,784      162,191          -     1,420,372     1,582,563      189,996            -        454,319         644,315
         Commissions, marketing and
           other acquisition expenses           25,887       28,927     422,282       477,096        11,719      19,424      432,375       463,518       27,279       26,730        573,806         627,815
         General and administrative
           expenses                             60,380       36,118     142,661       239,159        70,495      34,489      155,175       260,159       84,827       47,793        199,639         332,259
         Other expenses                         45,725        1,410       6,557        53,692        29,435       1,726        5,731        36,892       38,684        2,513           7,681         48,878
         Financial expenses                          7            5       5,674         5,686            39         270        5,813         6,122           43          117        *) 5,706        *) 5,866
         Total expenses                        279,418       66,460    9,603,539     9,949,417      273,879      55,909    2,019,466     2,349,254      340,829       77,153      1,241,151       1,659,133
         Income (loss) before taxes on
            income                              58,324       34,927     246,575       339,826        73,722      24,051     (181,679)      (83,906)      68,268       29,731       (252,932)       (154,933)

         *)       Reclassified, see Note 2c.
         **)      Includes provident fund activities, consolidated for the first time in the reporting period, and Clal Insurance is a guarantor for minimum yield to its members.
                                                                                                  - 37 -
                                                                                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009

NOTE 5:- SEGMENT REPORTING (Cont.)
                                                                             Three months ended September 30, 2009                 Three months ended September 30, 2008 *)
                                                                                                     Life                                                   Life
                                                                       Provident    Pension       insurance       Total       Provident    Pension       insurance       Total
                                                                                           Unaudited                                              Unaudited
                                                                                                                   NIS in thousands

             Gross premiums earned                                           -               -    1,046,503    1,046,503            -             -     1,044,384     1,044,384
             Premiums earned by reinsurers                                   -               -       48,782       48,782            -             -        50,031        50,031

             Premiums earned on retention                                    -               -     997,721       997,721            -             -       994,353       994,353

             Net investment income (loss) and financial income           77,456         1,156     2,212,764    2,291,376       154,324       (3,422)    (1,265,199)   (1,114,297)
             Income from management fees                                 61,143        36,217        45,964      143,324        61,845       29,902         34,874       126,621
             Income from commission                                           -             -        12,144       12,144             -            -         15,977        15,977
             Other income                                                     -             -             -            -             -           51              -            51

             Total income                                               138,599        37,373     3,268,593    3,444,565       216,169       26,531      (219,995)       22,705

             Gross payments and change in liabilities in respect of
               insurance contracts and investment contracts              80,123              -    3,042,464    3,122,587       162,191            -      (271,449)     (109,258)
             Reinsurers' share in payments and change in liabilities
               in respect of insurance contracts                             -               -      (40,734)     (40,734)           -             -       (26,782)      (26,782)

             Payments and change in liabilities in respect of
               insurance contracts and investment contracts on
               retention                                                 80,123              -    3,001,730    3,081,853       162,191            -      (298,231)     (136,040)

             Commissions, marketing and other acquisition expenses        8,455         9,679      130,798       148,932         5,603        6,207       144,665       156,475
             General and administrative expenses                         17,235        12,978       45,595        75,808        23,878       11,508        59,208        94,594
             Other expenses                                              16,646           470        2,709        19,825         9,253          622         1,940        11,815
             Financial expenses                                               -             1        2,907         2,908            28          268         2,593         2,889

             Total expenses                                             122,459        23,128     3,183,739    3,329,326       200,953       18,605       (89,825)      129,733

             Income (loss) before taxes on income                        16,140        14,245       84,854       115,239        15,216        7,926      (130,170)     (107,028)


             *)     Reclassified, see Note 2c.




                                                                                    - 38 -
                                                     CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 6:- CAPITAL MANAGEMENT AND REQUIREMENTS

        a.   Management's policy is to maintain a solid capital basis in order to preserve the Company's
             ability to continue to operate so as to yield a return for its shareholders and maintain good
             relations with other factors such as suppliers, insurance agents and Group employees and in
             order to support future business development. The Company and some of its subsidiaries are
             subject to external capital requirements. The capital requirements from institutional entities that
             are consolidated in the financial statements are established by the Regulator of the Insurance.

        b.   Below are details of the capital requirements according to the Supervision of Insurance Business
             (Capital Adequacy Requirement from an Insurer) Regulations, 1998, as amended ("the capital
             regulations") and the Regulator's directives applicable to insurance subsidiaries in Israel:
                                                                    Consolidated insurance subsidiaries in Israel
                                                                                                          Clal
                                                                       Clal            Clal             Credit
                                                                    Insurance         Health          Insurance
                                                                                    Unaudited
             As of September 30, 2009                                            NIS in thousands
             Minimum shareholders' equity:
             Amount required as per the Regulator's regulations
              and directives (1) (3)                                 3,025,035          341,883            27,725

             Amount calculated as per the regulations:
             Primary capital                                         2,848,820          432,640            47,688
             Subordinate capital - subordinated deeds                1,145,520                -                 -

             Total capital calculated as per the regulations         3,994,340          432,640            47,688

             Surplus (2)                                              969,305            90,757            19,963

             Additional surplus not included in the calculation
              of capital                                                     -           35,781             8,905

             Investments in investees and related companies
               that must be placed against capital surplus as per
               the Regulator's directives or are held against
               capital surplus thereby forming non-distributable
               surplus                                                  87,422                 -                -
             Primary capital:
             Minimum amount required by the regulations                 83,092           83,092            27,696
             Amount calculated as per the regulations                2,848,820          468,421            56,593

             Surplus                                                 2,765,728          385,329            28,897
             (1) The required amount also includes a capital
                   requirement in respect of:
                 Deferred acquisition costs in life assurance
                   and insurance against sickness and
                   hospitalization and acquisition of insurance
                   portfolio costs                                    837,334           142,918                 -
                 Extraordinary risks in life assurance                326,274                 -                 -
                 Unrecognized assets as defined in the capital
                   requirements (mainly loans and advances to
                   agents)                                              96,475           21,814                29
                 Investment in subsidiaries and provident and
                   pension fund management rights                    1,144,637                -                 -
                 Special capital requirements                                -           16,280                 -

                                                                     2,404,720          181,012                29


                                                     - 39 -
                                                     CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 6:- CAPITAL MANAGEMENT AND REQUIREMENTS (Cont.)
                                                                   Consolidated insurance subsidiaries in Israel
                                                                                                         Clal
                                                                      Clal            Clal             Credit
                                                                   Insurance         Health          Insurance
                                                                                    Audited
             As of December 31, 2008                                            NIS in thousands
             Minimum shareholders' equity:
             Amount required as per the Regulator's regulations
               and directives (1) (3)                               3,041,034          287,204            26,745
             Amount calculated as per the regulations:
             Primary capital                                        1,879,584          239,722            47,688
             Subordinate capital - subordinated deeds                 939,792                -                 -

             Total capital calculated as per the regulations        2,819,376          239,722            47,688

             Surplus (deficit) (2)                                   (221,658)         (47,482)           20,943

             Additional surplus not included in the calculation
              of capital                                                    -                -             4,784

             Actions for supplementing the equity performed
               up to the signing of the financial statements:
             Issue of primary capital                                199,949            55,000
             Increase in subordinate capital due to issue of
               capital as detailed above                             149,962                  -
             Decrease in unrecognized assets due to issue of
               capital as detailed above                               14,996                 -
             Other decrease in unrecognized assets                      9,446                 -

             Surplus as of December 31, 2008 taking the above
               activities into account                               152,695             7,518

             Primary capital:
             Minimum amount required by the regulations                80,191           80,191            26,746
             Amount calculated as per the regulations               1,879,584          239,722            52,472

             Surplus                                                1,799,393          159,531            25,726

            (1) The required amount also includes a capital
                 requirement in respect of:
                Deferred acquisition costs in life assurance and
                  insurance against sickness and
                  hospitalization and acquisition of insurance
                  portfolio costs                                    819,076           121,601                 -
                Extraordinary risks in life assurance                320,010                 -                 -
                Unrecognized assets as defined in the capital
                  requirements (mainly loans and advances to
                  agents)                                            174,436            21,458                18
                Investment in subsidiaries and provident and
                  pension fund management rights                    1,125,363                -                 -
                Special capital requirements                                -           13,676                 -

                                                                    2,438,885          156,735                18




                                                     - 40 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 6:- CAPITAL MANAGEMENT AND REQUIREMENTS (Cont.)

            (2)   Apart from the general requirements in the Companies Law, the distribution of a dividend
                  out of capital surplus in insurance companies is subject to liquidity requirements and
                  compliance with the Ways of Investment Regulations.

            (3)   a)    In June 2008, a circular was published with respect to the mode of application of
                        the principles of measurement and presentation under IFRS, for the calculation of
                        the required capital and the admissible capital of insurance companies starting
                        from the financial statements for the second quarter of 2008. The purpose of the
                        circular is to set directives regarding the mode of application of the Capital
                        Regulations with respect to investments in investees (including insurance
                        companies and managing companies controlled by insurance companies).
                        According to the circular, the capital requirements pursuant to the Capital
                        Regulations will continue to be based on separate financial statements. In order to
                        calculate the admissible capital according to the Capital Regulations, the
                        investment of an insurance company in another insurance company or in a
                        controlled managed company, as well as in other investees, will be calculated on
                        an equity basis along the chain of control.

                  b)    In November 2009, an amendment to the Supervision of Financial Services
                        (Capital Adequacy Requirement from an Insurer) Regulations, 2009 (Revised) was
                        issued ("the amendment"), effective starting 30 days from issuance.

                        In the amendment, capital requirements in the following categories are suggested
                        in addition to the existing capital requirements:

                        (1)   Return yielding programs in life assurance that are not backed, in whole or
                              in part, by designated debentures.

                        (2)   Operating risks.

                        (3)   Credit risks as a percentage of assets based on the level of risk that
                              characterizes the different assets.

                        (4)   Catastrophe risks in general insurance.

                        (5)   Capital requirements for guarantees.

                        (6)   Capital requirements for the insurer's holding of provident fund and pension
                              fund management companies.

                        In addition, the following mitigations were granted:

                        (1)   A mitigation regarding the calculation of the capital in respect of data
                              systems development expenses, subject to the Regulator's approval;

                        (2)   A deduction of the reserve for tax that was created due to inadmissible assets
                              that are held against the investment regulations or in contrary the Regulator's
                              directives;

                        (3)   It was determined that the Regulator will be able to allow, subject to the
                              conditions he will apply, a reduction of the required capital, at the rate of
                              35% of the initial difference, for the acquisition of provident fund activities
                              or a provident funds management company.

                                                 - 41 -
                                            CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 6:- CAPITAL MANAGEMENT AND REQUIREMENTS (Cont.)

                     In the framework of the amendment, the definition of basic capital was eliminated,
                     the definitions of primary capital and subordinated loan capital were changed and
                     the definition of third tier capital was added. The definitions of subordinated loan
                     capital and third tier capital became subject to the conditions and rates that the
                     Regulator will define. Consequently, and in accordance with the supervision's
                     intentions to adopt, in the future, the Solvency II directive of the European Union
                     with respect to guaranteeing the insurers' repayment capability, in November 2009
                     a draft circular of institutional entities - Composition of Admitted Shareholders'
                     Equity of an Insurer, was published. The draft sets principles for the structure of an
                     insurer's admitted shareholders' equity, and a framework of principles for the
                     recognition of various capital components and their classification into the various
                     capital tiers. The Company is studying the draft instructions and it cannot estimate
                     its implications at this stage, among others, due to the lack of clarity regarding the
                     draft’s implications on the Company's existing primary capital and subordinated
                     loan capital. The insurance companies and the Regulator are expected to hold
                     discussions regarding this issue.

                     Regarding this matter the Regulator published a temporary order, according to
                     which in the period from the date of the beginning of the amendment up the date
                     the Regulator will notify, there will be no change in the definitions, in the structure
                     and in the manner of calculation of the existing capital.

                     According to the amendment an insurer will be required to increase, up to the date
                     of publication of the financial statements, its shareholders' equity in respect of the
                     difference between the required capital according to the regulations, before the
                     amendment and after it ("the difference"). The difference will be calculated for
                     each date of the financial statements as specified below until the date of their
                     issuance:

                     At December 31, 2009, at least 30% of the difference;
                     At June 30, 2010, at least 45% of the difference;
                     At December 31, 2010, at least 60% of the difference;
                     At June 30, 2011, at least 75% of the difference;
                     At December 31, 2011, the full difference.

                     Based on the aforementioned amendment, the minimum capital difference that
                     would have been required from Clal Insurance, including in respect of its insurance
                     subsidiaries (Clal Credit Insurance and Clal Health), as at September 30, 2009, is
                     an increase of approximately NIS 1.2 billion. According to the amendment and the
                     temporary order as stipulated above and given Clal Insurance's existing capital,
                     Clal Insurance is required to gradually increase its capital over several years by
                     approximately NIS 0.3 billion. As stated above, the Regulator has allowed a
                     reduction of 35% from the original difference in the required capital for the
                     acquisition of management companies and the activity of provident funds totaling
                     approximately NIS 0.3 billion.




                                            - 42 -
                                             CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 6:- CAPITAL MANAGEMENT AND REQUIREMENTS (Cont.)

                 c)   In June 2009, a second draft of the Financial Institutions Circular was issued
                      regarding the capital requirements of management companies as well as a draft of
                      the Supervision of Financial Statements Regulations (Provident Funds) (Minimum
                      Shareholders' Equity required from a Management Company), 2009 ("the draft")
                      and a draft of Income Tax Regulations (Rules for Approving and Managing
                      Provident Funds) (Revised), 2009 ("the directives").

                      In accordance with the directives, it is proposed to expand the capital requirements
                      from management companies. The new capital requirements will include capital
                      requirements relevant to the volume of the managed assets, but not less than an
                      initial shareholders' equity of NIS 10 million. The draft prescribes two alternatives
                      for the minimum required shareholders' equity in the manner in which the
                      management company is entitled to deposit the required amount in a special trust
                      account from which withdrawals will only be allowed by approval of the
                      supervisor and under the terms detailed in the draft, or alternatively in the fact that
                      the management company may hold the required amount in the context of its own
                      accounts provided that it places an additional amount composed of the amount of
                      the unrecognized assets with the addition of the capital requirements for
                      management companies controlled by the management company, as defined in the
                      draft, and provided that the management company holds unpledged assets in the
                      amount of the required minimum shareholders' equity.

                      In accordance with the directives, a management company that has obtained a
                      license prior to the date of the publication of the Circular and whose shareholders'
                      equity on the date of publication is lower than the required minimum shareholders'
                      equity as above will be required to increase its shareholders' equity at least by half
                      of the required amount up to March 31, 2010 and the balance of the amount up to
                      December 31, 2010.

                      Based on an initial estimate as of September 30, 2009, the minimum capital
                      requirement from Clal Insurance, for its provident fund activity and for its
                      management subsidiaries (Meitavit Atudot, Old Atudot and Clal Provident), grew
                      by approximately NIS 82.5 million, this in addition to the amount discussed in b)
                      above. This requirement was calculated excluding C.P.Y. in view of the expected
                      discontinuance of its activity in January 2010 as stated in Note 8p below.

                      Deliberations are being held with respect to this draft with the Regulator of the
                      Insurance but at this stage, it is unclear when these proposed amendments will
                      become effective and what the relevant arrangements they prescribe will be.

                 d)   On January 25, 2009, the Regulator issued a letter regarding mitigations in the
                      capital required from insurance companies regarding the subordinated capital rate.
                      According to the letter, an insurance company will be entitled to include in its
                      recognized shareholders' equity subordinate capital at a rate of 75% of the total
                      increase of primary capital and not at 50%, as determined in the Supervision
                      Regulations, this up to a ceiling of 60%of the total primary capital. The increase in
                      the subordinate capital rate will be amortized on a straight-line basis between June
                      30, 2009 and June 30, 2010.


                                             - 43 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 6:- CAPITAL MANAGEMENT AND REQUIREMENTS (Cont.)

                        The mitigation is subject to obtaining the advance approval of the Regulator and
                        will apply to:

                        -     Increase in the primary capital created from the provision of funds to the
                              insurance company by its controlling shareholders between December 1,
                              2008 and September 30, 2009.

                        -     Increase in capital due to the transfer of companies that are mainly engaged
                              in holding real estate properties as defined in Article 23(c) to the Investment
                              Regulations.

                        In March 2009, Clal Insurance obtained an approval for benefiting from the
                        mitigation. As of September 30, 2009, the mitigation has not been utilized.

                  e)    According to the letter issued by the Regulator on January 25, 2009 regarding
                        mitigations in the capital required from insurance companies, an asset held against
                        the Investment Regulations in respect of which the deviation is passive and was
                        created after October 1, 2008 will not be considered as an unallowable asset as
                        defined in the capital regulations subject to the advance approval of the Regulator.
                        As of the date of the financial statements, the Company has several passive
                        deviations that are not considered an unallowable asset pursuant to the Regulator's
                        approval as above. As of balance sheet date, Clal Insurance has several passive
                        deviations amounting to approximately NIS 200 million which are not considered
                        an unrecognized asset pursuant to the Regulator's approval as above.

                  f)    According to a letter issued by the Regulator on March 30, 2009, starting from the
                        financial statements for 2008 through December 30, 2010, an insurance company
                        and a managing company will not distribute a dividend without the Regulator's
                        advance approval. According to the letter, as a rule, the distribution of dividends at
                        a rate exceeding 25% of the distributable income will not be permitted.

            (4)   The Company undertook to supplement up to 50% of the equity required from Clal
                  Insurance based on the Capital Regulations. This undertaking will be exercised only
                  when the equity is negative and will remain in effect as long as the Company is the
                  controlling shareholder in Clal Insurance.

            (5)   Pursuant to the approval, effective May 2003, which was granted by the Regulator to the
                  controlling shareholders of IDB Holdings Ltd. ("IDB Holdings"), and the amendment to
                  the permit terms of December 21, 2005, in the framework of the Regulator's approval for
                  establishment of a special purpose company for Clal Insurance, IDB Holdings is
                  obligated to meet the Company's commitment, as described in 5) above as long as it is the
                  direct and indirect controlling shareholder in Clal Insurance. In addition, the controlling
                  shareholders are required to maintain the capital requirements, amongst others, of IDB
                  Holdings, IDB Development and the Company, as long as there are pledges on their
                  controlling holdings in IDB Holdings. According to the approval, the Company's equity,
                  with respect to its stake in Clal Insurance, will not be lower, at any time, than 120% of
                  the minimum solvency margin required from the Clal Insurance as at September 30,
                  2005, linked to the CPI of September 2005. As at balance sheet date, the Company's
                  equity is higher than the amount required.



                                               - 44 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 6:- CAPITAL MANAGEMENT AND REQUIREMENTS (Cont.)

                  The permit also prescribes that IDB Development's equity at any given time cannot be
                  lower than the product of its holding rate in the Company multiplied by 120% of the
                  equity required from the Company as above and that IDB Holdings' equity at any given
                  time will not be lower than product of IDB Holdings' holding rate in IDB Development
                  multiplied by 120% of the equity required from IDB Development as above.

                  To the best of the Company's knowledge, as of September 30, 2009, the capital
                  requirements mentioned above are met with respect to IDB Development and IDB
                  Holdings.

                  The approval prescribes conditions and restrictions regarding the recording of charges on
                  the chain of control holdings in Clal Insurance. To the best of the Company's knowledge,
                  IDB Holdings is acting to obtain the Regulator's approval for certain effected acquisitions
                  of the means of control in the Company's chain of control and existing charges recorded
                  in excess of the approval.

            (6)   Clal Insurance undertook to complement the equity required from Clal Credit Insurance
                  in accordance with the Capital Regulations by up to 50% of the equity. This undertaking
                  will be exercised only when there is a capital deficiency and will be valid as long as Clal
                  Insurance is the controlling shareholder of Clal Credit Insurance.

            (7)   The Company undertook to complement, at any time, the equity of a subsidiary, Meitavit
                  Atudot Pension Fund Management Company Ltd. ("Meitavit"), to the amount determined
                  in the Income Tax Regulations (Regulations for Approval and Management of Provident
                  Funds), 1964. The undertaking will be valid as long as the Company controls Meitavit,
                  directly or indirectly.

            (8)   The Company undertook to complement, at any given time, the equity of a subsidiary -
                  C.P.Y. The Israeli Company for Managing the Rights of the Electric Corporation's
                  Employees Ltd. ("C.P.Y.") to the amount determined in the Income Tax Regulations
                  (Principles for Approval and Management of Pension Funds), 1964. The undertaking will
                  be valid as long as the Company controls C.P.Y., directly or indirectly.

            (9)   Clal Insurance provided a guarantee to complement capital in an amount not to exceed
                  NIS 500 million for Clal Finance Batucha Investment Management Ltd. ("Batucha"),
                  which is a sub-subsidiary of the Company, in order to comply with the minimum capital
                  required from a primary market maker as prescribed in the document "Conditions for
                  Appointment of a Primary Market Maker in Government Bonds and Conditions for its
                  Activities". On August 1, 2008, the minimum capital required from a primary market
                  maker was reduced to NIS 400 million.




                                               - 45 -
                                                   CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 6:- CAPITAL MANAGEMENT AND REQUIREMENTS (Cont.)

                    In order to provide the guarantee, approval was received from the Regulator of Insurance
                    determining that in any case the amount of the guarantee is not to exceed 15% of the
                    equity of the Clal Insurance (including subordinated capital), and that Clal Insurance is
                    required to provide against the guarantee, equity, as defined in the Capital Regulations, in
                    an amount equal to 7.5% of the amount of the guarantee actually provided. In
                    consideration for providing the guarantee, Batucha will pay Clal Insurance an annual
                    guarantee commission at a rate of 0.3% of the difference between Clal Finance Batucha's
                    equity and NIS 400 million calculated on a quarterly basis. Batucha's operations as a
                    primary market maker commenced in September 2006.

                    The approval of the Regulator to the incorporation of a special purpose subsidiary and the
                    provision of the loan to Clal Finance provided that the total amount of the loans to Clal
                    Finance, a subsidiary of the Company, and to Batucha, including guarantees, is not to
                    exceed 15% of Clal Insurance's equity and that with the provision of the loan as above,
                    the letter of guarantee provided by Clal Insurance to Batucha will be cancelled, apart
                    from an amount not exceeding the lower of the capitalized interest, which is not
                    recognized as capital in accordance with the provisions of Accounting Standard No. 22 of
                    the Israel Accounting Standards Board (superseded by IAS 32), of a perpetual capital
                    note that was granted to Batucha by Clal Finance, and NIS 100 million.

                    As at the date of the financial statements, Batucha's equity is lower than NIS 400 million
                    and the actual guarantee amounts to approximately NIS 1.6 million.

        c.   The subsidiaries that are pension and provident management companies meet the minimum
             capital requirements prescribed by the Income Tax Regulations (Rules for Approving and
             Managing Provident Funds), 1964. As for the increase in capital requirements from these
             companies, see b(3)(c) below.

        d.   The insurance subsidiaries in Israel meet the capital requirements prescribed by applicable
             regulations, see also Note 8n below.

        e.   On July 13, 2009, the department of members and supervision of the Tel-Aviv Stock Exchange
             offered non-bank members a new proposed model for securing the financial stability of non-
             bank Stock Exchange members and requested their response to the proposed model. The
             purpose of the new model is to disclose all the risks inherent in the non-bank member's activity
             and to secure its ability to repay its short-term liabilities. The management of the subsidiary is
             studying the principles of this model but the subsidiary's management estimates that if and as far
             as this model is adopted in the format presented to the subsidiary, it will be required to increase
             its shareholders' equity in order to preserve its present level of activity. It should be clarified that
             the subsidiary's management intends to study the proposed model and deliver its comments to
             the Stock Exchange. Moreover, the model has not yet been approved by the Stock Exchange
             Board of Directors or by the Israel Securities Authority, the Minister of Finance and the Israeli
             Parliament's Finance Committee. At this stage, the subsidiary does not possess the information
             regarding the structure of the final model to be approved and is unable to assess its implications,
             if any.




                                                   - 46 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES

        a.   Class action and material motions for approving claims as class actions:

             The amounts of the claims described below are true as of the date of filing, unless otherwise
             stated.

             Following are details of material claims filed against the Group not in the ordinary course of
             business:

             There is a general exposure, which cannot be estimated and/or quantified, among others, as a
             result of the complexity of the services provided by the Group to its policyholders. The
             complexity of these arrangements contains, among others, a potential for arguments due to
             information gaps and interpretations between the Group and the other parties to the insurance
             contracts and the investment contracts, which relate to many commercial and regulatory
             conditions. It is not possible to anticipate the type of arguments and interpretations that will be
             raised in this area pursuant to the Class Actions Law, as well as the exposure that will be
             derived from them.
             There is also a general exposure that arises from the fact that complaints are filed from time to
             time against the institutional entities that are part of the Group, including complaints to the
             Supervisor of the Capital Market, Insurance and Savings Division at the Ministry of Finance
             with respect to rights of policyholders pursuant to insurance policies and/or the law.
             These complaints are handled on a current basis by the public complaints bureau of the various
             Government institutions. The supervision decisions in these complaints, if decided, might be
             granted as lateral decisions which apply to wide groups of policyholders. At times, the
             complaining factors also threaten to take legal action in the context of a class action. Due to the
             preliminary stage of these proceedings, it is hard to establish whether a lateral decision is
             granted by the supervisor regarding these complaints and/or whether class actions are filed as a
             result of these proceedings and it is impossible to assess the potential exposure in respect of
             these complaints. Therefore, no provision was included in respect of said exposure.
             Below are details regarding the exposure to class actions and motions to approve claims as class
             actions that were filed against the Group:

             1.    Below is a condensed description of a class action and motions to approve claims as class
                   actions filed against the Company, as described in Note 49a to the Company's annual
                   financial statements for 2008, which did not undergo any material changes up to the date
                   of signing the financial statements:

                   a)     A claim was filed with the Tel-Aviv District Court against a subsidiary, Clal
                          Insurance, and a motion for approving the claim as a class action on behalf of
                          policyholders who had purchased from Clal Insurance comprehensive motor
                          insurance policies who had paid/had been billed in the seven years preceding the
                          filing of the claim for insurance fees for recovering the value of the policy. The
                          plaintiff argues that the insurance fees were illegally collected without obtaining
                          the Regulator's approval for the insurance fee collection and rate. Alternatively the
                          plaintiff is arguing that the Regulator's approval, as far as it had been obtained, was
                          granted by overstepping authority and is therefore null and void. The plaintiff
                          estimates the damage caused to the represented group at approximately NIS 100
                          million and alternatively at NIS 32 million. In July 2007, the Court approved the
                          class action and decided that Clal Insurance had collected recovery fees without a
                          written approval by the Regulator. Clal Insurance filed a motion for appeal with the
                          Supreme Court.


                                                 - 47 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                  b)   A claim was filed with the Tel-Aviv District Court against a subsidiary, Clal
                       Insurance, and a motion for approving the claim as a class action by a life
                       assurance policyholder who claims that Clal Insurance charges from its life
                       assurance policyholders excessive insurance fees on the first of the first month of
                       engagement with the company whereas the policy itself is extended and the
                       insurance coverage is provided only on a later date in that month. The plaintiff
                       estimates the damage caused to the represented group at approximately NIS 29.25
                       million.

                  c)   A claim was filed with the Tel-Aviv District Court against a subsidiary, Clal
                       Insurance, and a motion for approving the claim as a class action. According to the
                       claim filed by a father and his underage daughter, they will never be able to realize
                       pregnancy test coverage included in their health insurance policy. The male
                       plaintiff will not be able to realize said coverage and the female plaintiff will not
                       need this coverage until she at least reaches puberty. Accordingly, they see no need
                       to add them and other relevant policyholders to this insurance coverage. The
                       plaintiffs argue that this coverage involves an unnecessary risk premium. The claim
                       is placed at NIS 50 million.

                  d)   A claim was filed with the Tel-Aviv District Court against a subsidiary, Clal
                       Insurance, and a motion for approving the claim as a class action. The claim was
                       filed by several plaintiffs against the subsidiary and several other defendants, all
                       insurance companies. The claim pertains to the fixed management fees charged by
                       the defendants for a profit sharing life assurance policy between 1992 and 2003
                       that were higher than the maximum rate permitted by law. The plaintiffs also argue
                       that the variable management fees had been collected from them each month
                       instead of on an annual basis, thereby preventing them from receiving the yield on
                       some of the management fees collected during the year. The amount sought from
                       all the defendants is estimated by the plaintiffs at NIS 244 million, of which the
                       amount sought from Clal Insurance is NIS 56 million.

                  e)   A claim was filed with the Tel-Aviv District Court against a subsidiary, Clal
                       Insurance, and a motion for approving the claim as a class action. The claim was
                       filed by several plaintiffs against the subsidiary and several other defendants, all
                       insurance companies. The claim relates to payment known as "sub-annual fees"
                       collected in the context of life assurance policies where the insurance tariff is
                       determined at an annual fee but the actual payment is made in installments. The
                       plaintiff argues that Clal Insurance charges a higher "sub-annual fee" than
                       permitted and in respect of types of policies that do not allow such fees. The
                       amount sought from all the defendants is estimated by the plaintiffs at NIS 2.3
                       billion, of which the amount sought from Clal Insurance is NIS 543 million.

                  f)   Two claims regarding the same matter were filed with the Tel-Aviv District Court
                       against a subsidiary, Clal Insurance, and motions for approving the claims as class
                       actions on behalf of a third party that was entitled to receive from the defendant as
                       a third party funds and/or insurance awards due to damage caused to a vehicle,
                       including reimbursement for the appraiser's fees that the third party had paid, that
                       were not paid and/or reimbursed by the defendant. The Court adjoined the hearing
                       of the separately filed motions. The plaintiff in the first claim estimates the damage
                       sustained to the entire group at approximately NIS 32 million and the plaintiff in
                       the second claim estimates the damage sustained to the entire group at
                       approximately NIS 8.3 million.


                                              - 48 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                  g)    A claim was filed with the Tel-Aviv District Court against a subsidiary, Clal
                        Insurance, and a motion for approving the claim as a class action on behalf of
                        policyholders who as of April 1, 2004 were entitled to receive from the defendant
                        insurance compensation for damage caused to a private vehicle or a commercial
                        vehicle of up to 4 tons, including for total loss, constructive total loss or theft,
                        while they were insured by the defendant according to chapter A to the standard
                        policy and did not receive full and/or partial compensation for the loss or damage
                        sustained to their vehicles' protective equipment. The plaintiff argues that Clal
                        Insurance acts in contrast to the provisions of article 1 to the rider to the
                        Supervision of Insurance Business Regulations (Contracts Terms for Private Auto
                        Insurance), 1986 ("the standard policy") by not paying its policyholders for the
                        damage caused to the vehicle's protective equipment installed at its requirement
                        and by making the policyholders illegally sign a waiver that is in contrast to the
                        directives of the Insurance Regulator. The plaintiff estimates the damage caused to
                        the entire group at NIS 48,870,000.

             2.   Below is a description of a class action and motions to approve claims as class actions
                  filed against the Company which underwent material changes from the date of issuing the
                  Company's financial statements for 2008 up to the date of approving these financial
                  statements and motions to approve material class actions filed after the date of issuing the
                  Company's financial statements for 2008 up to the date of approving these financial
                  statements:

                  a)    In April 2006, a subsidiary, Clal Insurance, received a financial claim filed against
                        it with the District Court in Tel-Aviv - Jaffa ("the claim"), as well as a motion to
                        approve the claim as a class action ("the motion") in the name of a private client
                        who purchased from Clal Insurance disability policies ("the policy"). The claim
                        and the motion include additional claimants and additional defendants that are
                        insurance companies.

                        The grounds of the claim that is the object of the request is, according to the
                        plaintiff, the creation of a misrepresentation, the stipulation in the policy that
                        stipulates "a period of waiting" of three months only after which and if the insured
                        is still disabled, the insurance company will begin paying insurance benefits and
                        will do so as long as the disability continues and not later than the termination of
                        the policy. The plaintiff claims that Clal Insurance collects a premium from the
                        policyholders also during the period of the last three months before the termination
                        of the policy, although if the insured event should occur during this period the
                        policyholder will not be entitled in any case to receive insurance benefits. The
                        plaintiffs claim that the defendants did not provide information about that.

                        The plaintiff is petitioning to approve the claim as a class action in accordance with
                        the provisions of the Class Actions Law, 2006. He claims that he was misled by
                        Clal Insurance and his claim is supported, inter alia by section 55 of the Control of
                        Financial Services (Insurance) Law, 1981, for the breach of section 3 of the
                        Insurance Contract Law, for the breach of the provisions of the Insurance Business
                        Control Regulations (Form of Policy and its Terms), 1980, as well as negligence
                        breach of legal obligation and unjust enrichment.




                                                - 49 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       According to the plaintiff they all suffered actual losses from the defendants, which
                       are estimated by them in a preliminary sum of NIS 47.61 million for the years
                       1998-2004 (out of this sum, NIS 13.33 million is the share of Clal Insurance) in
                       respect of the premiums which they paid during the period in which they had no
                       cover.

                       In the decision on February 3, 2009, the District Court approved the claim as a
                       class action ("the decision"). In the decision it was determined that the grounds for
                       the claim are a breach of Sections 38 and 39 to the Supervision of Financial
                       Services (Insurance) Law, 1981 ("the Supervision Law"), misleading according to
                       Section 55 to the Supervision Law, breach of agreement and misleading according
                       to the Contracts Law, a breach of a legislated duty, a breach of Section 39 to the
                       Contracts Law (General Section), 1973, collection of insurance fees during the last
                       three months of the insurance period is a depriving condition in a standard contract
                       and that Clal Insurance was unlawfully enriched in breach of the Unjust
                       Enrichment Law, 1979.

                       In its decision, the Court determined that the remedy will be the refund of the
                       insurance fees that Clal Insurance actually collected from its policyholders under
                       the policy for the last three months before the end of the policy's term, with the
                       addition of linkage differences and interest as mentioned in Clause 28(a) to the
                       Insurance Contracts Law, from the date of collection up to the actual refund.

                       On April 19, 2009, the Court ordered to defer the date of hearing the claim and the
                       date of filing the letters of defense and of placing an ad in the newspaper for the
                       approval of the claim until the Supreme Court decides in the motion for appeal
                       filed by Clal Insurance. On April 26, 2009, Clal Insurance filed a motion for
                       appeal. The Supreme Court decided that the motion for appeal merits a response.
                       The plaintiff filed a motion to appeal the decision to defer said dates.

                       Clal Insurance's management, based on the opinion of its legal advisors, believes
                       that Clal Insurance has good arguments in the motion for appeal. Accordingly, in
                       the opinion of Clal Insurance's management, based on the opinion of its legal
                       advisors, it is more likely (in other words, a probability that exceeds 50%) that the
                       Court will accept the motion for appeal and the appeal. Therefore, no provision
                       was made in the financial statements.

                  b)   In October 2002, a subsidiary, Clal Insurance, received a claim that was filed
                       against it and against Migdal Insurance Co. Ltd. ("Migdal") with the District Court
                       in Tel-Aviv - Jaffa ("the claim"), as well as a request to approve the claim as a
                       class action ("the request"). The aforesaid is on behalf of the entire borrowing
                       public - those who have taken out mortgages - who insured their lives in the
                       framework of mortgage loans received from one of the mortgage banks, through
                       Clal Insurance or Migdal, as applicable, and who were required to pay premiums
                       which, allegedly, include therein commissions which the respondents paid to the
                       mortgage banks ("the Group").

                       According to the plaintiffs, the aforesaid actions and/or omissions of the
                       respondents as mentioned caused the plaintiffs and the members of the group
                       monetary damages in the amount that was paid as commissions to the mortgage
                       banks.



                                              - 50 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The plaintiffs are petitioning, among other things, for a declaratory order by which
                       the payment of the commissions to the banks was against the law, for an order
                       prohibiting the respondents from continuing to pay commissions to the mortgage
                       banks, and for an order obligating the respondents to return to the members of the
                       group the excess money that was allegedly collected, or alternatively, to bear their
                       damages, plus linkage differences and interest. In addition, the plaintiffs are
                       petitioning for orders to disclose documents and provide accounts.

                       The amount of the plaintiff's personal claim against Clal Insurance is NIS 2,832
                       (calculated nominally). The amount of the class action is estimated by the plaintiffs
                       in hundreds of millions of shekels, in light of the size of the group.

                       In December 2002, Clal Insurance filed a motion for stay of proceedings of the
                       claim, because of the pending proceedings dealing with similar issues as those in
                       the basis of this claim, in the framework of a class action that was filed against
                       Mishkan Bank Hapoalim Mortgage Bank Ltd. and others ("Mishkan's claim") (this
                       request was also filed by Migdal). In April 2003, the Court accepted the request for
                       stay of proceedings with respect to the claim and the request.

                       In June 2006, the plaintiff submitted a request to renew the proceedings in this
                       case. The motion was rejected by the Court in January 2007. In March 2007, the
                       Supreme Court rejected a request for leave to appeal the decision. Therefore, at this
                       stage the proceedings in this case are stayed.

                       On March 2, 2009, the representative plaintiff, whose claim was filed against
                       Migdal, filed a request against Migdal under Section 7(a) to the Class Actions Law,
                       wherein the Court was requested to instruct the transfer of deliberations regarding
                       this case to those who are handling the Mishkan's claim. On March 9, 2009, the
                       representative plaintiff, whose claim was filed against Clal Insurance, rendered his
                       response according to which he joins the request to transfer the deliberations. Clal
                       Insurance filed its response to the request. The defendants responded to Clal
                       Insurance's response. On August 31, 2009, the Court granted the request and
                       ordered to assign the hearing in the case to the Board discussing the Mishkan
                       claim. Consequently, on October 11, 2009, Clal Insurance filed a motion for stay of
                       proceedings in the case until the Mishkan claim is resolved. No decision has been
                       granted in this matter to date.
                       In the opinion of the management of Clal Insurance, which is based on the opinion
                       of its legal advisors, Clal Insurance has good defense arguments against the
                       request. Accordingly, the management of Clal Insurance believes, based on the
                       opinion of its legal advisors, it is unlikely (in other words, the probability is lower
                       than 50%) that the Court will accept the motion and that the plaintiff will succeed
                       the claim. Therefore, no provision was made in the financial statements.
                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the claim and the scope of
                       the financial obligation that Clal Insurance will be committed to if it is recognized
                       as a class action. This, among other things, is due to the fact that the scope and
                       contents of the case hearing, after it is recognized as a class action, will be affected
                       by the Court's decision regarding the approval of the motion to recognize the claim
                       as a class action normally referring to the grounds of the claim as approved or not
                       approved, to the remedies as approved and not approved etc.


                                               - 51 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                  c)   On April 1, 2007, a statement of claim and motion to certify the case as a class
                       action ("motion to certify") were filed with the Tel Aviv District Court against Clal
                       Finance Batucha, a consolidated company of a consolidated company - Clal
                       Finance, as well as against a list of other organizations: Bank Hapoalim Ltd., Bank
                       Leumi le-Israel Ltd., Israel Discount Bank Ltd., First International Bank of Israel
                       Ltd., Harel Investment House Ltd. and Central Company for Stock Market Services
                       Ltd.

                       The statement of claim and motion to certify were filed under the Class Action
                       Law, 2006 ("Class Action Law").

                       The plaintiffs claim that they own participation units in various trust funds
                       managed in the past by subsidiaries of the banks, including Ilanot Discount Ltd.
                       ("Ilanot Discount"), which was sold to Clal Finance.

                       The issues behind the claim and the motion to certify are brokerage commissions,
                       which the plaintiffs claim Clal Finance Batucha, as manager of the Ilanot Discount
                       trust fund, generally pays Israel Discount Bank Ltd. ("Discount Bank") for
                       purchase and sales transactions of securities and/or foreign exchange, which
                       Discount Bank conducts on its behalf as it is a member of the stock exchange.

                       The plaintiffs contend that these brokerage commissions are higher than the
                       commission that is paid to Discount Bank by various private entities. By doing so
                       the petitioners contend that Clal Finance Batucha causes a decrease in the value of
                       the Fund's assets, a decrease in the value of all the participation units in it, and as a
                       result, a decrease in the profit of each investor.

                       Furthermore, the plaintiffs contend that the reason for collecting the high
                       commission is various agreements that Clal Finance Batucha and Discount Bank
                       came to in the framework of the sale of control in the management of the Ilanot
                       Discount funds.

                       Thus the plaintiffs claim that by acting in this manner Clal Finance Batucha
                       violated the provisions of the Joint Investments in Trust Law, 1994. In addition, the
                       petitioners claim that Clal Finance Batucha even violated the duty of trust towards
                       the holders of participation units in the fund, was in breach of the contract between
                       it and the investors in the trust fund, misled the investors and took advantage of
                       their ignorance.

                       According to the petitioners the group's aggregate damage, and accordingly the
                       sum of the class action, amounts to NIS 386,150,000. The claim and the request for
                       approval were not only against Clal Finance Batucha but also against another six
                       entities, as detailed above, and the petitioners did not specify in their claim the
                       amount that is required from Clal Finance Batucha. The petitioners contend that
                       from this amount Clal Finance Batucha is responsible for the sum of about
                       NIS 50.3 million, and for part of this amount it is sued together and severally with
                       Discount Bank, from whom Clal Finance purchased Ilanot Discount.

                       Clal Finance Batucha is supposed to submit its response to the request for approval
                       up to December 15, 2009.




                                               - 52 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The legal proceedings are at a very early stage and Clal Finance Batucha has not
                       yet submitted its response to the request for approval. Furthermore, the petitioners
                       are presently considering their actions in respect of this procedure, while
                       examining the possibility to resign the claim and the request for approval.
                       Nevertheless, in the opinion of Clal Finance Batucha, based on the opinion of its
                       legal advisors, the chance that the request to approve the claim as a class action
                       will be accepted is lower than the chance that it will be rejected. Therefore, no
                       provision was set-up in the financial statements.

                  d)   In January 2008, a subsidiary, Clal Insurance, received a claim that was filed with
                       the Petach Tikva District Court ("the claim") as well as a motion to certify the
                       claim as a class action ("the motion").

                       The plaintiff maintains that Clal Insurance collected a premium derived from the
                       list price of the vehicle for a comprehensive vehicle property insurance policy ("the
                       policy"), while in any case of an insurance event, as defined in the policy, the
                       policyholder will be paid a benefit representing the lower value of his vehicle, in
                       accordance with the "weighted price" of the vehicle, which is influenced by various
                       parameters that affect the price of the vehicle. According to the plaintiff, Clal
                       Insurance charged an exaggerated price for the policy that is not derived from the
                       true and correct price of the vehicle. As the plaintiff maintains, when the insurance
                       contract is executed, the respondent does not reveal the difference and the
                       discrepancy between the value of the vehicle for payment of the premium and its
                       value for payment by the insurance company upon the occurrence of an insurance
                       event.

                       The plaintiff is asking the Court to order Clal Insurance to refund monies paid to it,
                       which he claims (as described above), in excess. Additionally the plaintiff is
                       petitioning the Court to receive declaratory relief that prevents and prohibits Clal
                       Insurance from continuing to collect from the plaintiff the surplus premium
                       amounts with respect to the insurance policy subject of the claim.

                       The causes specified in the claim are, inter alia: violation of the duty of good faith
                       and disclosure requirement, misleading and/or negligent misrepresentation, abuse
                       of the plaintiff's power with respect to its customers, discriminatory terms in a
                       standard contract, unjust enrichment, claim that the sections of the policy conflict
                       with public policy, violation of the provisions of the Supervision of Financial
                       Services Law (Insurance), 1981, violation of the provisions of the Insurance
                       Contract Law 1981 and violation of a legislated obligation.

                       The group the plaintiff wishes to represent is any person or corporation that meets
                       the criteria and/or cumulative requirements, as follows: (1) purchased a policy as
                       defined above from the respondent, in accordance with the Insurance Business
                       Supervision Regulations (Terms of Contract for Private Vehicle Insurance) during
                       the three years preceding the filing of the statement of claim; (2) he is the first
                       owner of a private vehicle, and the term of ownership exceeds 12 months from the
                       date on which the vehicle was purchased; (3) average annual travel of his vehicle
                       (kilometrage) exceeds the average annual travel of a private vehicle in Israel (in
                       accordance with the criteria specified in the statement of claim and the motion); (4)
                       as of the date on which the subject claim was filed, no claims on the
                       aforementioned matters and with the causes mentioned in the subject claim have
                       been filed with the Court.


                                              - 53 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The plaintiff believes the estimated amount of the claim with respect to all
                       members of the group, which he wishes to represent, is NIS 73.06 million. The
                       amount of the plaintiff's personal claim is NIS 4,531.

                       On March 20, 2008, the plaintiff filed a request to amend the request and add an
                       allegation whereby Clal Insurance violated the Supervision Circular No. 2000/12.
                       Clal Insurance did not object to the amendment of the request. Clal Insurance
                       replied to the request in July 2008. On January 13, 2009, there was a hearing in
                       which the parties were interrogated. The parties later submitted their closing
                       statements.

                       In the opinion of the management of Clal Insurance, which is based on the opinion
                       of its legal advisors, Clal Insurance has sound arguments against the request and
                       the claim. Accordingly, the Management of Clal Insurance believes, based on the
                       opinion of its legal advisors, it is unlikely (in other words, the probability is lower
                       than 50%) that the Court will accept the motion and that the plaintiffs will succeed
                       in the motion. Therefore, no provision was made in the financial statements.

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance management, based on the estimate of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, inter alia, due to the reasons detailed at the end
                       of Note 7(a)(2)(b).

                  e)   In April 2008, a subsidiary, Clal Insurance, received a claim that was filed with the
                       Jerusalem Labor Court ("the claim") as well as a motion to certify the claim as a
                       class action ("the motion").

                       According to the plaintiff, Clal Insurance determined in an "Executive Pension
                       Plan" insurance policy that the pension coefficient according to which insured
                       women will be paid the insurance proceeds, when they reach retirement age, will
                       be lower than that of insured men, because of the longer life expectancy of women.
                       And yet the respondent collected and continues to collect from insured women risk
                       premiums identical to those it charges men, notwithstanding the fact that the
                       women's mortality rates are much lower than those of men. According to the
                       plaintiff in 2001 or close thereto the respondent modified the policies, but only in
                       respect of new policies.

                       The principal relief sought from the Court is to rule that:

                       1)    The discrimination practiced by the respondent is in contravention of the law
                             and any provision and/or action based on this discrimination will be declared
                             null and void.




                                               - 54 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       2)    The plaintiff and the other members of the group it seeks to represent ("the
                             Group") is entitled to select between the following alternatives: (1) To
                             equalize the pension coefficient for an insured woman and an insured man
                             and to rule that in the event of a one-time payment instead of a pension, the
                             one-time payment shall be increased to the insured woman, in the ratio of the
                             pension coefficient of an insured man to the pension coefficient of an insured
                             woman at the relevant age. (2) To reduce both retroactively and
                             prospectively the amounts for risk charged to the plaintiff and to set them at
                             appropriate risk amounts, according to the plaintiff, for an insured woman,
                             whereby the reduced amounts shall be added to the accumulated amount of
                             savings.

                       3)    To issue similar rulings in respect of the other members of the group who
                             have not been located or have not exercised their right to select between
                             these choices.

                       The reasons argued in this claim are, inter alia, violation of the principle of equality
                       and discriminatory behavior, discriminatory terms in a standard contract, lack of
                       good faith and unjust enrichment.

                       The group the plaintiff seeks to represent is all women who purchased from the
                       respondent "Executive Pension Plan" insurance policies wherein are made
                       distinctions between men and women in respect of pension payments, whereas no
                       distinctions are made between the sexes in respect of the risk premium.

                       The plaintiff does not stipulate the amount of damage caused her and in the
                       absence of the required data to assess the exact monetary amount, she estimates the
                       overall amount of damage to the members of the group at millions of shekels.

                       In April 2008, three other claims on the same grounds were filed with the
                       Jerusalem Labor Court against other insurance companies, together with requests
                       to approve the claims as class actions. The President of the National Labor Court
                       decided to consolidated the proceedings with respect to the various claims and hold
                       them in the Jerusalem Regional Court.

                       In October 2008, the Court accepted Clal Insurance's request to dismiss the claim
                       in limine due to lack of material jurisdiction to discuss the claim. In the Court's
                       decision it was determined that the Labor Court has no material jurisdiction to
                       discuss the plaintiff's claims and they should file their claims with an instance that
                       has material and local jurisdiction to discuss their claims. It was also decided that
                       since there is a dispute between the parties also whether there is local jurisdiction,
                       there is no point in transferring the claims to another Court.

                       In November 2008, the plaintiffs filed an appeal to the National Labor Court
                       against the aforementioned decision of the District Court. In January 2009, Clal
                       Insurance submitted closing statements on its behalf to the National Labor Court.
                       On September 17, 2009, the National Labor Court ruled in favor of the appeal and
                       decided that the Regional Labor Court has material jurisdiction for hearing the
                       claim, excluding the causes for damages. Clal Insurance is considering appealing to
                       the Supreme Court of Justice regarding the National Labor Court's decision.




                                               - 55 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       Management of Clal Insurance believes, based on the opinion of its legal advisors,
                       that Clal Insurance has good defense arguments against the request. Therefore, the
                       management of Clal Insurance believes, based on the opinion of its legal advisors,
                       it is unlikely (in other words, the probability is lower than 50%) that the Court will
                       accept the motion and that the plaintiffs will succeed in the motion. Therefore, no
                       provision was made in the financial statements.

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance management, based on the estimate of its legal counsel, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  f)   In September 2008, Clal Insurance received a claim that was filed against it with
                       the Nazareth District Court ("the claim"), together with a request to approve the
                       claim as a class action ("the request"), according to the Class Actions Law, 2006.

                       The plaintiff was employed by Hassneh Israel Insurance Company Ltd.
                       ("Hassneh"), which terminated its activities and was purchased in 1992 by Migdal
                       Insurance and Clal Insurance. The plaintiff had policies through Hassneh that were
                       transferred to Clal Insurance. The plaintiff contends that although the policies were
                       transferred from Hassneh to Clal Insurance on January 1, 1993, Clal Insurance used
                       the index of December 1992 that was published only on January 15, 1993, for
                       calculating the policies' rates, instead of using the previous indices as follows. The
                       plaintiff contends that with respect to one policy for which the linkage mechanism
                       was semi annual, Clal Insurance should have calculated the policies' values
                       according to the index that was published in July 1992 in respect of June 1992 and
                       for policies that their linkage mechanism is monthly, Clal Insurance should have
                       calculated the policy value on the basis of the index that was published in
                       December 1992 in respect of November 1992.

                       The causes that are contended in this claim are, among others, a breach of an
                       agreement and misleading, unjust enrichment, the breach of the duty of acting in
                       bona fide and in an acceptable manner in complying with the contract obligations
                       and the breach of the trust obligation of an insurer toward beneficiaries.

                       The group that the plaintiff wishes to represent includes any person who is a
                       beneficiary or was a beneficiary in life insurance policies and/or in social rights
                       insurance policies that Clal Insurance issued and/or acquired and/or received from
                       "Hassneh" and alternatively, any other group, as per the Court's instruction.

                       The main remedies that the plaintiff requests from the Court are to give instructions
                       regarding the proof of entitlement for remedies and payment of compensation, as
                       the Court will regard to be suitable, to obligate Clal Insurance to provide the
                       plaintiff with all the information it has for the calculation of the damage, to order to
                       compensate each group member for the damage that was caused to him regarding
                       the causes for the claim and alternatively, to obligate Clal Insurance to correct its
                       records and calculations, in order to provide an accurate position of the monetary
                       rights that each group member has.




                                               - 56 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The plaintiff notes that as a result of the incorrect calculation of Clal Insurance, the
                       amount of the personal damage that was caused to his is NIS 26,707. The plaintiff
                       contends that he does not have the tools to evaluate the damage that was caused to
                       the rest of the group members. However, according to his estimate it looks like it
                       amounts to many tens of millions of NIS.

                       On May 17, 2009, Clal Insurance replied to the request and filed its statement of
                       defense.

                       On November 8, 2009, the Nazareth District Court, at the plaintiff's request,
                       decided to dismiss the request and strike the claim.

                  g)   In May 2007 and in July 2007, Clal Insurance received claims ("the claim")
                       together with a request to approve the claims as class actions ("the requests") which
                       were filed with the Haifa District Court.

                       The plaintiffs, private clients, purchased from Clal Insurance executive insurance
                       policies that participate in investment income. Under these policies coverage was
                       also provided for disability income insurance ("the policy"). The grounds for the
                       claims is, as contended by the plaintiffs, the method of calculating the monthly
                       insurance benefits paid to the policyholders that are entitled to receive them
                       following work disability. The plaintiff contend that Clal Insurance violated the
                       terms of the policy, when it failed to link the monthly amount paid to the
                       policyholders, after 24 months had passed from the date of first receiving an
                       annuity in respect of work disability, to the results of the investments of the
                       insurance portfolio managed by Clal Insurance, under the policies. In doing so,
                       they contend that Clal Insurance violated its obligation under the provisions of the
                       insurance policy, the general contract laws as well as unjust enrichment.

                       The plaintiffs are petitioning to approve the claim as a class action in accordance
                       with the provisions of the Class Action Law, 2006. The group the plaintiffs are
                       seeking to represent includes all of the parties insured by Clal Insurance (or those
                       who were insured), who are entitled, under the terms of the Policy, to the linkage of
                       the monthly annuity that is paid to them under profit participating policies to the
                       results of the investment portfolio ("linked annuity"). This refers to policyholders
                       who were entitled to receive a linked annuity, at any given time, or alternatively,
                       with respect to policyholders who were entitled to receive a linked annuity during
                       the last seven years, or alternatively to alternative, policyholders who were entitled
                       to receive a linked annuity during the last three years.

                       The plaintiff who filed his request in July 2007 ("the second plaintiff") notes in his
                       request that in May 2007 a request was filed to approve the claim as a class action
                       ("the first plaintiff") and on the whole, the cause for the claim is the same as the
                       cause for which he filed his request. However, the second plaintiff claims that his
                       request is not pointless, for several reasons that he will specify before the Court, if
                       he is required to do so.




                                               - 57 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The first plaintiff claims that his personal damage totals NIS 33,198.12, and his
                       initial estimate of the damage to all members of the group is NIS 74.25 million
                       (after deducting management fees), and alternatively, about NIS 95.44 million
                       (before deducting management fees).

                       The second plaintiff claims that his personal damage totals NIS 32,323, and his
                       initial estimate of the damage to all members of the group is NIS 75 million (if the
                       claim is limited to 7 years) or alternatively, NIS 37.5 million, or alternatively to
                       alternative NIS 32.3 million, respectively (if the claim is limited to three years).

                       Clal Insurance has yet to respond to the requests. In February 2008, the Court
                       joined the hearings on the two aforementioned requests.

                       Clal Insurance had identified a problem in its IT systems with respect to the
                       calculation of the linkage on the monthly annuity for work disability. Clal
                       Insurance is worked to resolve the computer problem, to identify the policyholders
                       entitled to additional annuity payments and to calculate the exact amounts still due
                       to them. As at the financial statements date, most of the actions required with
                       respect to the current payments had been completed.

                       In any event, the management of Clal Insurance believes that the amounts that will
                       be required to supplement the annuities and adjust them to annuities that were paid
                       in the past are significantly lower than the amount of damage estimated in the
                       claim. The management of Clal Insurance believes that the amounts that will be
                       required to supplement the annuities and adjust them, as mentioned above, have
                       been provided for in the financial statements and additional provisions are not
                       required, beyond said provision, in respect of the aforementioned claim.

                       On November 26, 2008, the parties issued a request to the Court to approve a
                       compromise arrangement regarding the claims, as well as the compromise
                       arrangement the parties request the Court to approve. On May 12, 2009, a hearing
                       was held at the Court regarding the Attorney General's request to submit his
                       position to the compromise arrangement. On July 2, 2009, the Attorney General
                       submitted his position in the cases at hand whereby the hearing in said cases, as in
                       the filed compromise arrangement, is unnecessary, this given the directive of the
                       Supervisor of Insurance in the Capital Market, Insurance and Savings Division,
                       received by Clal Insurance on June 23, 2009, which instructed Clal Insurance,
                       among other things, to reimburse every single policyholder in the policy that is the
                       subject of the cases at hand the full difference of insurance compensation
                       retroactively and without time limitation. A hearing in the motion to approve the
                       compromise arrangement was held on July 9, 2009. In view of the Attorney
                       General's position, a further hearing in the cases was scheduled for October 11,
                       2009.

                       On October 11, 2009, the Court ruled that the request (and the claim) would be
                       stricken following the withdrawal request filed by the representatives of the parties
                       under mutual consent.




                                              - 58 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                  h)   In June 2007, a claim was filed with the Tel Aviv Jaffa District Court ("the claim"),
                       against Dikla Insurance Company Ltd. ("Dikla"), together with a request to
                       approve the claim as a class action ("the request").

                       The grounds for the claim is the insurance plan "Mashlim Legimlay", which is a
                       joined plan together with Dikla, Harel Insurance Company Ltd., Migdal Insurance
                       Company Ltd. and the subsidiary Clal Health (Clal Health has a 20% participation
                       in the policy). In the claim it was contended that the premium collected for the
                       aforementioned plan was higher than the rate that was permitted by the Insurance
                       Regulator and there had also been some changes in the insurance plan but the
                       policyholders were not informed about these changes as required by the Regulator.

                       The plaintiffs defined the group as a group that includes individuals who are
                       insured and/or were insured from the year 1995, under the health insurance policy
                       "Mashlim Legimlay" through Dikla. The plaintiffs estimate that the amount of the
                       claim in respect of the entire group members they seek to represent is NIS 115
                       million (not including interest). Dikla submitted its response to the request in
                       November 2007.

                       In August 2008, the plaintiffs filed a request to amend the statement of claim and
                       the request to approve the claim as a class action, as well as an amended statement
                       of claim and a request for approval. Under the amended request for approval the
                       plaintiffs' alternative allegation is that even if the raise in tariffs was legally
                       approved, the update for the year 2002 was performed at a later date than that
                       stated in the policy for effecting the raise in the premium. Thus, Dikla missed the
                       date for raising the tariffs for the year 2002. The rest of the allegations were not
                       changed.

                       The request for the amendment was approved. Accordingly, it was determined that
                       the defendant, Dikla, will be able to submit an amended response on its behalf.

                       In November 2008, a response to the amended request for approval, on behalf of
                       the defendant, Dikla, was submitted.

                       Clal Health is not a party to these proceedings.

                       In April 2009, the plaintiffs withdrew the claim.

                  i)   In December 2008, a claim was filed against a subsidiary, Clal Insurance with the
                       Tel Aviv Jaffa District Court ("the claim"), together with a request to approve the
                       claim as a class action ("the request").
                       The grounds for the claim are third party coverage under motor casco insurance
                       policies. The plaintiff contends that Clal Insurance acts unlawfully, when it rejects,
                       either totally or partially, third party claims to receive the full insurance benefits for
                       a decrease in value as a result of damage cause to third party vehicles. The plaintiff
                       contends that Clal Insurance should pay the third parties the full insurance benefits
                       for the decrease in value based on the opinion of the appraiser who was appointed
                       by the third party, and regretfully, to provide a contrasting opinion on behalf of
                       Clal Insurance insofar as it disagrees with the third party's appraiser. It was also
                       contended in the claim and in the request that Clal Insurance signs the third parties
                       on settlement statements unlawfully and in contradiction to the directives of the
                       Regulator of Insurance.

                                               - 59 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The plaintiff contends that the non-payment of the full insurance benefits regarding
                       the decrease in value according to the appraiser's opinion, provides the grounds for
                       a claim for violation of legislated duties pursuant to the Insurance Contract Law,
                       1981, and the Supervision of Insurance Regulations (Contract Terms for Insurance
                       of Private Vehicles), 1986 and the Regulator's directives, as well as the grounds for
                       a claim regarding unjust enrichment.

                       The amount that is demanded personally by the plaintiff is NIS 424.5 as at the date
                       the claim was filed. In the event that the claim will be approved as a class action,
                       the amount that will be demanded is estimated by the plaintiff at NIS 79,970,000.

                       Clal Insurance has replied to the request. A preliminary hearing regarding the
                       request is scheduled to be held on December 29, 2009.

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiffs will succeed in
                       the motion. Therefore, no provision was made in the financial statements.

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  j)   In January 2009, a claim was filed against a subsidiary, Clal Insurance with the
                       Tel-Aviv-Jaffa District Court ("the claim"), together with a request to approve the
                       claim as a class action ("the request"), pursuant to the Class Actions Law, 2006.

                       The grounds for the claim and the request are mainly the petitioner's allegations
                       against Clal Insurance regarding the violation of the Supervision of Financial
                       Services Law (Engagement in Pension Consultancy and Marketing), 2005
                       ("Consultancy Law") and specifically the violation of Section 13 to the
                       Consultancy Law and non-compliance with Clal Insurance's duties under legal
                       provisions, among others due to: (a) non-performance and not making sure of
                       performing a pension marketing procedure (under legal provisions) (b) failure to
                       provide written arguments with respect to the recommendation of the suitable
                       pension product (as determined by law).

                       The petitioner contends, among others, that there has been a violation of a
                       legislated duty, negligence, violation of agreement, mala fides during negotiations
                       and unjust enrichment on behalf of Clal Insurance.

                       The group the petitioner wishes to represent is the group of Clal Insurance's
                       customers/policyholders, with whom Clal Insurance performed a transaction as
                       defined in the Consultancy Law, during the period from August 10, 2006 (the date
                       the Pension Consultancy Law is applicable to the defendant, Clal Insurance) up to
                       the date the claim was filed. The petitioner estimates that the number of group
                       members may amount to tens of thousands.


                                              - 60 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       Among the remedies that are requested in the statement of claim, the Court is also
                       requested to: (a) to declare that the duly under Clause 13 to the Consultancy Law,
                       applies to Clal Insurance; (b) to declare that Clal Insurance has violated the
                       provisions of Clause 13 to the Consultancy Law; (c) to order Clal Insurance to
                       refund the petitioner all the management fees as determined under the policy, at the
                       rate of 13% of the current deposits (the premium); (d) to order Clal Insurance to
                       pay each one of the group members a compensation for not receiving consultation
                       during the pension marketing process (as defined in the Consultancy Law), in the
                       sum equal to the petitioner's estimated cost of the pension marketing procedure.

                       As contended in the request and in the claim, the amount of the personal claim is
                       the damage that was caused to the petitioner - NIS 482 and the amount of the claim
                       with respect to the reset of the group members is the aggregate damage to all the
                       group members - NIS 14,420,633, which is comprised, according to the calculation
                       stated in the request and in the claim, from management fees during the
                       determining period (as defined in the request) and a compensation/refund of the
                       consultation cost.

                       Clal Insurance responded to the request on May 10, 2009. The case is scheduled for
                       affiant interrogation on November 18, 2009.

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiffs will succeed in
                       the motion. Therefore, no provision was made in the financial statements.

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  k)   In February 2009, a claim was filed against a subsidiary, Clal Insurance with the
                       Tel Aviv Jaffa District Court ("the claim"), together with a request to approve the
                       claim as a class action ("the request"), pursuant to the Class Actions Law, 2006.
                       The claim and the request were filed against Clal Insurance and two other
                       insurance companies ("the defendants").

                       The plaintiffs contend that Clal Insurance collects excess premium from its
                       policyholders for the loss of profits component, which is covered under the chapter
                       dealing with natural disasters and earthquakes in the policy type "business premises
                       umbrella", for a compensation period of less than one year, whereas its estimate of
                       the risk it is exposed to regarding this component under the same policy is lower.




                                              - 61 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The plaintiffs allege that in case of coverage with respect to loss of profits which is
                       included in the policies, as mentioned, which is caused by damages that are not
                       natural disasters and earthquakes, and relates to a short compensation period, Clal
                       Insurance estimates that the risk it is exposed to is lower, and charges the
                       policyholders for this coverage, insurance fees that reflect the risk it is exposed to,
                       according to the short period that was acquired. On the other hand, the plaintiffs
                       contend that in the event of coverage due to loss of profits that is included in the
                       policies, as mentioned, which is caused by damages that are natural disasters and
                       earthquakes, Clal Insurance collects from its policyholders full insurance fees and
                       does not reduce them in proportion to the compensation period that was determined
                       in the policy.

                       The allegations in this claim are: violation of prohibition to mislead a policyholder
                       pursuant to the Supervision of Financial Services (Insurance) Law, 1981 and a
                       violation of the bona fide duty during negotiations in accordance with the Contracts
                       Law (General Section), 1973.

                       The group all the plaintiffs in this claim wish to represent are all those who hold
                       business premises insurance policies of any of the defendants, under which the
                       policyholders' business were insured for loss of profits due to natural disasters
                       and/or earthquakes, for a period shorter than twelve months, at any time during the
                       seven years prior to submitting the request ("the group members").

                       The plaintiffs contend that according to their calculations, the total alleged damage
                       that was caused to the entire group, as defined above, by all the defendants together
                       is NIS 204,842,260 (not including interest), without specifying the amount that is
                       claimed from each of the defendants separately.

                       The remedies that are demanded by all the plaintiffs under this claim are, among
                       others, a refund of all the amounts that were excessively collected from the group
                       members as part of the business premises insurance policy, that were paid during
                       the seven years prior to filing the request, as well as a decree to order the
                       defendants to refrain from collecting excess premiums in the future from the group
                       members in the framework of the business premises insurance policies.

                       Clal Insurance has responded to the request and the plaintiff has responded to Clal
                       Insurance. A pre-trial hearing was held on September 29, 2009 whereby the Court
                       allowed Clal Insurance to file a written response to the plaintiff's response to Clal
                       Insurance. Another pre-trial hearing is scheduled for November 30, 2009.

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiffs will succeed in
                       the motion. Therefore, no provision was made in the financial statements.




                                              - 62 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  l)   In April 2008, a subsidiary, Clal Insurance, received a claim that was filed with the
                       Petach Tikva District Court ("the claim") as well as a motion to certify the claim as
                       a class action ("the motion").

                       According to the plaintiff, in risk policies sold by it until the end of 1998, and in
                       combined policies that combine risk and savings that were sold by it until the end
                       of 1999, Clal Insurance used outdated mortality tables that had been drawn up in
                       the 1950s, for the purpose of calculating the premium for the risk element in the
                       insurance policies sold by it for decades thereafter, when there already existed
                       more updated tables.

                       The main grounds for the contended claims are, inter alia: violation of the
                       obligation of trust, deception, violation of the obligation of full disclosure, lack of
                       good faith, discriminatory condition under the Law of Standard Contracts, unjust
                       enrichment, violation of the Consumer Protection Law, 1981, violation of the
                       Supervision of Insurance Business Law, 1981 and violation of the provisions of the
                       Restrictive Trade Practices Law, 1988.

                       The group the plaintiff seeks to represent is all policyholders of Clal Insurance who
                       took out a life insurance, executive pension or personal insurance contract from
                       July 31, 1998 and whose policies include risk cover, provided up to the age of 65
                       or over and for the purposes of their insurance use was made of mortality tables
                       A49-52 and those derived from them.

                       The plaintiff states that he does not have precise knowledge of the estimated,
                       maximum number of members of the group, and estimates the maximum number
                       of group members is likely to reach tens of thousands and even hundreds of
                       thousands.

                       The plaintiff states that the damage caused to him and to the others in the group is
                       equivalent to the amount by which the premium collected in practice was greater
                       than the correct premium that should have been set had use been made of an
                       updated and applicable mortality table, plus the cost load element.

                       The plaintiff seeks, inter alia, that the Court shall hand down declarative relief in
                       respect of the discrimination and/or injustices caused by Clal Insurance, as
                       described above.

                       Further, the plaintiff seeks that the Court declare that the correct mortality tables
                       for calculating the premium are other tables offered by it and that the Court order
                       Clal Insurance to make a repayment for the excess premium charged.
                       On May 5, 2009, the plaintiff filed a request to order Clal Insurance to submit its
                       response to the request of approval and a statement of defense no later than by May
                       30, 2009.


                                              - 63 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       On May 9, 2009, the District Court allotted dates for filing responses and
                       statements of defense.

                       Based on the agreement between the parties, which was granted the Court's
                       approval, on September 10, 2009, Clal Insurance filed a response to the request for
                       approval and a statement of defense. According to the agreement reached in the
                       hearing, the class action plaintiffs have four months to file their counter responses
                       to the responses to the requests for approval.

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Therefore, the management of Clal Insurance believes, based on the opinion of its
                       legal advisors, the probability that the claim will be approved as a class action is
                       not higher than 50%. Therefore, no provision was made in the financial statements.

                  m)   In March 2009, a claim was filed against a subsidiary, Clal Insurance, with the Tel-
                       Aviv District Court ("the claim") and a motion to approve the claim as a class
                       action pursuant to the Class Action Law, 1996 ("the motion").

                       The claim pertains to a personal accidents insurance policy. According to the
                       plaintiff, Clal Insurance sells personal accidents insurance policies and issues the
                       buyers a "policy list" where it states the amounts of weekly compensation in the
                       event of occupational disability caused by an accident in the period stipulated in
                       the policy, but does not clarify in the policy list that if a permanent disability is
                       determined for the policyholder, it ceases to pay the weekly insurance
                       compensation for occupational disability. The plaintiff further argues that in the
                       policy itself, Clal Insurance fails to specify this restriction regarding the cessation
                       of weekly payments next to the relevant item and also fails to highlight this
                       restriction by placing it under a misleading title.

                       The grounds for the claim are: breach of Section 55 to the Law for the Supervision
                       of Financial Services (Insurance), 1981, which proscribes misrepresentation and
                       breach of legislative duties by virtue of the law.

                       The group which the plaintiff wishes to represent consists of any person and/or
                       other legal entity that purchased in the three years preceding the filing of the
                       motion personal accidents insurance policies from Clal Insurance and sustained an
                       insurance event that is relevant to the policy and did not receive insurance
                       compensation for occupational disability for the duration of the policy's covered
                       period on the grounds of permanent disability ("the group members").

                       The plaintiff states that it does not hold all the correct data for properly assessing
                       the size of the group and compensation to the public's benefit. The plaintiff argues
                       that given its calculation based on annual financial data of Clal Insurance, the
                       estimated scope of the damage for the entire group members on a three-year basis
                       is NIS 75 million.

                       Clal Insurance has yet to respond to the request.




                                              - 64 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiffs will succeed in
                       the motion. Therefore, no provision was made in the financial statements.

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  n)   In April 2009, a claim was filed against a subsidiary, Clal Insurance, with the Tel-
                       Aviv District Regional Labor Court ("the claim") and a motion to approve the
                       claim as a class action ("the motion").

                       The plaintiff argues that when applying the provisions of the Wage Protection Law,
                       1958 ("the Wage Protection Law") and collecting employers' debts for
                       contributions to executive insurance policies, Clal Insurance sends the employers
                       and their employees unfounded warning letters in connection with the non transfer
                       of pension contributions by employers in respect of their employees, this despite
                       the fact that the employers were not actually behind in making those pension
                       contributions. The plaintiff claims that Clal Insurance is acting in contrast to the
                       provisions of the Wage Protection Law and is automatically and mechanically
                       ending warning letters also to employers that are not behind on making the
                       required contributions.

                       The causes of the claim are, among other things, misleading of the group members
                       and their employees, the breach of the duty of care, unjust enrichment and mala
                       fide.

                       Among other things, the plaintiff is asking the Court to grant the following
                       remedies: to declare that in sending warning letters, Clal Insurance is not
                       complying with its full duties pursuant to the Wage Protection Law, thereby
                       allowing the provisions of Article 19a(d) to the Wage Protection Law to apply to
                       the plaintiff; to instruct that each member of the represented group will be able to
                       prove their entitlement to compensation; to grant a mandamus against Clal
                       Insurance ordering it to make up a list of all the names of employers and/or
                       employees that are insured by Clal Insurance and that had received appeals
                       regarding debts and to produce photocopies of all those appeals. In addition, the
                       plaintiff is seeking to obligate Clal Insurance to pay it compensation and fix the
                       representing lawyers' fees at a rate not below 15% of the value of the remedy
                       granted to the group members.

                       The group which the plaintiff is seeking to represent consists of all the employers
                       insured by Clal Insurance and/or their employees and/or the insurance agents on
                       their behalf who received appeals regarding the non transfer of employee
                       contributions despite not being behind on those transfers in the period from April 1,
                       2002 through the date of granting the decision in the class action. Alternatively, the
                       plaintiff is asking the Court to establish a different definition for the group.


                                              - 65 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The plaintiff estimates the size of the group at 4,500 employers, representing 10%
                       of total employers that manage their employees' executive insurance policies with
                       Clal Insurance. The plaintiff is asking damages of NIS 30,000 per group member
                       and in total NIS 135,000,000.

                       On June 29, 2009, Clal Insurance filed a motion to dismiss the claim in limine with
                       the Tel-Aviv District Regional Labor Court for lack of material jurisdiction and a
                       motion to extend the date for filing the response until after the decision in the
                       dismissal motion.

                       In a decision of July 5, 2009, the Court ordered holding a preliminary hearing in
                       the request for dismissal and extending the date for filing the response to the
                       request for approval. On August 11, 2009, Clal Insurance responded in writing to
                       the arguments verbally raised by the plaintiff in a hearing held on July 15, 2009.

                       On September 24, 2009, Clal Insurance filed a notification of update and
                       supplementation of the argument required in view of a ruling reached by the
                       National Labor Court in a different matter in the context of which an appeal to the
                       Regional Court's decision to strike in limine another claim due to absence of
                       jurisdiction to hear claims with no connection to labor law had been granted.

                       A decision in the request for dismissal has not yet been granted.

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiffs will succeed in
                       the motion. Therefore, no provision was made in the financial statements.

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  o)   In February 2008, a subsidiary, Clal Insurance, received a claim that was filed with
                       the Tel Aviv-Jaffa District Court ("the claim") as well as a motion to certify the
                       claim as a class action ("the motion"). The claim was also filed against additional
                       respondents, all of which are insurance companies ("the respondents").

                       The plaintiffs claim that the respondents collected a premium in respect of
                       additional insurance coverage (rider) for the theft and/or replacement of a built-in
                       audio system, as part of a comprehensive vehicle insurance policy. The plaintiffs
                       claim that payment of said premium is clearly unreasonable, as they claim an
                       original built-in audio system cannot be stolen and/or the theft of said system is so
                       extraordinary and rare that it should be seen as a case where the risk of its being
                       stolen is virtually nil ("built-in audio system"), and accordingly it is unfitting to
                       charge any amount whatsoever for its insurance and/or an insurance amount equal
                       to that collected from someone who does not have an integral audio system
                       installed in his vehicle.


                                              - 66 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The plaintiffs are asking the Court to issue a mandatory injunction ordering the
                       respondents to refund the monies paid to them, which they claim to have been for
                       naught, as the result of the collection of the premium for insurance coverage for the
                       built-in audio system in the amount of NIS 50 for each policy holder for each
                       insurance year. Furthermore, the Court was asked to issue a mandatory injunction
                       ordering the respondents to provide the plaintiffs with copies of documents to
                       assess and quantify the damage claimed and precise identification of the group.
                       Alternatively, should it be too difficult to estimate the personal damage of each
                       applicant, the Court is requested to order the issue of any other relief to the benefit
                       of the group.

                       The group the plaintiffs wish to represent is any policyholder who purchased a
                       comprehensive insurance policy (and/or subscription for insurance coverage of a
                       specific package) from the respondents and who over the past seven years has paid
                       as part of the comprehensive vehicle insurance, premiums and/or subscription fee
                       for insurance coverage of the vehicle audio system, and the specific model of the
                       vehicle in respect of which the policyholder paid said premium has a built-in audio
                       system installed.

                       The causes specified in the claim are, inter alia: cancellation of provisions of the
                       policies regarding insurance of the audio system in accordance with the Insurance
                       Contract Law, 1981, and refund of the premium in accordance with the Contract
                       Law (General Part) 1973, misleading and performance of an act that involves
                       taking advantage of the distress of a consumer under the Supervision of Financial
                       Services Law (Insurance) 1981, and the Consumer Protection Law, 1981
                       ("Consumer Protection Law"), violation of the duty of disclosure under the
                       Consumer Protection Law, violation of the Sales Law, 1968, negligence and
                       violation of a legislated obligation, lack of good faith and unjust enrichment.

                       The plaintiffs did not estimate the total amount of the claim for the entire group
                       represented, although they did note that it is reasonable to assume that it is in the
                       many tens of millions of shekels. Furthermore, the plaintiffs do not note their
                       estimation of Clal Insurance's share in the overall amount of the claim.

                       On June 4, 2009, the petitioners filed a request for removing the motion for
                       approval pursuant to Article 16 to the Class Action law, 2006. The petitioners also
                       asked to dismiss their personal claim against Clal Insurance. In the context of the
                       request of dismissal, the respondents, including Clal Insurance, agreed to pay
                       NIS 2,000 to each of the relevant petitioners as well as an amount of NIS 8,660
                       plus VAT to the representatives of the petitioners for covering some of the
                       expenses regarding said proceedings.

                       On June 30, 2009, the Court accepted the motion for dismissal (subject to making
                       said payment), struck the motion for approval and dismissed the petitioners'
                       personal claim against Clal Insurance.

                  p)   In March 2008, a subsidiary, Clal Insurance, received a claim that was filed with
                       the Tel Aviv-Jaffa District Court ("the claim") as well as a motion to certify the
                       claim as a class action ("the motion").




                                              - 67 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       According to the plaintiff, when a third party vehicle is damaged by a vehicle
                       insured by Clal Insurance, and the damaged party elects not to repair the vehicle
                       and claims from Clal Insurance compensation for his damage, Clal Insurance
                       requires proofs from the third party that he repaired his vehicle and if it does not
                       receive such proofs, it refrains from paying the full insurance proceeds that it
                       would have paid the third party, while signing the third party on a statement of
                       payment where only part of the insurance proceeds have been paid.

                       According to the plaintiff, this practice of Clal Insurance is in contravention of the
                       provisions of sections 65, 67, 56 (a), 56 (c) of the Insurance Contracts Law, 1981,
                       and section 12(a) of the addition to the Regulations Concerning Insurance
                       Transactions (Contractual Conditions for Insuring a Private Vehicle), 1986.

                       The main arguments are: violation of legislated obligations, as stated above, and on
                       account of the Unjust Enrichment Law, 1979.

                       The group the plaintiff wishes to represent is: any person and/or other legal entity
                       that was entitled to have received from Clal Insurance as a third party monies
                       and/or insurance proceeds for damage to a vehicle, in the three years prior to filing
                       of this claim and Clal Insurance failed to transfer to him/her/it the full monies
                       and/or insurance proceedings to which entitled, because of not having proven to
                       Clal Insurance that the damage had been repaired. The plaintiff notes that in this
                       claim it will be possible to identify those entitled to compensation from the
                       information available to Clal Insurance.

                       The personal amount of the plaintiff's claim is NIS 2,780. The plaintiff estimates
                       the amount of damage to the entire group at about NIS 225 million. The plaintiff
                       notes that the correct information for assessing the size of the group and the scale
                       of damage to the group is held by Clal Insurance.

                       The amount of the claim for the entire group is the amount of damage claimed as
                       stated, with in addition special compensation to the plaintiff and its legal fees.

                       Clal Insurance submitted its response to the request on March 4, 2009. A hearing
                       was held on May 27, 2009. During the hearing and after the parties had submitted
                       their arguments, the Court suggested that the parties conduct a sample testing of the
                       respondents' argument that the rate of incidents where insurance rewards paid to
                       third parties had been reduced only due to the failure to repair the damaged vehicle
                       and where no third party waiver had been signed is negligible. The conclusion of
                       said sample testing confirmed the respondents' argument that the number of
                       incidents where insurance rewards to third parties had been reduced solely due to
                       the failure to repair the damaged vehicle and where no waiver had been signed is
                       remote. Another hearing is scheduled for February 17, 2010.

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiffs will succeed in
                       the motion. Therefore, no provision was made in the financial statements.




                                              - 68 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  q)   In April 2008, a subsidiary, Clal Insurance, received a claim that was filed with the
                       Tel Aviv-Jaffa District Court ("the claim") as well as a motion to certify the claim
                       as a class action ("the motion").

                       According to the plaintiff, Clal Insurance acted in contravention of the provisions
                       of section 28(a) of the Insurance Contracts Law, 1981, and of Regulation 27(g) of
                       the Addition to the Regulations Concerning Insurance Transactions (Contractual
                       Conditions for Insuring a Private Vehicle), 1986, according to which, where a
                       claim is filed for insurance proceeds, and the money is paid to the claimant 30 days
                       after presentation of the claim, the insurer must add to the insurance proceeds
                       annual interest of 4%, for the period that commenced 30 days after filing of the
                       claim until date of actual payment.

                       According to the plaintiff, Clal Insurance pays the money 30 days after filing the
                       claim while refraining from adding interest and signs the plaintiffs on statements of
                       payment. According to the plaintiffs, through said non-payment of interest, Clal
                       Insurance is enriching itself at the expense of the plaintiffs.

                       The main arguments are: violation of legislated obligations, as stated above, and on
                       account of the Unjust Enrichment Law, 1979.

                       The group the plaintiff wishes to represent is: any person who in the 7 years prior
                       to filing this claim, received from the respondent insurance proceeds for damage to
                       a private vehicle, whether insured by Clal Insurance with comprehensive insurance
                       or received insurance proceeds as a third party, where insurance proceeds were
                       paid to this person 30 days and more after submitting a claim to Clal Insurance,
                       without having added to the insurance proceeds money annual interest of 4% as
                       required by law. The plaintiff notes that it will be possible to identify those entitled
                       to compensation from the information held by Clal Insurance.

                       The personal amount of the plaintiff’s claim is NIS 10. The plaintiff estimates the
                       amount of damage to the entire group at about NIS 28.7 million. The plaintiff notes
                       that the correct information for assessing the size of the group and the scale of
                       damage to the group is held by Clal Insurance.

                       The amount of the claim for the entire group is the amount of damage claimed as
                       stated, with in addition special compensation to the plaintiff and legal fees.

                       Clal Insurance submitted its response to the request on January 26, 2009.

                       On February 3, 2009, the petitioner filed its response to Clal Insurance's reaction.




                                               - 69 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       A hearing was held on October 14, 2009 in which an outline of a settlement
                       between the parties had been presented before the Court in the spirit of the Court's
                       suggestion. Based on the Court's decision of October 15, 2009, the parties were
                       asked to submit to the Court's perusal the proposed settlement by the date of the
                       next hearing, scheduled for November 23, 2009.

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiffs will succeed in
                       the motion. Therefore, no provision was made in the financial statements.

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  r)   At the end of April 2003, a subsidiary, Clal Insurance, received a financial claim
                       filed against it with the District Court in Tel-Aviv - Jaffa ("the claim"), as well as a
                       motion to approve the claim as a class action ("the motion"). The aforesaid is on
                       behalf of the policyholders who purchased general insurance policies from Clal
                       Insurance beginning from August 5, 1997 (the date the amendment to the Insurance
                       Supervision Law, 1981 ("the Supervision Law") relating to class actions, entered
                       into effect) and for which Stamp Duty was paid ("the represented group").
                       The grounds of the claim that is the object of the motion is, according to the
                       plaintiff, the creation of a misrepresentation, according to which the policyholders
                       are liable for Stamp Duty (while the plaintiff claims that the insurer is liable for
                       paying the Stamp Duty), and the unlawful collection of Stamp Duty from the
                       policyholders while forcing and misleading, without any authority and while
                       enriching itself at the expense of its policyholders.

                       The plaintiff appealed for the approval of the claim as a class action and for the
                       return of the Stamp Duty, paid by the members of the represented group in addition
                       to interest and linkage differences according to the law.

                       The amount of the plaintiff's personal claim is NIS 352. The plaintiff claims that
                       the estimated damage caused to the represented group is the amount of about
                       NIS 199.3 million (including interest and linkage differences to the date the claim
                       was filed).

                       In a decision of June 7, 2009, the District Court at the central region approved the
                       claim as a class action and also determined that although the stamp duty applies to
                       both Clal Insurance and the policyholder, Clal Insurance fully collected stamp duty
                       from the policyholder without obtaining the policyholder's consent and without
                       divulging to the policyholder that it is not legally bound to pay the full stamp duty.
                       According to the Court's decision, Clal Insurance illegally charged its
                       policyholders for half the stamp duty charge.




                                               - 70 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The Court established as a remedy in the claim the reimbursement of the amount
                       paid by the policyholders as half the stamp duty in relation to the holders of
                       policies of residential insurance, business insurance, car insurance (motor act and
                       comprehensive), transferred funds and personal accidents acquired from Clal
                       Insurance in the period from August 5, 1997 through April 27, 2003 who paid Clal
                       Insurance stamp duty.

                       On August 10, 2009, the Court rejected Clal Insurance's motion for dismissing the
                       class action hearing until a decision is rendered in the motion for appeal that Clal
                       Insurance intends to file with the Court ("the motion for dismissal") and decided
                       that at this stage, Clal Insurance must issue a press release and file a statement of
                       defense as stated in the decision.

                       On September 1, 2009, Clal Insurance filed a petition for appealing the decision to
                       the Supreme Court. On September 30, 2009, the Supreme Court ruled that the
                       petition for appeal merits a response and determined a deadline for the respondents
                       to file their response. The respondents have yet to file their response.

                       In furtherance to several proceedings held in September-November 2009, the Court
                       instructed the manner of issuance to the press of the approval of the class action.

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion for appeal and the appeal. Therefore, no
                       provision was made in the financial statements.

                  s)   In August 2008, a subsidiary, Clal Insurance received a claim that was filed against
                       it with the Tel Aviv Jaffa District Court ("the claim"), together with a request to
                       approve the claim as a class action ("the request"), according to the Class Actions
                       Law, 2006.
                       The grounds for the claim are with respect to the accident disability appendix to
                       Clal Insurance's policy ("the appendix"). The plaintiff contends that Clal Insurance
                       weighs the disabilities that were caused to the policyholder in a number of limbs, in
                       a manner that significantly reduces the insurance benefits the plaintiff is entitled to.
                       The plaintiff contends that by weighing the disabilities, as mentioned, Clal
                       Insurance is acting in contradiction to the policy directions; it misleads its
                       policyholders in contradiction to the Supervision of Financial Services (Insurance)
                       Law, 1981 ("the Supervision Law"), it breaches the directives of Section 38(a) to
                       the Supervision Law and acts in mala fides.

                       The plaintiff appeals only for a declarative remedy with respect to his personal
                       claim. In his request, the plaintiff appeals for a remedy to be refunded by the
                       insurance benefits for the weighted disabilities, as mentioned. The sum that is
                       claimed by the entire group is not yet estimated.




                                               - 71 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       It should be noted that in the past the plaintiff filed a monetary claim, together with
                       a request to approve the claim as a class action, for the same appendix that is the
                       subject of the request and the claim in this case ("the previous request"). The
                       previous request was rejected by the Tel Aviv District Court and the appeal that the
                       plaintiff filed to the Supreme Court regarding the District Court's decision, was
                       stricken-off with the consent of the parties. Thereafter, the plaintiff filed a personal
                       claim against Clal Insurance. In his personal claim the plaintiff won the case.

                       On July 29, 2009, the Attorney General announced that he does not intend to
                       express his position in this case. The Attorney General claims that there is litigation
                       pending against other insurance companies in the Supreme Court which is liable to
                       affect the outcome of the claim and motion.

                       Clal Insurance responded to the request in November 2009.

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiffs will succeed in
                       the motion. Therefore, no provision was made in the financial statements.

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  t)   In August 2008, a subsidiary, Clal Insurance received a claim that was filed against
                       it with the Tel Aviv Jaffa District Court ("the claim"), together with a request to
                       approve the claim as a class action ("the request"), according to the Class Actions
                       Law, 2006.

                       The plaintiff contends that Clal Insurance does not pay and/or compensate its
                       policyholders and/or third parties, for the VAT component that they pay for
                       repairing the damage that was caused to the vehicle and for the appraiser's fees. In
                       addition, the plaintiff contends that Clal Insurance illegally refrains from paying
                       the policyholders and/or third parties, the VAT component in respect of the
                       decrease in the vehicle's value.

                       The plaintiff contends that the assumption that is attributed to Clal Insurance,
                       whereby the policyholders and/or third parties that are a company or an approved
                       dealer, get V.A.T. returns by way of a deduction of input tax, is incorrect and Clal
                       Insurance is aware of it.

                       The main causes for the alleged claims are: the breach of legislated duties by virtue
                       of law, the breach of the Insurance Contract Law, 1981, and the cause by virtue of
                       the Unjust Enrichment Law, 1979.

                       The remedy the plaintiff appeals for is a compensation for the relative share in the
                       VAT that cannot be credited as input tax.


                                               - 72 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The group the plaintiff wishes to represent is: anyone and/or any other legal
                       personality who was entitled to receive from Clal Insurance insurance benefits
                       and/or a payment in respect of a damage that was caused to the vehicle, either if he
                       was insured or if he was a beneficiary (a third party) and Clal Insurance refrained
                       from paying him the full VAT component, as mentioned, for that damage,
                       including the full VAT component for the appraiser's fees, during the seven years
                       prior to filing the claim, and including the full VAT component for the decrease in
                       the vehicle's value, from July 2005 up to the date the claim was filed. The plaintiff
                       notes that he does not have the correct data in order to accurately estimate the size
                       of the group and the compensation to the public.

                       The amount that the plaintiff demands for himself is NIS 726.64, as at the date the
                       claim and the request were filed. Based on information from Clal Insurance's
                       annual financial statements, the plaintiff estimates that the damage to the entire
                       group will amount to about NIS 59 million. The plaintiff notes that the exact data
                       for estimating the size of the data and the amount of the damage is held by Clal
                       Insurance. The amount of the claim in respect of the entire group is in the amount
                       of the alleged damage, as mentioned, plus a special compensation for the plaintiff
                       and lawyers' fees.

                       Clal Insurance responded to the request. On October 21, 2009, the Court ordered to
                       assign the request and claim pursuant to Article 7 to the Class Action Law, 1996 to
                       the judge in the claim and request for approval of a class action filed against
                       another insurance company in a similar case. A preliminary hearing was scheduled
                       for December 31, 2009.

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiffs will succeed in
                       the motion. Therefore, no provision was made in the financial statements.

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  u)   In June 2008, a claim was filed with the Tel Aviv Jaffa District Court ("the claim"),
                       together with a request to approve the claim as a class action ("the request"),
                       against two provident funds "Tamar" and "Gefen" ("the Funds"), that are managed
                       by Clal Provident Ltd. ("Clal Provident"), a sub-subsidiary of the Company, and
                       against the Phoenix Insurance Company Ltd. ("the Insurer") and against Israel
                       Discount Bank Ltd. ("Discount Bank").

                       The plaintiff contends that the Insurer continued to collect premiums for the "Ofek"
                       type group life insurance policy that was prepared for part of the funds' members,
                       also from members that discontinued their membership in the funds at various
                       dates, in contradiction to the provisions of the law.



                                              - 73 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The causes that are contended in this claim are, among others, the breach of the
                       Supervision of the Insurance Business Law, 1981, the Supervision of Insurance
                       Business Regulations (Group Life Insurance), 1993 and the provisions of the
                       Insurance Regulator's circular with respect to the continuity in group life insurance,
                       as well as mala fides and improper disclosure.

                       The plaintiff requests the Court to order the following remedies, as a whole or in
                       part; to provide a declarative ruling that the "Ofek" type group policy will be null
                       and void with respect to those member of the funds who had ended their
                       membership in the funds from the date they had left the group. Concurrently with
                       the declarative remedy, to instruct the Insurer to allow the funds members who
                       ended their membership and are still paying the group life insurance premiums, to
                       chose whether they wish to continue the insurance under a private life insurance
                       policy according to the directives of the Insurance Regulator with respect to the
                       continuity of group life insurance, or to instruct the insurer to refund the premium
                       that was unlawfully collected from the fund members who had retired, from the
                       date they left the group. Alternatively, or in addition, the plaintiff requests to order
                       a compensation by a ruling that will order a compensation in favor of the group
                       pursuant to the Class Actions Law, 2006 ("the Law"), and alternatively to the
                       alternative or in addition, to give a declarative ruling that will be right and fair
                       under the circumstances. In addition, the plaintiff requests to instruct to issue a
                       decree to disclose the documents relating to the number of the group members.

                       The group that the plaintiff wishes to represent is any member who had ended his
                       membership in the funds, and he was insured by the "Ofek" type group life
                       insurance. The plaintiff notes that the exact number of the group members and the
                       dates they ended their membership in the group will be sorted out during the
                       procedure. The plaintiff states the amount of the damage that was allegedly caused
                       to him (NIS 38,000) and he notes that the sum of the premium that was collected
                       from the entire group members will be sorted out during the procedure.

                       Clal Provident replied to the request. In a preliminary hearing held on September
                       23, 2009, the Court offered the plaintiff to strike the claim and request against
                       anchoring the insurer's liability according to which the "Ofek" insurance policy
                       will be valid and binding even for members who retired from the provident fund. A
                       preliminary hearing was scheduled for December 23, 2009.

                       In October 2008, Discount Bank transferred to Clal Provident, through its
                       representative, a commitment to grant compensation in the framework of this
                       claim. Under the commitment for compensation, Discount Bank undertook to
                       compensate Clal Provident "for any charges if it will be charged" under the claim,
                       provided that Clal Provident will be represented in this claim by the representatives
                       of Discount Bank and Clal Provident will not have any allegations against the bank
                       with respect to this representation.

                       The management of Clal Provident believes, based on the opinion of its legal
                       advisors, that Clal Provident has good defense arguments against the request.
                       Accordingly, the management of Clal Provident believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiffs will succeed in
                       the motion. Therefore, no provision was made in the financial statements.



                                               - 74 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Provident's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Provident will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  v)   In May 2007, a subsidiary, Clal Insurance, received a claim filed with the Tel
                       Aviv-Jaffa District Court in respect of business transferred to Clal Health as part of
                       arrangements for changing the structure between Clal Insurance and Clal Health in
                       January 2006 ("the claim") and a motion to certify the claim as a class action ("the
                       motion"). The claim was also filed against Dikla Insurance Company Ltd., Harel
                       Insurance Company Ltd., and Migdal Insurance Company Ltd. (collectively with
                       Clal Health - "the defendants").

                       The claim involves the payment of insurance benefits after the occurrence of an
                       insurance event in accordance with the Mashlim Legimlay nursing care policy,
                       which is a joint policy of all the defendants (Clal Health's share in the liability
                       under this policy is 20%) and/or any other nursing care insurance policy of any of
                       the defendants with similar terms. The plaintiff is demanding a refund of the
                       insurance premiums he paid, as aforementioned, after the occurrence of the
                       insurance event.

                       The claim was filed on behalf of all of the insured parties under the Mashlim
                       Legimlay policy and/or other nursing care insurance policies of any of the
                       defendants with similar terms over the past seven years and currently, including
                       insured parties who have passed away and who experienced an insurance event.

                       The claim was filed under the Class Action Law, 2006. The claim alleges, inter
                       alia, violation of the provisions of the Supervision of Financial Services
                       (Insurance) Law, 1981, violation of the Insurance Contract Law, 1981, violation of
                       the provisions of Insurance Circular 2004/11 of April 29, 2004, unjust enrichment,
                       and conduct tantamount to lack of good faith and inadequate disclosure.

                       The amount of the plaintiff's personal claim is NIS 8,201.73. The plaintiff
                       estimates the amount of the overall claim against all of the defendants at
                       NIS 165,730,305.

                       The remedy requested in the claim is to order Clal Health and the remaining
                       defendants to refund the insurance premiums collected by the members of the
                       group during the period in which insurance benefits were paid, and alternatively or
                       in addition, to grant compensation by means of a ruling awarding compensation to
                       the group or the public, and alternatively to the alternative or additionally, to issue
                       a declaratory ruling deemed appropriate and just by the Court under the
                       circumstances.

                       The defendants filed their response to the request in September 2007.

                       In June 2009, the Court granted the request and approved the claim as a class
                       action. In October 2009, the defendants filed a petition for appealing the decision
                       to the Supreme Court. In its decision of October 20, 2009, the Supreme Court ruled
                       that the request merits a response.


                                              - 75 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The management of Clal Health believes, based on the opinion of its legal advisors,
                       that Clal Health has good defense arguments against the request. Accordingly, the
                       management of Clal Health believes, based on the opinion of its legal advisors, that
                       it is unlikely (in other words, the probability is lower than 50%) that the Court will
                       accept the motion and that the plaintiffs will succeed in the motion. Therefore, no
                       provision was made in the financial statements.

                  w)   In July 2009, a claim was filed against a subsidiary, Clal Insurance, with the
                       Petach-Tikva District Court ("the claim") as well as a motion for approving the
                       claim as a class action ("the motion"). The motion was also filed against additional
                       insurance companies (collectively, "the defendants").

                       The claim pertains to the alleged short payment of compensation to taxi drivers in
                       third party claims for the shut down of taxis damaged in car accidents. According
                       to the plaintiff, all the defendants, arbitrarily, unjustifiably and in a manner that
                       implies advance, forbidden and wrong coordination, even in cases where a CPA
                       approves the loss of income, paid the petitioner whose vehicle was damaged by
                       "fault" of vehicles insured by comprehensive insurance by the defendants on the
                       relevant dates for every day of shut down due to repairs, monetary compensation of
                       merely NIS 150. The petitioner is arguing that all its attempts to appeal this
                       decision were met with a uniform and unexplained response that this is the
                       standard rate for insurance companies for a "shut down day" of taxis.

                       The plaintiff argues that the respondents' conduct is clearly discriminatory against
                       the rights of taxi drivers in Israel by denying of them full compensation for the
                       damages incurred to them by conditioning the payment of monetary compensation
                       on signing an "acceptance and release" form thereby exploiting, according to the
                       plaintiff, the taxi drivers' plight and financial pressures.

                       The claim was filed pursuant to the Class Action Law, 2006. The group which the
                       plaintiff wishes to represent is every taxi driver whose vehicle was involved in a
                       car accident and who filed, in the seven years preceding the date of filing the claim,
                       consequent third party claims against the defendants and received (as settlement
                       and not by Court order) funds for "shut down days" originating from property
                       damage.

                       The causes of the claim are, among other things, negligence, breach of statutory
                       duty for coordinating prices of "shut down days" in contrast to the provisions of the
                       Supervision of Financial Services (Insurance) Law, 1981 and of the Restrictive
                       Trade Practices Law, 1988 and holding negotiations in mala fide in contrast to
                       Section 12 to the Contracts Law (General Section), 1973.

                       The amount of the plaintiff's personal claim against Clal Insurance is NIS 705.
                       Based on the plaintiff's assumptions and evaluations, the overall claim against the
                       defendants in respect of the entire represented group approximates NIS 132 million
                       with the addition of special compensation for the plaintiff and legal fees. The
                       plaintiff did not estimate Clal Insurance's share in the overall damage to the group.




                                              - 76 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiffs will succeed in
                       the motion. Therefore, no provision was made in the financial statements.

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  x)   In September 2007, a claim was filed against a subsidiary, Clal Insurance, with the
                       Tel-Aviv-Jaffa District Court, with respect to business that was transferred to the
                       subsidiary - Clal Health ("the claim") together with a request to approve the claim
                       as a class action ("the request"). The claim was also filed against Migdal Insurance
                       Company Ltd., Harel Insurance Company Ltd., Menorah Mivtachim Insurance Ltd.
                       and the Israel Phoenix Insurance Company Ltd. (collectively, "the defendants").

                       The grounds for the claim are with respect to an initial exclusion period of 90 days
                       that is in health insurance policies and/or surgery insurance policies of Clal Health.
                       The plaintiff contends, according to the provisions of the policy, that Clal
                       Insurance collected from him insurance fees during the entire initial exclusion
                       period and on the other hand it did not provide the plaintiff with any
                       product/service or insurance coverage during the initial exclusion period. Hence,
                       the plaintiff alleges that the collection of the insurance fees during the initial
                       exclusion period is illegal and forms an unlawful enrichment. The Court is
                       requested to order Clal Health to stop collecting the insurance fees for the initial
                       exclusion period and to refund the insurance fees that it collected from the group
                       members during the aforementioned period, with the addition of interest and
                       linkage differences.

                       The amount of the plaintiff's personal claim, who is a policyholder of Clal Health,
                       is NIS 1,186, (one thousand one hundred and eighty six NIS), as at the date the
                       claim was filed. The total amount of the claim against the defendants is
                       NIS 730,864,000 (seven hundred and thirty million eight hundred and sixty four
                       thousand NIS). The plaintiff does not state what part of the above amount is
                       attributed to Clal Health. Nevertheless, on the basis of the plaintiff's allegations
                       under the claim, one may understand that the amount that is claimed from Clal
                       Health is NIS 191 million.

                       In November 2008, Clal Health submitted its reply to the request.

                       In September 2009, the plaintiffs requested to withdraw the above claim and
                       request.

                       In October 2009, the Court struck out the claim and request.




                                              - 77 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                  y)   In March 2007, a subsidiary, Clal Insurance, received a monetary claim ("the
                       claim") and a petition to approve the claim as a class action ("the petition") that
                       were filed against it and other defendants (Migdal and Harel), all of them insurance
                       companies, with the Tel-Aviv District Court.

                       The plaintiffs contend that Clal Insurance continues to charge its customers who
                       have executive insurance policies, even after they have reached the age of
                       retirement (65), a premium in respect of the risk component of the policy, which
                       they contend is expensive and unnecessary. The plaintiffs contend that Clal
                       Insurance should have transferred the premium it charges in respect of the risk
                       component to the saving component of the policy, and to thus increase the amount
                       of the accumulated savings. The plaintiffs contend that Clal Insurance does this
                       contrary to the terms of the policy, and they demand that the premiums that were
                       collected as aforementioned be returned to them.

                       The claim was filed in accordance with the Class Actions Law, 2006 and alleges,
                       inter alia, unlawful enrichment, deviation from the terms of the policies and
                       unlawful collection of premiums.

                       The amount of the personal claim against Clal Insurance is NIS 985. If the request
                       is accepted and the claim is certified as a class action, the plaintiffs estimate the
                       amount claimed from all the defendants to be NIS 900.4 million, of which the
                       amount attributed to Clal Insurance is not specified.

                       On September 29, 2009, Clal Insurance responded to the claim. A preliminary
                       hearing in the request is scheduled for April 6, 2010.

                       The management of Clal Insurance believes, based on the opinion of its legal
                       advisors, that Clal Insurance has good defense arguments against the request.
                       Accordingly, the management of Clal Insurance believes, based on the opinion of
                       its legal advisors, that it is unlikely (in other words, the probability is lower than
                       50%) that the Court will accept the motion and that the plaintiff will succeed in the
                       motion. Therefore, no provision was made in the financial statements.

                       Nevertheless, should the claim be approved as a class action, in the opinion of the
                       Clal Insurance's management, based on the opinion of its legal advisors, it is not
                       possible, at this early stage, to estimate the prospects of the class action and the
                       scope of the financial obligation that Clal Insurance will be committed to if it is
                       recognized as a class action. This, among other things, for reasons stipulated at the
                       end of Note 7(a)(2)(b).

                  z)   In September 2009, a claim ("the claim") and a request for approving the claim as a
                       class action ("the request") were filed with the Regional Labor Court in Jerusalem
                       against a subsidiary, Meitavit Atudot, and others - Co-op Jerusalem Supermarket
                       Chain 1992 Ltd. ("Co-op Jerusalem") and KGM Central Pension Fund of Histadrut
                       Members Ltd. ("KGM") (collectively referred to in this subsection as "the funds").




                                              - 78 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                        The claim pertains to the adequacy of the severance pay accruals and the
                        classification and segregation of the funds contributed to the pension fund by April
                        1999. The plaintiffs argue that the defendants did not make adequate contributions
                        in the funds and/or did not pay them the legally required severance pay since the
                        base salary used to calculate the severance pay upon their retirement did not take
                        into consideration other salary components paid to employees of Co-op Jerusalem
                        which the plaintiffs argue represent an integral part of their salary. The plaintiffs
                        also argue that until 1999, no segregation was practiced in the funds between the
                        compensation component and the severance component contributed by the
                        employer so that although the severance pay was provided for, on the one hand the
                        employer did not make up for the difference in severance pay and on the other
                        severance pay was taken out of amounts held for compensation thereby impairing
                        the plaintiffs' rights.

                        The plaintiffs also contend that the defendants had violated the Severance Pay
                        Law, 1963 and the collective agreement and are therefore claiming as follows: the
                        reimbursement of amounts in respect of the error committed in Co-op Jerusalem's
                        accruals for compensation at real value; the calculation of severance pay according
                        to their full salary; the payment of compensation for stay of severance pay; the
                        payment of all abovementioned amounts with the addition of interest and linkage
                        differences. The personal amount claimed by the three plaintiffs collectively is
                        NIS 224,149. The plaintiffs did not state the overall class action amount if the
                        claim is approved as a class action.

                        Meitavit has not yet responded to the request. A preliminary hearing has been
                        scheduled for January 25, 2010.

                        At this stage, Meitavit is still studying the claim and is therefore unable to assess
                        the chances of the claim and request to prevail at this early stage.

                  aa)   In September 2009, a claim ("the claim") and a request for approving the claim as a
                        class action ("the request") were filed with the Tel-Aviv-Jaffa District Court
                        against a subsidiary, Clal Insurance, and others.

                        The claim relates to a group life insurance policy for IDF professional soldiers and
                        retired staff. The plaintiff, a professional soldier with the IDF, argues that the
                        defendants acted illegally by not obtaining the group members' consent to issuing a
                        life insurance policy and given that the payment of premiums is done by automatic
                        deduction from their salaries and the policy and/or premium deduction from salary
                        cannot be cancelled. The plaintiff also argues that the defendants are violating the
                        policy's provisions by over collecting premiums and not producing the full policy
                        for the group members.

                        The grounds for requesting to approve the claim as a class action include: acting in
                        contrast with the law and the Insurance Supervision Circulars; breach of statutory
                        duty; implied breach of agreement and/or obligation; breach of bona fide duty in
                        executing the agreement; breach of fiduciary duty; fraud and/or negligence;
                        deception; unjust enrichment.




                                               - 79 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                        The plaintiff is seeking to cancel and recover all the premiums collected in the
                        seven years prior to filing the claim and request, except for policyholders who
                        waive their right of recovery and agree in writing to remain policyholders.
                        Alternatively, the plaintiff is seeking to order the prospective cancelation of
                        premiums for all the group members who did not and will not grant their consent in
                        writing to the premiums' collection. Alternatively and as a different and separate
                        ground, the plaintiff is asking to recover all the over charged premium amounts (in
                        excess of the policy's premiums) in the last seven years. The plaintiff is asking that
                        the defendants deliver to the group members the full version of the policy.

                        If the claim is approved as a class action with respect to the remedy of canceling
                        the policies and recovering all the past premiums, the amount claimed by the
                        plaintiff is NIS 490,000,000. The plaintiff's personally claimed amount for past
                        premiums is NIS 2,165. If the claim is approved as a class action with respect to
                        the remedy of recovering the past overly charged premiums, the amount claimed
                        by the plaintiff is NIS 85,000,000. The plaintiff's personally claimed amount for
                        over charged premiums is NIS 483.

                        Clal Insurance has not yet responded to the request and no hearing date has been
                        scheduled.

                        At this stage, Clal Insurance is still studying the claim and is therefore unable to
                        assess the chances of the claim and request to prevail at this early stage.

                  ab)   In September 2009, a claim ("the claim") and a request for approving the claim as a
                        class action pursuant to the Class Action Law, 1996 ("the request") were filed with
                        the Central District Court against a subsidiary, Clal Provident, Meitavit Atudot
                        Pension Fund Management Company Ltd. ("Meitavit"), subsidiaries of Clal
                        Insurance and nine other management companies of provident funds or other
                        insurance companies ("the defendants").

                        The plaintiffs argue that the defendants deducted from the members' accounts
                        and/or imposed on the members the effective costs involving the investment of a
                        portion of their funds into basket certificates. The plaintiffs argue that these
                        effective costs are non-deductible expenses and/or expenses that cannot be imposed
                        on members' accounts by law. The plaintiffs are arguing that the actual deduction
                        of the effective costs from the plaintiffs' accounts deposited in trust with the
                        defendants was illegal and caused each of the defendants damages equivalent to the
                        effective costs illegally charged from them.

                        Among other things, the grounds for the claim are: breach of explicit contractual
                        obligations towards the plaintiffs (by virtue of the provisions of the articles of
                        association of the provident funds or insurance policies in which the plaintiffs'
                        contributions were made), breach of statutory duty, conduct significantly not in
                        compliance with the standards of behavior expected and required from the
                        defendants and negligent behavior and cause by force of the Consumer Protection
                        Law, 1981.

                        The group which the plaintiffs wish to represent consists of anyone who is (was) a
                        member of either of the provident funds and/or insurance policies managed by the
                        defendants and whose funds were invested in basket certificates during the period
                        from November 10, 2005 to the date of filing the claim.


                                               - 80 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                        The personal damage claimed by the plaintiffs due to the actions undertaken by
                        Clal Provident and Meitavit amounts to NIS 33.49 and NIS 30.12, respectively and
                        in total - NIS 63.61.

                        The damage claimed and assessed by the plaintiffs for the entire group due to the
                        actions undertaken by Clal Provident and Meitavit amounts to NIS 12,721,914
                        against Clal Provident and to NIS 20,462,021 against Meitavit, totaling
                        NIS 33,183,935. The plaintiffs mention that they reserve the right to revise these
                        amounts based on data and documents obtained by them in the course of the
                        proceeding.

                        Clal Provident and Meitavit have not yet responded to the request.

                        The managements of Clal Provident and Meitavit believe, based on the opinion of
                        their legal advisors, that Clal Provident and Meitavit have good defense arguments
                        against the request. Accordingly, the managements of Clal Provident and Meitavit
                        believe, based on the opinion of their legal advisors, that it is unlikely (in other
                        words, the probability is lower than 50%) that the Court will accept the motion and
                        that the plaintiffs will succeed in the motion. Therefore, no provision was made in
                        the financial statements.

                  ac)   In September 2009, a claim ("the claim") and a request for approving the claim as a
                        class action ("the request") were filed with the Central District Court against a
                        subsidiary, Clal Insurance, regarding a collective insurance policy for covering
                        students' personal accidents issued by Clal Insurance ("the policy").

                        As argued in the claim and request, upon the occurrence of an insurance event
                        (bodily injury), Clal Insurance refuses to pay for a specialist opinion and requires
                        its policyholders to participate in said expense. Furthermore, Clal Insurance does
                        not notify its policyholders of their right to have a medical specialist appointed for
                        them at Clal Insurance's expense.

                        According to the claim and request, by doing so, Clal Insurance is violating the
                        provisions of the Insurance Contract Law, 1981 and is misleading its policyholders
                        and unjustly benefits at their expense.

                        The personal amount claimed by the plaintiff is NIS 2,925 (plus VAT). The request
                        for approval does not state the overall amount claimed but it is clarified that the
                        request for approval merits being heard in the District Court.

                        Clal Insurance has not yet responded to the request.

                        The management of Clal Insurance believes, based on the opinion of its legal
                        advisors, that Clal Insurance has good defense arguments against the request.
                        Accordingly, the management of Clal Insurance believes, based on the opinion of
                        its legal advisors, that it is unlikely (in other words, the probability is lower than
                        50%) that the Court will accept the motion and that the plaintiff will succeed in the
                        motion. Therefore, no provision was made in the financial statements.




                                               - 81 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                        Nevertheless, should the claim be approved as a class action, in the opinion of the
                        Clal Insurance's management, based on the opinion of its legal advisors, it is not
                        possible, at this early stage, to estimate the prospects of the class action and the
                        scope of the financial obligation that Clal Insurance will be committed to if it is
                        recognized as a class action. This, among other things, for reasons stipulated at the
                        end of Note 7(a)(2)(b).

                  ad)   In September 2009, a claim ("the claim") and a request for approving the claim as a
                        class action ("the request") were filed with the Central District Court against a
                        subsidiary, Clal Insurance, and other defendants, all insurance companies.

                        The claim alleges that the defendants illegally charge extra fees for the age and/or
                        driving seniority of an additional licensed vehicle user. According to the plaintiffs,
                        they purchased from the defendants compulsory vehicle insurance policies and on
                        the date of signing were asked by the defendants and/or their employees and/or
                        messengers and/or anyone on their behalf to pay excess insurance coverage for the
                        age and/or driving seniority of an additional licensed vehicle user. The plaintiffs
                        argue that the defendants collected excess fees from the policyholders for the
                        driver's age and/or driving seniority by deception and/or non disclosure and/or
                        misrepresentation under the pretext of expanding the insurance coverage.

                        The claim was filed pursuant to the Class Action Law, 1996. The group which the
                        plaintiffs wish to represent is all the buyers of compulsory vehicle insurance
                        policies who paid excess fees for the insurance coverage of licensed vehicle drivers
                        between early 2004 through the date of filing the claim (September 10, 2009).

                        The grounds of the claim include: the Supervision of Financial Services
                        (Insurance) Law, 1981, the Motor Act Insurance Order [Revised], 1970, the
                        Contracts Law (General Section), 1973, the Unjust Enrichment Law, 1979,
                        negligence and breach of statutory duty.

                        The personal amount claimed by plaintiff No. 7 from Clal Insurance is between
                        NIS 800 and NIS 900. Based on the plaintiffs' assumptions and assessments, the
                        overall amount claimed from all the defendants for the entire represented group is
                        NIS 1,356,596,608. The plaintiffs did not assess Clal Insurance's share in the
                        overall damage to the group members.

                        On September 30, 2009, after only 20 days from its filing, the plaintiffs filed a
                        request for withdrawal of the claim and request for approval of a class action in the
                        context of which the representative of the plaintiffs clarified that after having filed
                        the request for approval and after having studied the relevant documents delivered
                        to the representative, the plaintiffs were convinced that a class action is not the
                        proper way to resolve this legal issue.

                        On October 14, 2009, Clal Insurance filed its response for the request for
                        withdrawal and consented to it without the issuance of an order for expenses.

                        At this stage, the Court's decision as to the withdrawal of the claim and request has
                        not been granted.

                        At this preliminary stage, the chances of the claim and request for approval of a
                        class action cannot be assessed.


                                               - 82 -
                                                   CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

         b.   Material claims:

              1.    In March 2008, a subsidiary, Guard, received a third party notice filed in Court in Illinois,
                    USA ("the claim") against it and against many other U.S. insurance companies, who were
                    members of the Board of Governors of the National Workers' Compensation Reinsurance
                    Pool ("the pool"), as detailed below.

                    The said pool is to ensure workers' compensation type insurance, which is mandatory in
                    the USA, in cases where insurance companies in the market refuse to insure them. There
                    are hundreds of insurance companies in the pool, run by the Board of Governors, to
                    which a number of companies from the pool are appointed from time to time.

                    This is against a background of legal proceedings that have been running for several years
                    against the insurance company American International Group Inc. and its subsidiaries
                    ("AIG"). In the proceedings it is claimed that AIG, a pool company, misled members of
                    the pool in its reports concerning its premiums, deliberately reducing the premium
                    amounts reported, thereby reducing AIG's share of the pool's costs (and of course
                    increasing the share of other members of the pool).

                    In the compromise AIG reached in 2006 with the Attorney General for the State of New
                    York, AIG admitted to the said actions and agreed to set up a compensation fund for the
                    said reduction of its share, for hundreds of millions of dollars.

                    Notwithstanding this agreed compromise, the pool filed a civil claim against AIG ("the
                    original claim") with a Court in Chicago for approximately a billion dollars, on the
                    grounds that the amount of the compromise is not fair compensation for damages incurred
                    by the pool.

                    In response on March 18, 2008, AIG submitted a statement of defense and a third party
                    notice against members of the pool's Board of Governors at the time the pool, including
                    Guard, filed its claim. AIG claimed that some members of the pool, among whom Guard
                    was not included, used to unlawfully report reduced premiums to the pool (similar to the
                    behavior to which AIG had admitted), and that they too benefited from reduced shares of
                    the pool's costs.

                    In addition, AIG claimed that the members of the Board of Governors, including Guard,
                    attempted a conspiracy against AIG in order to weaken it and harm its reputation, inter
                    alia by setting up obstacles for AIG in correcting the shortcomings to which it had
                    admitted and by preventing the identifications of shortcomings in the behavior of other
                    members of the pool.

                    The grounds of the claim are lack of good faith, conspiracy, embezzlement, breach of the
                    obligation of trust and grounds under the racketeering law ("RICO Law").

                    To the best of Guard's knowledge, the amount claimed is not stated in the claim, however,
                    the plaintiffs seek compensation to cover the damage caused them by the said actions,
                    plus interest and legal fees. They are also seeking penal compensation and compensation
                    of three times the value as provided under the RICO law.

                    Guard and other members of the Board of Governors filed a request to erase the notice to
                    the third party in limine, on the basis of the claim that filing this request is unjustified and
                    the notice to the third party does not reveal any allegation against any of them.


                                                   - 83 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                  In a decision that was made on February 23, 2009, the Court deliberated, among others,
                  the request to erase the notice to the third party. The Court instructed to erase all the
                  allegations in the claim against Guard due to lack of cause, except for the violation of the
                  duty of trust. It should be noted that since these were only erases, AIG is still able to
                  amend the statement of claim.

                  On January 26, 2009, AIG filed a request to remove the claim that was filed against it due
                  to lack of jurisdiction. In its decision of August 20, 2009, the Court accepted AIG's
                  request to strike the claim. Under these circumstances, AIG's claim against the third
                  parties including Guard remains in tact. According to the change in plaintiffs as discussed
                  above, on September 25, 2009, AIG filed a revised claim ("the revised claim") which was
                  amended by it on October 16, 2009. AIG's arguments in the revised claim are similar in
                  nature to the arguments made by it in the context of the original claim but also include
                  reference to marginal markets in which AIG and one of the defendants (Liberty Mutual)
                  operate other than the pool.

                  On October 30, 2009, the defendants, including Guard, filed a request to dismiss the
                  revised claim. A decision in this request has yet to be made.

                  In the opinion of Guard's management, based upon the assessment of its legal counsel, it
                  is more reasonable than not that Guard will overcome AIG's claims. Accordingly, in the
                  opinion of Guard's management, based upon the opinion of its legal counsel, if Guard
                  carries on its defense until a ruling, it is not expected (namely, chances do not exceed
                  50%) that AIG's claims against Guard will succeed and that the ruling that will be handed
                  down will be in favor of AIG and against Guard. Accordingly, in the opinion of Guard's
                  management, based upon the opinion of its legal counsel, the likeliness that Guard will be
                  found responsible in a Court ruling to pay any amounts based upon the said claim does
                  not exceed 50%. Therefore, no provision was made in the financial statements.

                  It should be noted that to the best of the knowledge of Guard's management, members of
                  the Board of Governors are entitled to indemnity in respect of their work on behalf of the
                  pool, subject to it being proven that they did not act out of malice and/or in an improper
                  manner and/or contrary to the provisions of the law and/or committed criminal acts.

                  On April 1, 2009, Safeco Insurance Company of America and Ohio Casualty Insurance
                  Company filed with the Illinois Court in the U.S. a claim and a motion to approve the
                  claim as a class action on behalf of themselves and all the pool members (excluding AIG)
                  ("the additional claim"). The arguments raised in the additional claim are essentially
                  identical to the arguments raised in the original claim. In the context of the additional
                  claim, arguments are raised against AIG and three other defendants. On April 9, 2009, the
                  additional claim was submitted to the judge in front of whom the claim was heard as a
                  related case.

             2.   In February 2006, E.M.M. Insurance Agency (1998) Ltd. ("Hachi Yashir"), an insurance
                  agency which, inter alia, served as a mediator for Clal Insurance in the sale of insurance
                  business to borrowers of mortgage banks, filed a motion with the Tel Aviv-Jaffa District
                  Court, against Clal Insurance, to impose on Clal Insurance, within the framework of a
                  requested interim order, to continue to pay Hachi Yashir commissions and advance
                  payments according to the agreement between the parties of May 2002 ("the agreement").
                  The motion to issue the interim order ex parte was dismissed due to laches.




                                                - 84 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                  At the same time, in February 2006, Clal Insurance filed a motion with the Tel Aviv-Jaffa
                  District Court to appoint a temporary and permanent receiver, by virtue of a bond, as well
                  as to enforce pledges against Hachi Yashir that were registered by virtue of the
                  agreement, in respect of Hachi Yashir's debt to Clal Insurance from the payment of loans
                  and advance payments.

                  The Israeli Phoenix Insurance Company Ltd. filed a motion to join the petition for
                  receivership.

                  In parallel to the petition for receivership, a temporary liquidator was appointed for Hachi
                  Yashir according to the petition filed with the Tel Aviv-Jaffa District Court by Hachi
                  Yashir’s employees. In view of the appointment of the liquidators, and in view of the fact
                  that the portfolio preservation is carried out by Clal Insurance with the liquidators'
                  consent, Clal Insurance informed the Court that the hearing in respect of the motion to
                  appoint a temporary receiver is unnecessary. In May 2006, a permanent liquidation order
                  was issued for Hachi Yashir and the temporary liquidators were appointed as its special
                  managers.

                  In March 2006, the temporary liquidators published an invitation to submit offers to
                  acquire the assets and rights of Hachi Yashir. After publication of the invitation, offers
                  were submitted by various parties, including by Clal Insurance. Ultimately, the
                  liquidators entered into agreements to sell all the assets and rights of the insurance
                  portfolio. Clal Insurance purchased the insurance portfolio of Hachi Yashir with respect
                  to its insurance. On May 10, 2006 (at the same time as appointment of the
                  aforementioned special managers), the sale agreement was approved by the Court.

                  In May 2007, Clal Insurance and Hachi Yashir filed mutual statements of claim to the
                  arbitrator appointed with the agreement of the parties.

                  Hachi Yashir claims that Clal Insurance violated the partnership agreement in the area of
                  mortgage insurance that was executed between the parties in May 2002 ("the
                  agreement"). Hachi Yashir claims, inter alia, that Clal Insurance did not transfer and/or
                  reduced commissions and/or advance payments that were due to Hachi Yashir under the
                  agreement; that Clal Insurance prevented Hachi Yashir from accepting new customers,
                  and in this regard blocked it from contacting customers of specific banks; that Clal
                  Insurance prevented Hachi Yashir from issuing debentures to be backed by future flow of
                  commissions from the sale of policies; that Clal Insurance did not perform its obligation
                  for a trustee mechanism for the funds of the premiums collected from the policyholders;
                  and finally, that Clal Insurance unilaterally cancelled the agreement.

                  The causes for the claim on which Hachi Yashir relies are, inter alia: breach of contract,
                  negligence, unjust enrichment, wrongdoings under the Antitrust Law, action in
                  contravention of the Commercial Wrongdoings Law and breach of contract. Hachi Yashir
                  claims that the acts and/or omissions of Clal Insurance led to the collapse of Hachi
                  Yashir, to the cessation of its activities and liquidation. Hachi Yashir estimates the value
                  of its claim at NIS 206 million (plus expenses and legal fees of 15%), an amount that it
                  claims reflects the value at which it was valuated prior to its collapse. In addition, Hachi
                  Yashir is demanding that the arbitrator issue an order for the issue of accounts to show
                  cause of unjust enrichment.




                                                - 85 -
                                                CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                  Clal Insurance submitted a statement of claim to the arbitrator in the amount of NIS 26.3
                  million against Hachi Yashir, with respect to Hachi Yashir's debts to it, attributable to the
                  loans Clal Insurance extended to Hachi Yashir and which were not paid back, as well as a
                  motion to recognize the amount paid by Clal Insurance to purchase the customer portfolio
                  from the Hachi Yashir liquidator (in the amount of NIS 3 million) as an amount included
                  in the existing lien that Clal Insurance has on the assets of Hachi Yashir. The liquidators
                  of Hachi Yashir are refusing to view the decision of the arbitrator issued in the said claim
                  of Clal Insurance as a decision in the claim for the debt as part of the dissolution
                  processes of Hachi Yashir, and even argue that Clal Insurance cannot now file proof of
                  debt in this matter. Clal Insurance filed a petition for issue of instructions and appeal with
                  the District Court with respect to the said decision of the liquidators.

                  On June 9, 2009, by way of compromise, the arbitrator ruled within the range agreed
                  between the parties that Clal Insurance shall pay Hachi Yashir a total of NIS 11.725
                  million as final and complete settlement of all the parties' claims, including, among other
                  things, Hachi Yashir's lawyers' fees. Each party will ultimately and utterly waive any
                  claims against the other. The amount awarded in the compromise was paid by Clal
                  Insurance to Hachi Yashir.

                  On July 2, 2009, a letter was received from the representatives of Mr. Shaul Pasternak, a
                  shareholder in Hachi Yashir, and of an insurance agency owned by Mr. Pasternak, Globus
                  Insurance Agency Ltd. ("Globus") in which it was noted that Mr. Pasternak intends to file
                  a claim against Clal Insurance, Mr. Avigdor Kaplan and others in Clal Insurance for
                  alleged personal damages caused to him by the collapse of Hachi Yashir. The letter also
                  states that mortgage banks and Clal Insurance collaborated against Hachi Yashir and that
                  in this context, Clal Insurance demanded that Hachi Yashir stop applying to the
                  customers of Tefahot Bank and Mishkan Bank and that Hachi Yashir's policy selling
                  activity in Clal Insurance be minimized. The letter further claims that Clal Insurance had
                  requested to circumvent the Liquidations Court and that the compromise agreement
                  signed between Clal Insurance and Hachi Yashir is illegal.

                  Mr. Pasternak argues that he sustained damages at a scope of tens of millions of NIS,
                  including damages due to the impairment of his shares in Hachi Yashir; damages arising
                  from Mr. Pasternak's and Globus' inability to realize contractual rights they had (as far as
                  they had any); damages arising from the realization of guarantees granted in respect of
                  loans received by Hachi Yashir and damages to Mr. Pasternak's reputation.

                  In the opinion of the management of Clal Insurance, which is based on the opinion of its
                  legal advisors, Clal Insurance has good defense arguments against the claim made by Mr.
                  Pasternak and Globus. Accordingly, in the management's opinion, based on the opinion
                  of its legal advisors, it is not expected (in other words, the probability does not exceed
                  50%) that such claim, if filed, will be accepted. Accordingly, in the opinion of Clal
                  Insurance's management, based upon the opinion of its legal counsel, the likeliness that
                  Clal Insurance will be obliged to pay any amounts based upon the said claim does not
                  exceed 50%. Accordingly, the Company did not record a provision in respect of this
                  claim.




                                                - 86 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

              3.   a)   In January 2008, a claim was filed against Tachlit Insurance Agency (1999) Ltd.
                        (formerly, Y. Vardi Insurance Agency (1999) Ltd.), a subsidiary of a subsidiary of
                        the Company ("the agency"), by Kibbutz Tzora and Tzora Furniture Ltd. in the
                        amount of about NIS 18 million ("the owners-lessors' claim"). The claim was also
                        filed against Menorah Insurance Co. Ltd., jointly and severally with the agency
                        (excluding an additional sum of about NIS 200,000 which is claimed only from
                        Menorah Insurance Co. Ltd.).

                        The claim concerns a fire that completely destroyed a building owned by Kibbutz
                        Tzora and Tzora Furniture Ltd. ("the owners-lessors"), which was leased to a
                        company called "Tzora Furniture 2000 of Global Group Ltd." ("the lessee", which
                        is a separate company with different ownership from Tzora Furniture Ltd.). Under
                        the lease agreement, the lessee undertook to attend to the insurance of the building
                        by an insurance that would include, inter alia, coverage for fire damage. The lessee
                        purchased from Menorah Insurance Company, through the agency, an insurance
                        policy for the building and its contents, which also include insurance coverage for
                        fire damage, under a policy in which a number of buildings were insured which
                        were at that time being used by various companies from the Teknion Group, to
                        which the lessee also belongs indirectly. After the fire event, Menorah rejected the
                        claim of the owners-lessors, contending that in view of the wording of the policy, it
                        is unclear whether the insured under the policy is Tzora Furniture Ltd. or the
                        lessee, and therefore both of them are possible plaintiffs in relation to the same
                        indemnity amount.

                        In view of the rejection of their claim for indemnity, Kibbutz Tzora and Tzora
                        Furniture Ltd. - the owners-lessors - filed the claim against Menorah and against
                        the agency, against which it was alleged that if it is ruled that the policy is not
                        applicable, then the agency was negligent in drafting it.

                        The agency is insured under a professional liability policy of Clal Insurance with a
                        limit of $ 1,000,000.

                        Following the Court's recommendation in a hearing of the case that took place in
                        September 2008, the plaintiffs and Menorah agreed to undergo a mediation
                        procedure. The mediation was not advanced by any of the parties to the claim.
                        Therefore, it looks like the mediation procedure is no longer relevant.

                        On March 12, 2009, Menorah filed a motion for filing a third party notice against
                        the agency. The agency filed its objection to the motion. In a decision accepted on
                        May 17, 2009, the Hon. Judge Grestel allowed Menorah to file a third party notice
                        against the agency and against other third parties.

                        On May 25, 2009, the representatives of the agency received the revised statement
                        of defense and a notice against third parties filed by menorah against Kibbutz
                        Tzora, the Beit Shemesh Union of Cities Firefighting Services, Biometrics Ltd. (a
                        sub-lessee in the building) and the agency. The amount of the notice was
                        NIS 6,000,000.




                                               - 87 -
                                              CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                       The principal claim against the agency is that the latter had concealed from
                       Menorah various material facts of which had Menorah been informed, it would not
                       have entered into the insurance contract that is the subject of the claim. The main
                       fact that Menorah argues had been concealed from it was that the previous insurer
                       of the Teknion Group (Clal Insurance Company Ltd.) refused to renew Teknion
                       Group's insurance in light of adding the lessee to Teknion's insurance policies and
                       that other insurance companies had refused to insure the Teknion Group and/or the
                       lessee.
                       The agency has not yet filed a statement of defense for the third party notice.
                       In a pre-trial held on July 1, 2009, the representative of Kibbutz Tzora announced
                       that the Kibbutz intends to file a fourth party notice against the Phoenix Insurance
                       Company Ltd. ("the Phoenix"). At the Court's recommendation, it was agreed to
                       attempt an arbitration proceeding between all the parties involved in the case,
                       including the Phoenix. It was also decided in the hearing that until the arbitration
                       proceeding is finalized, there is no need to submit additional statements of claim
                       and that if the arbitration proceeding is rejected, the Court will assign dates for
                       filing statements of claim.

                       In a pre-trial hearing of October 15, 2009 attended by all the representatives of the
                       parties in other related cases, it was agreed that everyone involved in the fire affair
                       would participate in an arbitration proceeding, which will be limited to 90 days.

                       In the opinion of the agency's management, based on an opinion of its legal
                       advisors, the agency has pretty good defense arguments. Therefore, in the opinion
                       of the agency's management, based on an opinion of its legal advisors, the chances
                       that the claim against the agency will be accepted is lower than 50%. Accordingly,
                       no provision was made in the financial statements of the agency.

                       As for the third party notice filed by Menorah against the agency, the agency
                       believes that based on legal opinion, it has pretty good defense arguments and that
                       although the agency's statement of defense has yet to be definitively drafted, prima
                       facie, and based on current information, it appears that the chances that the third
                       party notice against the agency will be accepted are lower than 50%. Accordingly,
                       no provision was made in the financial statements of the agency.

                  b)   In addition to the third party notice filed by Menorah against the agency in
                       connection with the owners-lessors' claim, as above, in May 2009, Menorah filed a
                       third party notice against the agency and other third parties in the context of a
                       claim filed against Menorah by the lessee in connection with the fire that broke out
                       in a building on the grounds of Kibbutz Tzora.

                       According to the claim, after the fire incident and following the damage caused, the
                       lessee applied to Menorah demanding to receive insurance compensation for the
                       damages to the structure's contents. As emerges from judicial documents
                       (processes of Court) filed in the two relevant affairs, Menorah has paid the lessee
                       substantial amounts on account of the insurance compensation for the damages to
                       the structure's contents. In the context of the claim, the lessee argues that Menorah
                       has not compensated it for the full damage sustained to the inventory due to the
                       fire, for fees to experts hired by the lessee and for the lessee's loss of earnings for
                       the 12-month period following the fire.
                       The amount of the claim and third party notice is NIS 3,410,056.

                                              - 88 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                        In the context of the third party notice, Menorah accuses not only the agency but
                        also Kibbutz Tzora, the Beit Shemesh Fire Department and Biometrics (a sub-
                        lessee of the lessee which Menorah claims deficiently installed a fire extinguishing
                        system, which affected the firefighting activity after the fire).

                        Menorah's main argument against the agency is that the agency had concealed from
                        Menorah various material facts of which had Menorah been informed, it would not
                        have entered into the insurance contract that is the subject of the claim, not even for
                        higher insurance fees. The main fact that Menorah argues had been concealed from
                        it was that the previous insurer of the Teknion Group (Clal Insurance Company
                        Ltd.) refused to renew Teknion Group's insurance in light of adding the lessee to
                        Teknion's insurance policies and that other insurance companies had refused to
                        insure the Teknion Group and/or the lessee. Menorah also argues that the agency
                        had misled Menorah into agreeing to extend the date for performing the protection
                        upgrading requirements as demanded by Menorah to be executed in the building by
                        the end of June 2007. Menorah also contends that the agency had tried to sway
                        Menorah's surveyor and Menorah itself during the stage of establishing the
                        required protection terms and consequently, affect the protection terms determined
                        in Menorah's policy as a condition for the insurance coverage's validity. The
                        agency filed a statement of defense on its behalf.

                        Based on its legal counsel, the agency's management believes that the chances that
                        the third party notice against the agency will be accepted are lower than 50%.
                        Accordingly, no provision was made in the financial statements of the agency.

             4.   In January 2009, a claim was filed with the Haifa Regional Labor Court against Maccabi
                  Magen Cooperative Society and against the subsidiary - Clal Health ("the claim").

                  The claim deals with the request to provide an affidavit regarding the plaintiff's
                  entitlement to file a claim in the future in order to receive insurance benefits in
                  accordance with the group long term care insurance policy for the members of Maccabbi
                  Health Services ("the policy"). The plaintiff contends that since he is a "policyholder", as
                  this term is defined in the policy, he is entitled to file a claim in the future to receive
                  insurance benefits in accordance with the policy, despite the fact that he was defined by
                  the National Insurance Institution as being in a supportive position, before the
                  "determining date" as defined in the policy, namely, July 1, 2008.

                  In March 2009, the plaintiff withdrew the claim.

             5.   In the framework of the agreement for the acquisition of the shares of Ilit (which was
                  merged with Aryeh, today - Clal Health) by the Company of November 1998, Ilit and its
                  former shareholders, jointly and severally, gave the Company a put option requiring one
                  of the former shareholders ("the buyer") to purchase the office building for $ 3.3 million
                  plus VAT. In March 2001, Ilit gave notice that the option had been exercised and it
                  informed the tax authorities of the sale. At the end of June 2001, the building was
                  vacated.




                                                - 89 -
                                                CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                  After exercising the put option, the buyer denied the existence of the option and also the
                  amount of the agreed consideration. The hearing of the abovementioned legal dispute is
                  in arbitration. In the framework of said arbitration, the Company and Clal Health are
                  suing the buyer, among other things, for discharge of the buyer’s liabilities towards them
                  regarding the option. In June 2002, the Tel-Aviv-Jaffa District Court decided to appoint
                  an arbitrator and to add the previous Ilit shareholders to the proceeding.

                  In July 2009, the arbitrator's decision was granted. Following the arbitrator's decision,
                  income in the amount of NIS 1.4 million was recorded in the last quarter of 2009. Clal
                  Health estimates that with the full adoption of the arbitrator's decision, Clal Health will be
                  able to record additional income of in excess of NIS 2 million.

                  During the course of these proceedings, an agreement was signed in September 2005 to
                  sell the building to a third party ("the second buyer") in consideration of about $ 1.8
                  million plus VAT. The buyer consented to the sale, and accordingly, the requested relief
                  in the claim against the buyer was amended to relief of compensation. Under the
                  agreement, the second buyer agreed to continue to handle the legal proceedings with the
                  owner of the adjacent plot. The sale made contingent upon the betterment tax authority
                  approving cancellation of the sale of the property to the buyer. This approval was
                  received. Notwithstanding the aforesaid, the second buyer did not fulfill the terms of the
                  agreement, and in particular the commitment to pay the consideration.

                  Following the above, the agreement was cancelled. The second buyer applied to the Court
                  for an interlocutory injunction preventing the sale of the building to third parties. The
                  request was denied in August 2006. At the same time, the second buyer sought relief of
                  enforcing the agreement with him. In July 2006, a statement of defense was filed, as well
                  as a counter-claim for declaratory relief that the agreement was lawfully cancelled and for
                  an order directing the director of land taxation to cancel the assessment of the sale
                  transaction to the second buyer. In January 2007, the second buyer filed an application to
                  split reliefs, which is mainly a request to claim compensation in the future if the Court
                  dismisses the claim for enforcement. In July 2007, a Court's order was issued for a
                  reciprocal disclosure and review of the documents. A pre-trial hearing took place on
                  January 24, 2008, in which the Court allowed the application to split reliefs. The
                  procedure is in the stage of proofs.

                  In the opinion of the management of the Company, which is based on the opinion of its
                  legal advisors, since the relief requested by the second buyer is relief of enforcement,
                  there is a probability of over 50% that the arguments of the defense will be allowed.
                  Accordingly, no provision was made in the financial statements. Furthermore, in the
                  opinion of the company's management which is based on the opinion of its legal advisors,
                  in the event that the second buyer files a claim for compensation in the future, based on
                  the same arguments (only) as those made in the claim for enforcement, the Company has
                  good defense arguments against such a claim.

                  Furthermore, in February 2006, a claim was delivered to Clal Health that was filed
                  against Ilit Real Estate A.P. Ltd. by third parties ("the third buyer") that had been
                  negotiating at the same time as the negotiations with the second buyer, alleging that the
                  negotiations with them were not held in good faith. The third buyer set the claim at the
                  amount of NIS 2,550 thousand, the profit to which the third buyer contends it would have
                  been entitled had it purchased the building. Since the second buyer breached the sale
                  agreement, an attempt was made to sell it to the third buyer.



                                                - 90 -
                                                   CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 7:- CONTINGENT LIABILITIES (Cont.)

                    In June 2006, an agreement was signed for the sale of the building to the third buyer for
                    $ 1.8 million plus VAT, subject to deleting the caveats and canceling the tax assessment
                    reported following the previous sale agreement. In the framework of the agreement, the
                    third buyer agreed to continue to handle the legal proceedings with the owner of the
                    adjacent plot. Therefore, the proceedings in that claim have been suspended.

                    In February 2007, an appendix to the sale agreement with the third buyer was signed,
                    whereby the transaction could be concluded even before the cancellation of the tax
                    assessment that was reported following the previous sale agreement. A few days after
                    executing the agreement, possession of the property was handed over to the third buyer,
                    against payment of the balance of the consideration (the consideration was paid in full,
                    including the funds held in trust). In view of that, in April 2007, the application of the
                    parties to dismiss the claim of the third buyer was allowed, with the provision that if the
                    claim of the second buyer for enforcement was allowed, the third buyer would once again
                    be entitled to file the same claim. In addition, the parties replaced the defendants and
                    counsel in the legal proceedings with the owner of the adjacent plot, and in October 2007
                    their application was allowed by the Court.

                    It should be noted that concurrently with the abovementioned proceedings, the owner of
                    the plot adjacent to the building filed a claim for remedy in the form of dispossession and
                    demolition of a fence. The claim has been stayed and the defendants and representatives
                    in the claim have been replaced following the sale of the property, as detailed above.

              6.    There has been no material change in the remaining material legal claims described in
                    Note 49b to the annual financial statements for 2008.

         c.   In addition to what is stated in Notes 49a and 49b to the annual financial statements for 2008, as
              updated in Notes 7a and 7b above, the Company and/or its subsidiaries are parties to further
              legal proceedings and/or to additional pre-trial proceedings, which are not insurance claims,
              initiated by clients, past clients and various third parties, in the total amount of NIS 39.3 million.
              The grounds for the claims against the Company and/or its subsidiaries in these proceedings are
              many and varied. In the opinion of the Company's management and/or of the managements of
              the subsidiaries, based upon legal advice concerning the prospects of the said outstanding
              claims, the financial statements include appropriate provisions in accordance with generally
              accepted accounting principles to cover possible damage from all these claims, where a
              provision is required.

         d.   The overall amount of the provision for claims filed against the Company and/or subsidiaries, as
              specified in Note 49a clauses 3, 7 and 29 and in Note 49b clauses 2 and 4 to the Company's
              annual financial statements for 2008, as far as they have been updated in Notes 7a and 7b above,
              and for claims and/or announcements of civil penalties filed against the Company and/or its
              subsidiaries as detailed in Note 7c above and for tax assessments to the best of judgment issued
              to a subsidiary, Clal Finance Batucha, as detailed in Note 10e below, approximates NIS 65.8
              million.




                                                   - 91 -
                                                   CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 8:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD

        a.   Details regarding quoted investments held by the Company:

                                                         Book value             Market value (1)
                                                        September 30,    September 30,   November 18,
                                                            2009             2009             2009
                                                          Unaudited
             Company name                                                NIS in millions

             Clal Finance (2)                                  262               292                293
             Titanium (through Clal Finance) (3)               149               110                110

             (1)   Based on the number of shares held by the Group companies as of September 30, 2009
                   (without adjustments for the dividends distributed in the period).

             (2)   During the reported period, the Company acquired about 2.46% of Clal Finance shares in
                   consideration of about NIS 7.25 million. The amount of about NIS 2.6 million which
                   constitutes the excess of book value over the acquisition cost is included as income under
                   investment income in the statement of income.

             (3)   Includes cost surpluses attributed to this investment. As for the testing of impairment in
                   the reported year, see paragraph t below.

        b.   As stated in Note 10c(3)(18)(p) to the financial statements as of December 31, 2008, on January
             2, 2009, a subsidiary of Clal Finance paid a total of approximately $ 7.5 million (approximately
             NIS 33 million) for the acquisition of the entire issued and outstanding share capital of Boyd
             Asset Management, LLC. In the reported period, the allocation of the excess of cost of
             acquisition over the carrying amount was performed as follows: an amount of $ 2,821 thousand
             was allocated to customer portfolios and an amount of $ 12,694 thousand was attributed to
             goodwill.

        c.   On December 24, 2007, an agreement was signed between a subsidiary, Clal Credit and Finance
             Ltd. and its subsidiary and the companies Leumi Card Ltd. and Leumi Card Credit Ltd. ("Leumi
             Card"), in respect of cooperation regarding the issue and operation of credit cards. Under the
             agreement, the subsidiary took upon itself to bear the "collection damages" as defined in the
             agreement, which relates to the customers' unsettled debts to Leumi Card.

             As at September 30, 2009, the subsidiary's balance of exposure in respect of these debts totaled
             about NIS 35 million.

        d.   On January 28, 2009, Du Zach Ltd. (a company wholly owned by Zachi Sultan, the CEO of Clal
             Underwriting. "Du Zach") informed Clal Finance of the exercise of an option it had been
             granted by Clal Finance as part of the founders' agreement of Clal Finance Underwriting Ltd., a
             subsidiary ("the underwriting company"), to sell all its holdings in the underwriting company to
             Clal Finance. Mr. Zachi Sultan also announced that upon the sale of Du Zach's shares to Clal
             Finance, he will retire from his office as Chairman of the Board.




                                                   - 92 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 8:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

             On March 29, 2009, Clal Finance entered into an agreement with Du Zach and the underwriting
             company for the sale of 26% of the underwriting company's issued share capital to Du Zach
             such that following the sale, Du Zach holds about 51% and Clal Finance holds 49% of the
             underwriting company's issued share capital. The consideration for the shares is approximately
             NIS 7.5 million, of which an amount of approximately NIS 5.5 million was paid upon closing
             and the balance of approximately NIS 2 million was paid in April 2009. On March 31, 2009, the
             transaction was closed. Near the date of closing, the underwriting company distributed a
             dividend of approximately NIS 26 million to its shareholders. Upon closing, the PUT option
             exercise notice provided by Du Zach to the Company for the sale of its shares in the
             underwriting company was cancelled and the PUT option itself was cancelled. Also cancelled
             was Zachi Sultan's announcement of his retirement from office as Chairman of the underwriting
             company.

             Under the agreement for the sale of control, Clal Finance and Du Zach granted each other PUT
             and CALL options in connection with the sale of additional holdings of Clal Finance in the
             underwriting company to Du Zach according to mechanisms at prices and periods as determined
             in the agreement for the sale of control. Clal Finance also assumed upon itself limitations as to
             the transfer of its shares in the underwriting company during the various exercise periods of the
             options.

             Based on a valuation by an external appraiser, the option for which the carrying amount was
             given is the CALL option granted to Du Zach in a total of approximately NIS 2.4 million in
             liabilities to shareholders in special companies for payments on account of shares and PUT
             option.

             Following the sale transaction as above, Clal Finance recognized a capital loss of approximately
             NIS 3.3 million included in other expenses in the income statement. The amount attributed in
             the capital loss to the Company's shareholders is approximately NIS 2.7 million.

        e.   In January 2009, Clal Finance signed an amendment to a number of agreements signed in May
             2006 with the other shareholders in AVA Financial Ltd. ("AVA") in connection with AVA's
             establishment and management. According to the amendment to the agreements, the CALL
             option that had been granted to Clal Finance for the acquisition of AVA shares, which would
             bring Clal Finance's holding to 51% of the issued share capital of AVA (on a basis of full
             dilution), was cancelled and instead Clal Finance was granted by the other shareholders, the
             option to acquire 5% of the proposed share capital of AVA on March 30, 2012, at the price
             according to the formula determined in the agreement; or until March 30, 2012, in the event of
             an offering of AVA or a transaction in the framework of which AVA shares will be sold
             (including through merger), at a price constituting a discount of 20% on the price that will be
             determined in the issue or the acquisition transaction, as above. In addition, the PUT option that
             was granted to the founders for the sale of all their holdings in AVA to Clal Finance was
             cancelled.

             The amendment also included provisions according to which: (a) half of the unsettled loan
             balance provided by Clal Finance to AVA in a total of $ 2.3 million (at Libor interest) will be
             repaid by June 30, 2009 and the outstanding amount will be repaid by June 30, 2010 (subject to
             AVA's solvency); (b) the loan agreement with AVA signed in February 2008 will be cancelled.
             As for details on the sale of Clal Finance's holdings in AVA, see Note 9a regarding events after
             the balance sheet date.




                                                 - 93 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 8:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

        f.   In March 2009, the Supervision of Financial Services Regulations (Provident Funds) (Securities
             Acquisition and Sale), 2009, ("Securities Acquisition and Sale Regulations") were enacted,
             effective since early April 2009. The regulations impose limitations on the purchases of
             securities in offerings where the underwriter, the distributor or the marketer is a related party of
             the institutional organization (pension, provident and profit sharing) and on the purchase or sale
             of securities through a related party. The Group estimates that the regulations will not have a
             material effect on its underwriting activity until January 2011. The Group believes that the
             reduction of allowable investment rate by institutional entities that are related to the underwriter
             starting from January 2011 is expected to have an effect on its underwriting activity as of that
             date whose scope cannot be assessed at present.

             Nevertheless, it should be stated that these limitations will only apply if Clal Holdings holds at
             least 25% of a certain type of the means of control over Clal Finance Underwriting. As for the
             agreement with Du Zach granting, among other things, mutual options to Clal Finance and Du
             Zach for the sale of their holdings in Clal Finance Underwriting, see d above.

             In addition, the Securities Acquisition and Sale Regulations impose a limitation whereby until
             January 2010, an institutional entity is unable to purchase or sell securities (brokerage) through
             a related Stock Exchange member at a scope in excess of 20% of the commissions paid for the
             entire purchases and sales made by the institutional investor during the year when after this date,
             an institutional entity will not be able at all to purchase or sell any securities through a related
             Stock Exchange member. The Group estimates that these regulations do not have a material
             effect on its brokerage service activity in the short term. Since the regulations have a lateral
             impact and they are likely to affect all the entities engaged in this field, the Group cannot assess
             their effect on its brokerage activity after January 2010.

        g.   Pursuant to the decision of the Company's Board of March 31, 2009 and the decision of the
             Board of a subsidiary, CIE Holdings B.V. ("CIE"), the Company and CIE entered into an
             agreement with a group of investors for the sale of the entire issued share capital of Clal
             Romania Asigurari-Reasigurari S.A. ("Clal Romania"), a subsidiary of CIE, in consideration of
             approximately € 500 thousand, representing some NIS 2.8 million ("the sale agreement").
             According to the sale agreement signed on April 7, 2009, during the intermediate period until
             closing, the Company will act towards the runoff of the insurance activity in Romania, including
             the cessation of hiring employees, the closure of branches, initiating additional cost saving
             measures and will also act to sell the existing insurance portfolio to a third party. The
             transaction was consummated on July 9, 2009.

             As a result of the sale of Clal Romania, the Company recorded a capital loss totaling
             approximately NIS 22 million included in other expenses in the income statement.




                                                  - 94 -
                                                CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009



NOTE 8:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

        h.   Loans and credit:

             1.    On March 1, 2009, the Company received from a bank a loan in the amount of NIS 360
                   million for the period of 5 years (up to March 1, 2014). The loan bears a variable interest
                   rate of Prime + 1.95% with the addition of a variable rate based on Maalot's rating of Clal
                   Insurance Company Ltd. (4.2% on the date the loan was received). This loan will be
                   repaid in semi-annual installments from September 1, 2009. The loan's principal will be
                   repaid in 7 semi-annual installments from March 1, 2011. The loan was used to repay on
                   call loans totaling NIS 260 million and NIS 100 million.
                   In the context of the loan agreement, the Company undertook upon itself, among other
                   things, a negative pledge limitation; a limitation on selling assets which under certain
                   conditions will be contingent on the bank's consent; and a limitation on a decrease in the
                   scope of the Company's holdings in Clal Insurance Company Ltd. due to dilution to a rate
                   lower than 76%.
                   The loan agreement also prescribes terms for placing the loan for immediate repayment,
                   among other things if Maalot's rating of Clal Insurance drops to BBB or lower.

             2.    On March 1, 2009, the Company received a loan in the amount of NIS 150 million from a
                   bank, for the period of 8 years (up to March 1, 2017). The loan bears variable interest at a
                   rate of 1.8% above Prime (4.05% on the date the loan was received) and it will be settled
                   by tri-monthly installments commencing from June 1, 2009. The loan's principal will be
                   settled in 10 semi-annual installments from September 2, 2012.

                   Financial criteria were determined for the loan whereby:

                   a)    The total net credit from the bank, net of cash and cash equivalents, will not be
                         higher than NIS 700 million.
                   b)    The total financing liabilities (including short-term and long-term loans from banks
                         and from financial institutions) will not be above NIS 1,000 million.

                   At balance sheet date, the Company is meeting the abovementioned financial covenants.
                   On any decline in the Company's rating below (A+), there will be an addition of 0.25% to
                   the interest (namely, when rated A, there will be an addition of 0.25%, when rated (A-),
                   there will be an addition of 0.5% and so on).

             3.    On March 5, 2009, the Company received a loan in the sum of NIS 40 million, for the
                   period of one year, from a bank which is an interested party of the Company. The loan
                   bears variable interest at the rate of 0.61% above Prime (2.86% on the date the loan was
                   received) and it will be settled in 4 tri-monthly installments commencing from June 5,
                   2009. The principal will be settled in one installment on March 5, 2010.
                   Financial criteria were determined for the loan whereby:
                   a)    The total net credit from the bank, net of cash and cash equivalents, will not be
                         higher than NIS 700 million.
                   b)    The total financing liabilities (including short-term and long-term loans from banks
                         and from financial institutions) will not be above NIS 1,000 million.
                   c)    The ratio of the value of holdings in the subsidiaries and in the investees plus cash
                         to the total financial debt will not be less than 2.5.
                   At balance sheet date, the Company is meeting the abovementioned financial covenants.


                                                 - 95 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 8:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

             4.   On February 26, 2009, the Company received a loan from a bank in the sum of NIS 50
                  million, for a period of 5 years. The loan bears variable interest at the rate of 1.6% above
                  Prime (3.85% on the date the loan was received). The interest will be settled in tri-
                  monthly installments commencing from May 26, 2009. The principal will be settled in 13
                  quarterly installments, commencing from February 26, 2011.

                  According to the financial covenants determined with respect to this loan, the ratio of the
                  value of holdings in the subsidiaries and in the investees plus cash to the total financial
                  debt will not be less than 2.5. Furthermore, the Company undertook towards the bank not
                  to pledge any of its assets during the loan period or to change the material holding
                  structure in the Company, except for internal changes inside the Group. Also, should the
                  Company's rating drop to (A) or lower, the interest will be raised to the rate of the bank's
                  raising cost + 3%.

             5.   On January 1, 2009, the Company received a loan from a bank in the sum of NIS 10
                  million, out of an approved credit line of about NIS 25 million. The loan bears variable
                  interest at the rate of 1.5% above Prime (3.75% on the date the loan was received). The
                  interest will be settled in quarterly installments. The principal will be settled in one
                  payment at the end of the year.

             6.   In June 2009, a subsidiary, Clalbit Financing Ltd. ("Clalbit Financing") issued according
                  to a prospectus registered liability certificates (series B) of NIS 1 par value each for a
                  total par value of NIS 100 million, bearing annual interest of 5.2%, linked (principal and
                  interest) to the Israeli CPI published for April 2009 and repayable in three equal annual
                  installments in 2016 through 2018. The interest on the liability certificates (series B) is
                  paid in nine annual installments on each calendar year starting 2010 until the final
                  repayment date in 2018. The effective interest rate of the liability certificates is 5.35%,
                  linked to the Israeli CPI.

                  The issuance proceeds totaled NIS 100 million and were granted as a subordinated
                  deposit to Clal Insurance under the same repayment and interest terms as those of the
                  liability certificates. The subordinated deposit is equal in rank to the subordinated deeds
                  issued and/or to be issued by Clal Insurance and has subordinated status compared to Clal
                  Insurance's other liabilities to creditors.

             7.   In the reported period, a subsidiary, Clal Insurance, repaid principal balances of
                  approximately NIS 77.3 of the subordinated deeds million in accordance with the original
                  amortization schedules.

             8.   In furtherance to the decision of the Board of Clal Finance regarding the plan to purchase
                  debentures (series A), in the first quarter of 2009, Clal Finance Batucha, a subsidiary,
                  purchased NIS 9,712 thousand par value of debentures (series A) of Clal Finance in
                  consideration of approximately NIS 7,655 thousand. As a result of the purchase, a gain
                  from early redemption of approximately NIS 2,543 thousand was derived and recorded in
                  the interim consolidated financial statements under net income from investments and
                  financial income.




                                                - 96 -
                                                  CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 8:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

        i.   In January 2009, Midroog announced the lowering of the debentures (Series A) issued by Clal
             Finance from A1- to A2- and lowering Clal Batucha's overall solvency rating from A1- to A2 -.

             On May 17, 2009, Midroog announced that the debentures (series A) of Clal Finance and Clal
             Batucha's overall solvency rating were being placed in the Watch List in view of the continued
             deterioration in the financial results in the first quarter of 2009 and the managerial instability.

             On May 14, 2009, Maalot announced that the debentures (series A) issued by Clal Finance and
             rated by Maalot at ilA- were being placed in the Credit Watch Negative List, this following the
             negative effects of capital market trends on Clal Finance's financial performances and its
             business positioning and the current managerial uncertainty, as phrased by Maalot.

             On September 29, 2009, Maalot announced that it was lowering the rating of the debentures
             (series A) issued by Clal Finance from (ilA-) to (ilBBB+) and removing them from the Watch
             List. The rating outlook for the debentures is negative. The lowering of the rating was derived
             from the reduction in the scope of local managed assets and the operational erosion in most of
             the contributing segments.

        j.   In furtherance to the claim described in Note 49b(4) to the financial statements as of December
             31, 2008, the following main events took place:

             On February 2, 2009, the Company and subsidiaries entered into a compromise agreement with
             respect to the above claim which was validated by the Tel-Aviv District Court. The main points
             in this compromise agreement are as follows:

             1.    The claim that was filed by the Company and subsidiaries to cancel the Arbitrator’s
                   award will be accepted, and the Arbitrator's award will become null and void; and the
                   claim that was filed for the approval of the Arbitrator's award will be rejected.

             2.    In return for waiving all the claims, demands and allegations of the plaintiffs against the
                   Company and subsidiaries and the final and complete settlement of all the claims,
                   demands and allegations regarding this issue, the subsidiaries will pay the total sum of
                   NIS 9.2 million to the plaintiff and its attorneys, according to the provisions of the
                   agreement. In the framework of the aforementioned compromise, the plaintiff gave the
                   subsidiaries a letter of apology, whereby, among others, he is asking for their consent to
                   the arrangement and he is expressing his regret and apologizing to their managers,
                   employees and legal advisors for the way he acted.
             The compromise agreement from February 2, 2009, was treated in the financial statements for
             2008 as an event which requires adjustment, in accordance with the provisions of IAS 10.
             On May 19, 2006, an agreement was signed with a third party whereby if the information,
             including documents it provided, would lead to the arbitrator's award being cancelled, then it
             would be entitled to NIS 21,000 thousand, including attorney's fees. This amount was deposited
             in trust in its favor.

        k.   On June 18, 2009, Mabat Indexes, a special purpose company engaged in issuing certificates,
             published a shelf prospectus of 25 additional series of basket certificates, short certificates and
             commodity certificates. On June 30, 2009, Mabat Indexes published a shelf offering report for
             offering the public 6 series of short certificates (of the series included in the shelf prospectus) as
             well as for listing for trade additional short certificates of the same series. During July 2009, the
             entire 6 offered series were issued and listed for trade. In return for the issuance of the
             certificates based on the shelf offering report, Mabat Indexes received a (gross) total of
             approximately NIS 126 million.

                                                  - 97 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 8:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

        l.   On June 28, 2009, Clal Trust Funds entered into an agreement with Hapoalim Bank Ltd.
             ("Hapoalim Bank") according to which the trust funds that Clal Trust Funds will choose to
             transfer to the operation of Hapoalim Bank will receive various operating services such as
             opening and managing the funds' accounts at Hapoalim Bank; a daily revaluation of the value of
             the funds' assets; a daily calculation of the purchase and redemption prices of the funds' units;
             transmitting the calculated unit prices to the Stock Exchange; preparing trade reports and trade
             files (based on the data found in Hapoalim Bank); preparing data and files for the funds' trustee;
             transferring the data to supervising authorities and for the purpose of preparing reports;
             producing irregular data from Hapoalim Bank's system for Clal Trust Funds' control over the
             funds. The services will be provided to the trust funds in return for an annual fee based on the
             value of the funds' assets whereby a monthly consideration ceiling is determined for funds with
             certain features. The agreement was signed for an indefinite period and may be terminated by
             either party for whatever reason by providing an advance 120-day notice. The parties may also
             terminate the agreement by providing a shorter-term notice as is imposed on the services by any
             regulatory restrictions.

             Simultaneously, Clal Trust Funds entered into an agreement with Hapoalim Bank for providing
             brokerage services whereby Clal Trust Funds is entitled (but not obligated) to perform through
             Hapoalim Bank the brokerage activity for the majority of the funds operated at Hapoalim Bank.
             Clal Trust Funds committed to grant brokerage services for foreign shares to the funds operated
             by Hapoalim Bank through the bank. The agreement prescribes selling and purchasing
             commission rates to be collected for any such brokerage activity.

             The operating services agreement signed by Clal Trust Funds with Discount Bank Ltd. will be
             terminated upon the transfer of the funds managed by Clal Trust Funds to Hapoalim Bank's or
             Clal Trust Funds' operation.

        m.   In furtherance to the Bill memo published in this respect, on June 28, 2009, the Israeli Ministers
             Legislative Committee approved an amended version of the Bill of Amendment No. 13 to the
             Joint Investments in Trust Law, 1994. The Amendment also prescribes the following changes:
             the enhancement of the trustee's independence of the fund manager, the adding of a requirement
             to specify the trustee's end of term date, the exception of a small fund from the requirement of
             the rate of relatives in the fund not to exceed 25%, the expansion of the trustee's reporting
             format for complied supervision, the elaboration of the proscription to receive benefits in
             connection with the fund's management, to allow the collection of differential management fees
             in a fund by way of refunding management fees to certain unit holders based on pre-established
             criteria, a change in the fund's liquidation mechanism into a more efficient and just one, the
             elaboration of the list of unit holders whose relation to the fund manager prohibits them from
             having voting rights in the general meeting, a change in the manner of imposing civilian
             penalties and the elaboration of the list of events in respect of which the unit holders must also
             receive the copy of the report filed with the Israel Securities Authority and the Stock Exchange.
             The amended version also proposes a change in the arrangement for offering units of a foreign
             fund in Israel and includes changes with respect to the Bill in this subject approved by the
             Knesset's Plenum in the past. The Amendment wishes to do away with the legal provision that
             compared the duties applicable to anyone who offers foreign fund units to the legal duties
             applicable to the fund manager and introduce a new arrangement. The new arrangement
             proposes allowing the offering of foreign fund units to the public provided that it is allowed by
             the Securities Authority and after the conditions stipulated by the Minister of Finance in the
             Regulations have been met. These conditions may relate, among other things, to the country of
             origin, the law pursuant to which the foreign fund has been established or according to which it
             operates, the supervision over the foreign fund, the fund's features or the fund manager's
             features.

                                                 - 98 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 8:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

             It is further proposed that the authority to allow the offering of foreign fund units will be
             restricted to units offered by an approval granted by a supervising authority in a certain country.
             It is also proposed to authorize the Minister of Finance to establish provisions that will apply to
             anyone offering foreign fund units to the public, including by way of registering foreign fund
             units for trade on the Israeli Stock Exchange.

             The Bill contains provisions according to which the fund manager will be forced to publish a
             tender for entering into a brokerage service agreement and authorize the Minister of Finance to
             establish rules for running the tender. According to the proposed Amendment, the fund manager
             will be prohibited from paying brokerage commissions or any other fees from the fund's assets
             to a company related to the fund manager or to the trustee in such a manner that those will not
             be allowed to participate in the tender. The Bill's significance for the Company is expressed in
             the restrictions on Clal Trust Funds' brokerage activity in Clal Finance Batucha.

             The Company believes that Amendment No. 13 to the Joint Investments in Trust Law, if and to
             the extent passed, is expected to have an indirect effect on Clal Trust Funds, a wholly controlled
             subsidiary, since the Amendment is expected to have a lateral effect on the trust fund sector and
             the companies operating in this sector. The Company cannot assess the direct effects of the
             Amendment's provisions on Clal Trust Funds. Nevertheless, the Company estimates that the
             opening of the Israeli market for competition from foreign trust funds may adversely affect Clal
             Trust Funds' activity and business results in this sector.

             The Company believes that Amendment No. 13 to the Joint Investments in Trust Law, if and to
             the extent passed, is expected to have an indirect effect on Clal Brokerage, a subsidiary. Since
             the Amendment is expected to have a lateral impact on the brokerage sector and the companies
             operating in this sector, the Company cannot assess the direct effects of the Amendment's
             provisions on Clal Brokerage. Nevertheless, the Company estimates that the prohibition of
             brokerage activity through a related entity is not expected to have a material impact on Clal
             Finance Batucha since the Amendment is expected to have a lateral impact on the brokerage
             sector and the companies operating in this sector.

             The information regarding the implications of Amendment No. 13 on the Company's activities
             also includes forward-looking information based on the Company's existing information on the
             date of this report as well as the Company's evaluations as of that date. Actual results could
             materially differ from the results evaluated or implied by this information, this, among other
             things, for the following reasons: the actually enacted legislation, the behavior of foreign trust
             funds and changes in the capital market.

        n.   In June 2009, the Company increased the amount of the letters of documentary credit issued by
             banks in favor of the Lloyd's insurance corporation in order to secure Broadgate's underwriting
             liabilities by another £ 2.6 million and in November 2009 the Board approved an additional
             increase of approximately £ 9 million. The increase in June 2009 was effected due to the
             increase in capital requirements from syndicates operating under the Lloyd's insurance
             corporation and the approval of the increase in November 2009 was required in view of
             Broadgate's intention to increase the premium capacity for 2010. The total letters of
             documentary credit as above in favor of Lloyd's, after effecting the planned increase in
             November 2009, will approximate £ 52 million. The letters of credit are backed by a back to
             back liability of the Company towards the lending banks (see also Note 6d above).




                                                 - 99 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 8:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

        o.   In July 2008, David Shield, Life Insurance Agency (2000) Ltd., informed Clal Health, of the
             non renewal of the exclusive mutual marketing agreement of health insurance products, to
             Israelis residing abroad. During September 2008, an agreement was signed between Clal Health
             and David Shield, for the settlement of the terms of separation between the two parties ("the
             separation agreement") including the manner in which David Shield will settle its debts to Clal
             Health. As of the date of the publication of the financial statements, there are disputes between
             Clal Health and David Shield regarding the final settlement of accounts between them. Clal
             Health's claim against David Shield was transferred to arbitration.

             In July 2009, the Tel Aviv District Court rendered a temporary injunction order sought by David
             Shield, prohibiting Clal Health and/or anyone on its behalf and/or anyone in its place to sell
             Relocation policies as the attached policy as appendix to the agreement between Clal Health and
             David Shield, only through David Shield and/or its consent, including an application to the
             insured of Relocation policies of David Shield, to David Shield suppliers and the Sick Funds in
             Israel in matters associated with the Relocation policies. The order will expire on July 28, 2011
             or earlier upon rendering an arbitration order between the parties. Arbitration proceedings
             commenced in October 2009 and were united with the arbitration proceedings discussed above
             in connection with the settling of accounts between the parties. In August 2009, Clal Health
             filed a motion to appeal the decision to the Supreme Court.

        p.   Effective 2005, C.P.Y, a company held by Clal Insurance (90.1%) and by Stock Services and
             Investments in Israel, E.B.E Ltd ("E.B.E") (9.9%) (E.B.E together with Clal Insurance, "the
             Shareholders"), manages the Central Compensation Fund for annuity of Electric Corporation
             employees. The management agreement is valid until January 31, 2010 and will be renewed for
             an additional year unless a notice is given 180 days in advance. In July, the Shareholders and
             C.P.Y announced the conclusion of the commitment to the management agreement on January
             31, 2010. The conclusion of the agreement as above will result in the discontinuance of C.P.Y
             operations.

        q.   On August 20, 2009, the Company's Board decided to approve the grant of 257,000 stock
             options exercisable into Company shares out of the Company's option plan for 2007 to 14
             employees and officers in the Company and in its subsidiaries who are not interested parties in
             the Company. The stock options are non-marketable and may be exercised upon vesting into
             one Ordinary share of NIS 1 par value. The exercise price is NIS 90 per stock option, linked to
             the Israeli CPI and respectively to the distribution of dividends and bonus shares, all as
             determined in the 2007 plan and the 2009 outline (which determined the exercise price and
             effective date of commencement of the vesting period).
             On September 23, 2009, the optionees were allocated 237,000 stock options.
             In practice, optionees that exercise the stock options will not be granted the full resulting shares
             but rather shares in a number reflecting the monetary bonus amount inherent in the stock
             options, namely, the difference between the quoted price of an Ordinary share of the Company
             on the exercise date and the exercise date of the option (net exercise).
             The options will be granted to each optionee in three equal annual portions vesting at the end of
             two years, three years and four years from the record date, as defined below, as the case may be.
             Each portion is exercisable for two years from vesting. The record date is the date of granting
             the options, except with respect to employees and officers to whom the options are granted in
             connection with their nomination for office and/or their promotion into office and/or a change in
             their rank in the Company and/or companies under its control for whom said date will be the
             record date. The earliest vesting date of the first portion of options allocated to any optionees
             based on the decision of the Board is January 20, 2010 and the latest expiration date of third
             portion options is August 19, 2015.

                                                 - 100 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 8:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

             The allocation is subject to the approval of the Stock Exchange and in some cases, to the
             approvals of the subsidiaries' authorized entities.

             The benefit inherent in the allocated stock options as above approximates NIS 6,005 thousand
             and will be recorded as an expense over each portion's entire vesting period.

             The fair value of the services received in consideration for the granted stock options as above is
             based on the fair value of the stock options granted and estimated using the Black & Scholes
             option pricing model. The parameters used in the application of the model are: a share price of
             NIS 82, exercise increment of NIS 90, weighted average expected volatility of 52.26%,
             weighted average expected life of the options of 2.92 years and risk-free interest rate of 0.62%.

             The expected volatility was determined based on the historical share price volatility. The life of
             the stock options was based on the assumption that the exercise of the options will be in the
             middle of the period between the provision date and the expiration date. The risk-free interest
             rate was established based on NIS Government bonds whose remaining life equals the expected
             life of the stock options.

        r.   On May 13, 2009, the CEO of Clal Finance announced his wish to terminate his office.
             Consequently, on the one hand, in the second quarter of 2009, Clal Finance reversed salary
             expenses recorded in previous periods totaling approximately NIS 2.5 million for options to
             which the CEO of Clal Finance will not be entitled due to his retirement (in accordance with the
             provisions of IFRS 2, "Share-based Payment") and on the other hand included a provision for a
             grant in connection with the termination of the CEO's employment of NIS 1.4 million.

             On August 19, 2009, the Board of Clal Finance approved an employment agreement with the
             new CEO of Clal Finance, Mr. Tal Raz, starting September 21, 2009. Mr. Tal Raz's monthly
             salary will be NIS 100,000, linked to the Israeli CPI, starting from the CPI for August 2009. For
             every year of employment, Mr. Tal Raz will be entitled to an annual bonus of a minimum of six
             monthly salaries to be calculated according to the last salary. The payment of a higher bonus
             will be at Clal Finance's Board's sole discretion. Nevertheless and despite said bonus, if Clal
             Finance's annual net income starting from 2010 onwards is or exceeds NIS 20 million, Mr. Tal
             Raz will be entitled to a minimum annual bonus for that year in the amount that is the higher of
             NIS 1 million or 3% of Clal Finance's net income for that calendar year. The agreement
             stipulates additional agreed upon provisions and arrangements to which Mr. Tal Raz will be
             entitled.

             Under the agreement, the allocation of 2,250,000 stock options exercisable into Ordinary shares
             of NIS 0.1 par value each of Clal Finance at no consideration. The stock options will vest and
             become exercisable for two years in four equal portions as follows:

             One quarter of the stock options will be exercisable after one year from September 21, 2009
             ("commencement of employment").
             One quarter of the stock options will be exercisable at the elapse of two years from
             commencement of employment.
             One quarter of the stock options will be exercisable at the elapse of three years from
             commencement of employment.
             One quarter of the stock options will be exercisable at the elapse of four years from
             commencement of employment.




                                                - 101 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 8:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (Cont.)

             The fair value of the stock options was estimated on the date of approval at approximately
             NIS 3.1 million according to a prepared valuation based on the Black & Scholes option pricing
             model. The value of the benefit was based on a daily standard deviation of 64.8% (for a period
             of two and a half years) and a risk-free interest rate ranging between 0.2% and 1.7%.

        s.   On September 22, 2009, Clal Finance's Board approved the extension of the period of the loan
             to an associate of the Company, Clal Finance Derivatives Ltd., by another year through
             December 31, 2010. The loan totals NIS 20 million and bears the Bank of Israel interest + 0.4%
             per annum.

        t.   Testing of impairment in the reported period:

             In order to prepare the financial statements as of September 30, 2009, Titanium Asset
             Management Corp. ("Titanium"), a subsidiary of Clal Finance, which manages customer
             portfolios abroad, examined the goodwill presented in its balance sheet in respect of its
             investees. In this context, Titanium contacted an outside independent appraiser ("the outside
             appraiser") who determined that an amortization of the goodwill balance of approximately
             NIS 13.8 million is required. Accordingly, Titanium recorded such amortization in its financial
             statements.

             In addition, Clal Finance conducted a test of impairment of the goodwill presented in its
             financial statements in respect of its investment in Titanium. For that purpose, Clal Finance
             obtained from the outside appraiser an opinion according to which an amortization of the
             goodwill balance in Clal Finance's accounts of approximately NIS 9.2 million is required. The
             outside appraiser's report as of September 30, 2009 was attached to Clal Finance's financial
             statements as of September 30, 2009, published on the Magna on November 10, 2009.

             As for the book value and market value of Titanium at balance sheet date, see a(3) above.

        u.   On August 9, 2009, Standard & Poor's Maalot ("Maalot") announced the lowering of the
             Company's rating from (ilAA-) to (ilA+) and the approval of the rating (ilAA) of Clal
             Insurance's letters of liability. These ratings are removed from the Watc List Negative. The
             rating outlook for the Company's rating and the rating of Clal Insurance's letters of liability is
             negative.

             Based on Maalot's announcement, the lowering of the Company's rating resulted, among other
             things, from the adoption of more rigorous regulatory requirements from insurance companies
             with respect to the increase of the capital base and the restrictions on dividend distribution.

             In May 2009, Midroog announced a rating of Aa2- for Clal Insurance's subordinated deeds
             (including Clalbit Finance's certificates of liability (series A) and (series B)).




                                                - 102 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 9:- EVENTS AFTER THE BALANCE SHEET DATE

        a.   Sale of Clal Finance's holdings in AVA Financial Ltd.:

             On October 15, 2009, Clal Finance entered into an agreement with AVA Financial Ltd.
             ("AVA") and the principal shareholders in AVA ("the buyers") for selling its holdings in AVA
             to the buyers ("the agreement").

             At closing, the sale of about 16.5% of AVA's offered share capital (representing 50% of the Clal
             Finance's stake in AVA) to the buyers was completed in consideration of approximately $ 1.9
             million. In addition, against the payment of $ 500 thousand at closing, Clal Finance granted the
             buyers a Call option to purchase Clal Finance's remaining holdings in AVA (about 16.5% of
             AVA's offered share capital) ("the Call option") in consideration of $ 7.44 million ("the exercise
             price"). On the record date, AVA repaid the outstanding balance of the shareholders' loan that
             had been provided to it by Clal Finance in an amount of $ 1.4 million. Near the record date,
             AVA distributed a dividend in which Clal Finance's share amounted to $ 2.475 million.

             The total consideration paid to Clal Finance on the record date with the addition of the
             distributed dividend, as above, and the repayment of the outstanding balance of the
             shareholders' loan all generated Clal Finance a cash flow of $ 6.29 million (approximately
             NIS 23.3 million).

             The Call option will be exercisable for a period of one year from closing ("the exercise period").
             The exercise will bear annual interest of Libor from the closing date through the date of actual
             payment. The agreement prescribes certain events whose occurrence will obligate the exercise
             of the Call option by the buyers as well as a mechanism for adjusting the exercise price in the
             event of a sale reflecting a value exceeding $ 48 million for AVA. Insofar as the Call option is
             not exercised, at the end of the exercise period the Company will have the option of purchasing
             485 of AVA's shares (representing about 5% of AVA's issued share capital) at a price of $ 1.
             This option can be exercised by Clal Finance within 30 days from becoming effective.

             During the exercise period, Clal Finance will not be entitled to receive a dividend for its
             remaining holdings in AVA (16.5%) with respect to an aggregate distribution amount of up to
             $ 3 million, if distributed.

             Starting from the record date, the rights and liabilities of the parties according to the founding
             agreement and shareholders' agreement of May 2006, as amended in January 2009, were
             canceled and/or restricted, including Clal Finance's right to appoint directors in AVA, which
             was canceled.

             According to Clal Finance's estimate as of the date of this report, the sale of some of Clal
             Finance's holdings in AVA which was completed at closing will not have a material effect.

             After balance sheet date, AVA is no longer an associate and will be accounted for as an
             available-for-sale asset pursuant to the provisions of IAS 39.




                                                - 103 -
                                                CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 9:- EVENTS AFTER THE BALANCE SHEET DATE (Cont.)

        b.   Transfer of Clal Finance's holdings in Clal Finance TIS Ltd.:

             On November 9, 2009, Clal Finance's Board approved entering into an agreement with the other
             shareholder in Clal Finance TIS Ltd. ("TIS"), M.A.N.A. Equity Holdings Ltd. ("EH"), whereby
             Clal Finance will transfer, at no consideration, its entire shares in TIS to EH ("the transfer of
             holding agreement"). Clal Finance also commits to provide TIS additional financing for its
             activity in a total of approximately NIS 1 million.

             Under the transfer of holding agreement, the provisions of TIS' founding agreement and the
             management service agreement were replaced, including in the following matters: (a) the option
             granted to EH for selling its holdings in TIS to the Company was canceled; (b) the parties
             waived their mutual arguments, including in connection with the obligation to finance TIS'
             activity in excess of the provisions of the agreement for the transfer of rights; (c) EH waived
             any claims against Clal Finance in connection with the receipt of management fees from TIS
             (insofar as any apply).

             The agreement also prescribes the following: (a) a mechanism for repaying the shareholders'
             loan provided by Clal Finance to TIS up to a maximum of NIS 6 million out of capital raising
             rounds or the sale of Clal Finance, if any; (b) TIS will be entitled to continue using the "Clal"
             name in the context of its own name by March 31, 2010 and will act to change its name so as
             not to include the name "Clal" after said date; and (c) Clal Finance Trust Management 2007 Ltd.
             will cease providing trust services to TIS customers by December 31, 2009.

             As of the date of the financial statements, Clal Finance's outstanding investment in TIS with the
             addition of loans approximates NIS 2.3 million. In the reported period, Clal Finance recorded a
             provision for loss of NIS 3.3 million in other expenses. The share of the equity holders of the
             Company in the loss totals NIS 2.7 million.

        c.   On September 24, 2009, the Company's Board approved applying to institutional investors in
             order to raise capital of up to NIS 200 million against the allocation of Ordinary shares of the
             Company. The Company's Board also approved designating an amount of approximately
             NIS 150 million of the raised amount, if and to the extent raised, for the purpose of providing
             funds to Clal Finance in the context of the issuance of rights in Clal Finance or by providing a
             subordinated debt to Clal Finance, or by any other way for reinforcing Clal Finance's capital.
             The allocation and provision of capital, if and to the extent performed, will be subject, among
             other things, to obtaining the approvals required by law, including from the relevant authorities
             and the Securities Stock Exchange.

             On October 5, 2009, 502,584 Ordinary shares of NIS 1 par value each were allocated at a price
             of NIS 79 per share for total proceeds of approximately NIS 39.7 million. The allocated shares
             represented about 0.94% of the Company's issued share capital following the allocation and
             about 0.89% of the Company's issued share capital following allocation on a fully diluted basis.

             On October 20, 2009, the Company made the following allocations:

             1.    Allocation of 5,400 units each consisting of 100 Ordinary shares of NIS 1 par value each
                   of the Company and of 40 stock options, unlisted for trade, each may be exercised into
                   one Ordinary share of NIS 1 par value of the Company to several investors in
                   consideration of NIS 8,000 per unit (at NIS 79 per share and NIS 2.5 per option) and for
                   total proceeds of approximately NIS 43.2 million (gross).




                                                - 104 -
                                                 CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 9:- EVENTS AFTER THE BALANCE SHEET DATE (Cont.)

             2.    Allocation of 127,000 Ordinary shares of NIS 1 par value each of the Company in
                   consideration of NIS 79 per share and for total proceeds of approximately NIS 10.03
                   million (gross).

             3.    Allocation to optionees who participated in the allocation of October 5, 2009 of a total of
                   94,400 stock options, unlisted for trade, each may be exercised into one Ordinary share of
                   NIS 1 par value of the Company in consideration of NIS 2.5 per option and for total
                   proceeds of NIS 236 thousand.
             In total, 667,000 shares and 310,400 shares arising from the exercise of options (unlisted for
             trade) were allocated in consideration of NIS 53.5 million. The entire allocated securities
             constituted about 1.8% of the Company's issued share capital (and voting rights) following
             allocation (assuming the exercise of all allocated stock options) and about 1.7% of the
             Company's issued share capital (and about 1.7% of the voting rights in the Company) following
             allocation and on a fully diluted basis.
             In both abovementioned allocations, 1,169,584 shares and 310,400 options were issued for total
             proceeds of approximately NIS 93.2 million.

        d.   In November 2009, an amendment to the capital regulations was issued, see Note 6b(3)(b)
             above.

        e.   As for the approval of the increase of the guarantee to Broadgate in November 2009, see Note
             8n above.


NOTE 10:- TAXES ON INCOME

        a.   Changes in the tax rates applicable to the Group's income:
             In accordance with the approval of the Knesset in June 2009, on July 1, 2009, a Value Added
             Tax Decree (the Tax Rate for Non-Profit Organizations and Financial Institutions), 2009 was
             published in the Acta whereby in the period from July 1, 2009 through December 31, 2010, the
             salary tax and profit tax rate applicable to financial institutions will be 16.5% instead of 15.5%
             ("the Amendment").
             In addition, on July 23, 2009, the Law for Economic Efficiency (Amended Legislation for
             Implementing the Economic Plan for 2009 and 2010), 2009 was issued, which prescribes a
             gradual reduction in the corporate tax rate down to 18% in 2016.
             Below are the statutory tax rates applicable to financial institutions, including the Company,
             following the two amendments:
                                                                                            Overall tax rate in
                                        Corporate tax rate          Profit tax rate        financial institutions
                      Year                                                %

             2009                                26                    (*) 16.0                  (*) 36.21
             2010                                25                        16.5                      35.62
             2011                                24                        15.5                      34.20
             2012                                23                        15.5                      33.33
             2013                                22                        15.5                      32.47
             2014                                21                        15.5                      31.60
             2015                                20                        15.5                      30.74
             2016 and onwards                    18                        15.5                      29.00
             (*)   Weighted rate.


                                                - 105 -
                                                  CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 10:- TAXES ON INCOME (Cont.)

              The effect of the change as above on deferred tax balances as of June 30, 2009 led to an increase
              in net income of approximately NIS 19.7 million carried to taxes on income and an increase in
              other comprehensive income of approximately NIS 5.7 million carried directly to equity for the
              nine and three months ended September 30, 2009.

              The effect of the change in profit tax rates on income in the nine and three months ended
              September 30, 2009 is immaterial.

         b.   In the reported period, tax assessments to the best of judgment were issued to the following
              subsidiaries: to Meitavit Atudot for the 2005-2007 tax years, to Atudot for the 2005 tax year, to
              Clal Provident for the 2006-2007 tax years regarding acquisition expenses for new members in
              provident and pension funds. The Tax Assessing Officer argues that these expenses are not
              deductible unless they are carried over the period. The subsidiaries dispute the Tax Assessing
              Officer's arguments that form the basis for said demand and have filed their objections
              accordingly. The effect of the tax assessments on the financial statements is immaterial since
              these are mainly timing differences.

         c.   On June 11, 2009, the Director of the Tax Authority received the report of the committee that
              examined the manner of taxation of sale transactions executed following the recommendations
              of the Bachar Committee according to which the banks were forced to sell their holdings in the
              provident funds and/or trust funds and/or management companies of the trust funds within a
              certain prescribed period ("the Committee"). It should be noted that this is an internal committee
              of the Israel Tax Authority that only represents the Tax Authority's position and might be
              binding for the tax assessing officers that handle the relevant cases.

              Insofar as the case involves transactions for the sale/purchase of trust funds and provident funds,
              the Committee has outlined the assessment principles according to which 80%-85% of the
              excess of cost in a sale transaction will be attributed to goodwill and to the account management
              contractual right collectively (goodwill: in trust funds - 50%-63%, in provident funds - 35%-
              42%, account management contractual right: in trust funds - 20%-32%, in provident funds -
              40%-48%). The remaining excess of cost (15%-20%) will be attributed to other non-expendable
              intangible assets that are not amortized by the buyer (such as customer list, brand name etc.).

              The Committee's report reiterates the Tax Authority's traditional position that intangible assets
              with no depreciation rate as per the depreciation regulations will not be amortized, yet the report
              recommends promoting a legislative process for determining a uniform amortization rate for
              intangible assets.

              With respect to transactions for acquiring shares and not activities or other assets (share sale
              transactions), the Committee decided that the sellers will be taxed pursuant to an ordinary sale
              of shares and the buyers will not entitled to any amortization for the cost of acquisition.

              The Committee's recommendations have no material effect on the income for the period.




                                                  - 106 -
                                                  CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2009


NOTE 10:- TAXES ON INCOME (Cont.)

         d.   The life insurance companies' association and the Tax Assessing Officer have signed a series of
              agreements in the past the latest of which referring to the 2007 tax year. The parties are holding
              negotiations in connection with extending the agreement to the 2008 tax year including
              reference to changes in equity following the transition to IFRS, also in the subject of accounting
              for differences on the transition date and carrying them for tax purposes such as quoted
              securities, supplemental life assurance pension reserve, indirect claims settlement expenses in
              general insurance and amendment of the calculation of the reserve of excess revenues over
              expenses in general insurance at a fixed return of 3% and in the recognition of gains from
              securities on an ongoing basis. At this stage, an agreement for the 2008 tax year has not yet been
              signed.

         e.   On September 29, 2009, Clal Finance Batucha received tax assessments to the best of judgment
              for 2005, 2006 and 2007 ("the tax assessments"). According to the tax assessments, Clal
              Finance Batucha cannot deduct cumulative expenses for those years totaling approximately
              NIS 137 million, of which an amount of approximately NIS 125 million arises from the non
              deduction of expenses relating to the Eli Aroch affair ("the Aroch affair"). After the balance
              sheet date, Clal Finance Batucha received a demand for payment of approximately NIS 58
              million to the best of judgment for said years.

              Based on the opinion of its professional advisors, Clal Finance Batucha estimates that it has
              good arguments which if accepted will lead to the cancelation of the tax assessments.
              Furthermore, based on the opinion of its professional advisors, Clal Finance Batucha estimates
              that even if said tax assessments were accepted, then out of the amount of non-deducted
              expenses as above, a material amount (for the Aroch affair) had been recorded by Clal Finance
              Batucha as taxable income in the 2008 tax year. Clal Finance Batucha filed its objection to said
              tax assessments.

              Based on the opinion of its professional advisors, Clal Finance Batucha estimates that it has
              made adequate provisions for covering the tax liability imposed on it, if any, without being
              required to respond to the issue of the scope of indemnification as described in Note 49b(4) to
              the financial statements for 2008 whose examination has not yet been completed.




                                                 - 107 -
                                                         CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
APPENDICES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2009



 APPENDIX A – Details of assets for yield-dependent contracts and other financial investments of
                                insurance subsidiaries in Israel

1.   Assets for yield-dependent contracts:

     Below are details of the assets held against insurance contracts and investment contracts:

                                                                           September 30,       December 31,
                                                                         2009        2008          2008
                                                                             Unaudited            Audited
                                                                                 NIS in thousands

     Investment property *)                                             1,054,090      1,109,406    1,232,781

     Financial assets:
     Quoted debt assets                                               10,431,429       9,169,540    9,194,300
     Unquoted debt assets                                              4,680,608       4,604,326    4,081,706
     Shares                                                            5,483,340       4,117,105    2,894,404
     Other financial investments                                       4,029,107       2,337,829    2,395,956

     Total financial investments *)                                   24,624,484     20,228,800    18,566,366


     Cash and cash equivalents                                          1,108,533        430,297     480,751

     Other                                                                432,044        397,431     326,734

     Total assets for yield-dependent contracts                       27,219,151     22,165,934    20,606,632

     *)      Presented at fair value through profit and loss.




                                                        - 108 -
                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
APPENDICES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2009



 APPENDIX A – Details of assets for yield-dependent contracts and other financial investments of
                           insurance subsidiaries in Israel (Cont.)

2.   Details of other financial investments:

                                                               September 30, 2009
                                               Fair value
                                                through
                                               profit and   Available-     Loans and
                                                  loss       for-sale      receivables     Total
                                                                    Unaudited
                                                                 NIS in thousands

     Quoted debt assets (a)                        71,025    6,237,539              -     6,308,564
     Unquoted debt assets (b)                      23,414            -     15,522,109    15,545,523
     Shares (c)                                         -      523,176              -       523,176
     Other (d)                                     36,682      450,536              -       487,218

     Total other financial investments            131,121    7,211,251     15,522,109    22,864,481

                                                               September 30, 2008
                                               Fair value
                                                through
                                               profit and   Available-     Loans and
                                                  loss       for-sale      receivables     Total
                                                                    Unaudited
                                                                 NIS in thousands

     Quoted debt assets (a)                       134,206    3,953,729              -     4,087,935
     Unquoted debt assets (b)                           -            -     14,666,029    14,666,029
     Shares (c)                                         -      477,889              -       477,889
     Other (d)                                     47,448      442,364              -       489,812

     Total other financial investments            181,654    4,873,982     14,666,029    19,721,665

                                                                December 31, 2008
                                               Fair value
                                                through
                                               profit and   Available-     Loans and
                                                  loss       for-sale      receivables     Total
                                                                      Audited
                                                                 NIS in thousands

     Quoted debt assets (a)                        59,639    3,832,527              -     3,892,166
     Unquoted debt assets (b)                      22,235            -     14,963,137    14,985,372
     Shares (c)                                         -      312,095              -       312,095
     Other (d)                                     17,992      420,993              -       438,985

     Total other financial investments             99,866    4,565,615     14,963,137    19,628,618




                                               - 109 -
                                                        CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
APPENDICES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2009


 APPENDIX A – Details of assets for yield-dependent contracts and other financial investments of
                           insurance subsidiaries in Israel (Cont.)
    a.    Composition of quoted debt assets:
                                                                                       September 30, 2009
                                                                                     Carrying      Amortized
                                                                                     amount          cost *)
                                                                                             Unaudited
                                                                                        NIS in thousands

          Government bonds                                                           3,589,743        3,527,546
          Other debt assets:
          Other non-convertible debt assets                                          2,649,146        2,584,518
          Other convertible debt assets                                                 69,675           71,430
                                                                                     2,718,821        2,655,948
          Total quoted debt assets                                                   6,308,564        6,183,494
          Impairments carried to profit and loss (on a cumulative basis)                38,781

                                                                                       September 30, 2008
                                                                                     Carrying      Amortized
                                                                                     amount          cost *)
                                                                                             Unaudited
                                                                                        NIS in thousands

          Government bonds                                                           1,883,732        1,893,823
          Other debt assets:
          Other non-convertible debt assets                                          2,134,407        2,265,606
          Other convertible debt assets                                                 69,796           79,763
                                                                                     2,204,203        2,345,369
          Total quoted debt assets                                                   4,087,935        4,239,192
          Impairments carried to profit and loss (on a cumulative basis)                19,178

                                                                                        December 31, 2008
                                                                                     Carrying       Amortized
                                                                                     amount           cost *)
                                                                                             Audited
                                                                                         NIS in thousands

          Government bonds                                                           1,919,693        1,886,662
          Other debt assets:
          Other non-convertible debt assets                                          1,913,598        2,239,376
          Other convertible debt assets                                                 58,875           80,880
                                                                                     1,972,473        2,320,256
          Total quoted debt assets                                                   3,892,166        4,206,918

          Impairments carried to profit and loss (on a cumulative basis)                71,219
          *)    Amortized cost - cost less principal payments with the addition (less) the cumulative amortization
                based on the effective interest method of any difference between the cost and the repayment amount
                and less any amortization in respect of impairment carried to the income statement.


                                                        - 110 -
                                                     CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
APPENDICES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2009



APPENDIX A – Details of assets for yield-dependent contracts and other financial investments of insurance
                                      subsidiaries in Israel (Cont.)
     b.   Composition of unquoted debt assets:

                                                                                 September 30, 2009
                                                                               Carrying        Fair
                                                                               amount          value
                                                                                      Unaudited
                                                                                  NIS in thousands
           Government bonds:
           Hetz bonds and treasury deposits                                   10,791,434     12,929,484
           Other non-convertible debt assets                                   4,754,089      4,916,494

           Total unquoted debt assets                                         15,545,523     17,845,978

           Impairments carried to profit and loss (on a cumulative basis)         53,394

                                                                                 September 30, 2008
                                                                               Carrying        Fair
                                                                               amount          value
                                                                                      Unaudited
                                                                                  NIS in thousands
           Government bonds:
           Hetz bonds and treasury deposits                                   10,116,915     11,316,342
           Other non-convertible debt assets                                   4,549,114      4,500,524

           Total unquoted debt assets                                         14,666,029     15,816,866

           Impairments carried to profit and loss (on a cumulative basis)         26,444

                                                                                 December 31, 2008
                                                                               Carrying        Fair
                                                                               amount          value
                                                                                       Audited
                                                                                  NIS in thousands
           Government bonds:
           Hetz bonds and treasury deposits                                   10,192,660     11,943,248
           Other non-convertible debt assets                                   4,792,712      4,472,212

           Total unquoted debt assets                                         14,985,372     16,415,460

           Impairments carried to profit and loss (on a cumulative basis)         39,764




                                                     - 111 -
                                                     CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
APPENDICES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2009



APPENDIX A – Details of assets for yield-dependent contracts and other financial investments of insurance
                                      subsidiaries in Israel (Cont.)
     c.   Shares:

                                                                                 September 30, 2009
                                                                               Carrying
                                                                               amount          Cost
                                                                                      Unaudited
                                                                                  NIS in thousands

           Quoted shares                                                         480,007        561,413
           Unquoted shares                                                        43,169         71,291

           Total shares                                                          523,176        632,704

           Impairments carried to profit and loss (on a cumulative basis)        319,676

                                                                                 September 30, 2008
                                                                               Carrying
                                                                               amount          Cost
                                                                                      Unaudited
                                                                                  NIS in thousands

           Quoted shares                                                         439,865        627,921
           Unquoted shares                                                        38,024         36,451

           Total shares                                                          477,889        664,372

           Impairments carried to profit and loss (on a cumulative basis)        184,245

                                                                                 December 31, 2008
                                                                               Carrying
                                                                               amount          Cost
                                                                                       Audited
                                                                                  NIS in thousands

           Quoted shares                                                         275,452        608,044
           Unquoted shares                                                        36,643         36,451

           Total shares                                                          312,095        644,495

           Impairments carried to profit and loss (on a cumulative basis)        334,346




                                                     - 112 -
                                                     CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
APPENDICES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2009


APPENDIX A – Details of assets for yield-dependent contracts and other financial investments of insurance
                                      subsidiaries in Israel (Cont.)
     d.   Other financial investments:

                                                                                        September 30, 2009
                                                                                      Carrying
                                                                                      amount          Cost
                                                                                             Unaudited
                                                                                         NIS in thousands

           Quoted financial investments                                                 141,128         218,761
           Unquoted financial investments                                               346,090         382,252

           Total other financial investments                                            487,218         601,013

           Impairments carried to profit and loss (on a cumulative basis)               106,121

                                                                                        September 30, 2008
                                                                                      Carrying
                                                                                      amount          Cost
                                                                                             Unaudited
                                                                                         NIS in thousands

           Quoted financial investments                                                 145,326         241,716
           Unquoted financial investments                                               344,486         365,791

           Total other financial investments                                            489,812         607,507

           Impairments carried to profit and loss (on a cumulative basis)                56,506

                                                                                        December 31, 2008
                                                                                      Carrying
                                                                                      amount          Cost
                                                                                              Audited
                                                                                         NIS in thousands

           Quoted financial investments                                                  97,754         217,326
           Unquoted financial investments                                               341,231         380,564

           Total other financial investments                                            438,985         597,890

           Impairments carried to profit and loss (on a cumulative basis)               105,959

          Other financial investments include mainly investments in basket certificates, trust fund participating
          certificates, investment funds, financial derivatives, future contracts, options and structured products.




                                                     - 113 -
                                                               CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
APPENDICES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2009



                    APPENDIX B – Special purpose investees in the finance segment

a.   Balance sheet data of special purpose companies included in the interim consolidated financial
     statements:
                                                                              September 30,        December 31,
                                                                            2009         2008           2008
                                                                                 Unaudited            Audited
                                                                                     NIS in thousands
     Assets
     Deferred tax assets                                                     2,329          567             346
     Debtors and other financial balances                                    9,010        6,847           8,396
     Other financial investments:
     Quoted debt assets                                                   2,938,486   3,937,599       2,779,465
     Unquoted debt assets                                                         -     260,546         276,658
     Shares **)                                                           1,822,426     547,341         985,087
     Others                                                                 218,228         798           5,521

     Total other financial investments                                    4,979,140   4,746,284       4,046,731
     Cash and cash equivalents pledged for holders of the basket
      certificates and liabilities                                         974,647    1,344,895        683,269
     Other cash and cash equivalents                                           825        7,420          4,663

     Total assets of special purpose subsidiaries                         5,965,951   6,106,013       4,743,405

     Liabilities
     Liability for debentures in liability certificates ***)                      -     368,791         352,581
     Deferred tax liability                                                       -       7,603           9,923
     Creditors, payables, and other financial balances                        4,564      24,621          12,785
     Liabilities due to certificates of deposit                                   -     119,608         121,931
     Liabilities due to liability certificates                              260,224     497,929    *) 389,791
     Liabilities due to compound certificates                               256,702     233,093    *) 158,798
     Liabilities due to basket certificates                               4,767,036   4,439,291    *) 3,435,647
     Liabilities due to short certificates                                  210,043     249,538    *) 124,256
     Liabilities to banks and others                                        381,347      56,887          37,666

     Total liabilities for special purpose subsidiaries                   5,879,916   5,997,361       4,643,378

     Shareholders' equity and balances with the Group companies             86,035      108,652        100,027

                                                                          5,965,951   6,106,013       4,743,405

     *)    Reclassification of mutual holdings between certificates as of December 31, 2008.

     **)   Net of the Company's shares acquired by the special purpose companies in the amount of NIS 17,523
           thousand, NIS 4,939 thousand and NIS 2,084 thousand as of September 30, 2009, September 30, 2008
           and December 31, 2008, respectively.

     ***) Net of the debentures held by the Group companies in the amount of NIS 16,278 thousand and
          NIS 19,328 thousand as of September 30, 2008 and December 31, 2008, respectively.




                                                               - 114 -
                                                        CLAL INSURANCE ENTERPRISES HOLDINGS LTD.
 APPENDICES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2009


                APPENDIX B – Special purpose investees in the finance segment (Cont.)

 b.    Data of profit and loss of the special purpose companies included in the interim consolidated financial
       statements:

                                                                           Nine months ended      Year ended
                                                                             September 30,       December 31,
                                                                           2009         2008         2008
                                                                                Unaudited           Audited
                                                                                   NIS in thousands

       Income

       Management fees                                                       8,556          2,870            3,229

       Financial income *)                                                  (9,723)        36,945           53,978

       Total income of special purpose subsidiaries                         (1,167)        39,815           57,207

       Financial expenses                                                   25,168               -                -

       Costs and expenses                                                   11,597         16,068           35,179

       Income (loss) before taxes                                          (37,932)        23,747           22,028

       Taxes on income (tax benefit) **)                                   (12,915)         8,074            8,645

       Income (loss) after taxes                                           (25,017)        15,673           13,383

       Earnings of special purpose associates                                  199            170              304

       Net income (loss)                                                   (24,818)        15,843           13,687

       *)    After neutralizing the income from holding the Company's shares by the special purpose companies in
             the amount of NIS 9,998 thousand for the nine months ended September 30, 2009 and after
             neutralizing the loss in the amount of NIS 1,884 thousand and NIS 4,040 thousand for the nine months
             ended September 30, 2008 and the year ended December 31, 2008, respectively.

       **)   With the addition of the tax effect in respect of the neutralization of the income (loss) from holding the
             Company's shares by special purpose companies in the amount of NIS 3,796 thousand, NIS 716
             thousand and NIS 1,565 thousand for the nine months ended September 30, 2009 and 2008 and for the
             year ended December 31, 2008, respectively.

                                                  ------------

F:\W2000\W2000\52014\M\09\EC9.DOC




                                                        - 115 -

				
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