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									                 IDB Development Corporation Ltd.

                          Financial Statements*

                         DECEMBER 31ST, 2008




The English version of this information as of December 31st, 2008 is a translation of
IDB Development Corporation Ltd. Financial statements from the Hebrew version,
and is made for convenience purposes only.
Please note that the Hebrew version constitutes the binding version.
                                                                           IDB Development Corporation Limited

      REPORT OF THE BOARD OF DIRECTORS ON THE FINANCIAL CONDITION OF THE
                 COMPANY FOR THE YEAR ENDED DECEMBER 31, 2008

The Board of Directors of IDB Development Corporation Ltd. is pleased to present the Report of the Board of
Directors as at December 31, 2008, which reviews the Company's principal activities in 2008 ("the reported
period"). The report was prepared in accordance with the Securities Regulations (Periodic and Immediate
Reports), 1970.

The Company is a subsidiary of IDB Holding Corporation Ltd. and it manages the investment activities of the
IDB Group through subsidiaries (companies in which the Group directly or indirectly holds 50% or more of
their rights), through affiliated companies (companies included in the financial statements on the equity basis)
and through other companies over which the Company does not exercise significant influence.

As at the date of this report the principal direct subsidiaries are Discount Investment Corporation Ltd. (74%),
Clal Industries and Investments Ltd. (61%) and Clal Insurance Enterprises Holdings Ltd. (57%).

The results of the Company that are included in the Board of Directors’ report relate to the share in results of the
Company’s equity holders, unless stated otherwise. Furthermore, in Note 47 of the financial statements for
December 31, 2008 the Company presented adjustments between the reports according to Israeli GAAP and the
reports according to IFRS as at January 1, 2007, and December 31, 2007 and for the year ended December 31,
2007.

1.      Operating Results

The Company sees high importance, during the current period in particular, to maintaining high cash balances at
both its administrative companies and its operational companies, this among other reasons, in order to allow the
companies high flexibility, a degree of non-dependence on the availability of external resources, and the ability
to take advantage of investment opportunities.

As of December 31, 2008, the aggregate volume of liquid means (cash, cash equivalents, and short-term
deposits) held by consolidated companies and equity-based investees in the IDB Group totaled approximately
NIS 9 billion. This figure does not include liquid means held by companies in the Clal Insurance Enterprises
Holdings Group.

At the date of publication of this report, the aforesaid aggregate volume of liquid means held by the companies
in the IDB Group (both subsidiaries and equity-basis investees) remained at a similar level, even after the
execution of investments and the settlement of debts by group companies during the first quarter of 2009.

With regard to additional possible sources of liquidity, the Company estimates that companies in the group are
able to raise financing, even under the current economic conditions.

The Company is a holding company as aforementioned, which mainly holds shares of investee companies. As
such, its net earnings mainly include and are affected by the following components:

–       The Group’s share in the earnings of investee companies, net.
–       Net realization gains and write-offs of investments, update of the value of investments and other non-
        recurring effects of the Company and its subsidiaries.
–       The staff activity of the Company, which includes net financing expenses, general and administrative
        expenses and income from management fees.

The earnings of the Company may fluctuate a great deal between the various reporting periods, mainly due to
the timing of realizing investments by the Company and its investee companies, the effect of changes in prices
of securities on the capital market, and also due to changes in the financing expenses of the Company and its
investee companies, the amount of which is affected by the net amount of debt, the linkage bases of the debt and
net financial assets, and the rate of change in the Consumer Price Index and the exchange rate of the dollar in
the reported period.



                                                                                               IDBD Directors' Report 1
                                                                              IDB Development Corporation Limited

1.      Operating Results (cont'd)


The shareholders’ equity of the Company is also affected by capital reserves in respect of the adjustment to
market value of investments accounted for as available-for-sale financial assets, and by capital reserves in
respect of adjustments from the translation of financial statements of investee companies prepared in foreign
currency.

Furthermore, the business results of the Company and its investee companies are impacted by political and
defense conditions, the state of the capital markets and the economic condition of the economy and of
international markets. Many additional external factors influence the Group's operations (see Par. 24 of Part 1 –
Description of Corporation's Businesses).

Global economic crisis
In 2008 the crisis in global financial markets deepened, with the collapse of a number of a large financial groups in
the USA and other countries, and the strengthening of the crisis on the sub-prime mortgage market that dragged
with it additional financial sectors. The escalation of the crisis resulted in, inter alia, severe damages to global
capital markets, significant falls and fluctuations in prices of securities on stock exchanges in Israel and around the
world, including significant falls and fluctuations in the securities’ prices of certain of the Company’s investee
companies, and deterioration in the credit crisis. As a result of the aforementioned events, a number of countries
have taken various measures to stabilize and prevent the deterioration of the financial markets, including by
providing money to financial institutions and lowering interest rates, but there is no certainty that these measures
will stop the crisis or its deterioration. It appears that the direct economic effects of the said crisis have not yet
reached their end, and there are concerns regarding the deepening of recession on the American and global
economies.
In addition to the aforementioned global financial crisis, there have been a number of other developments in the
Israeli economy in recent months, including, inter alia, significant fluctuations in the exchange rates of principal
foreign currencies in relation to the shekel.
The aforementioned developments in the markets may have significant and prolonged negative effects on the
business results of the Company and its investee companies, on their liquidity, equity and assets and the ability to
realize these assets, the situation of their businesses, (including the demand for the products of the Company's
investees) ,their financial covenants, their credit rating, their ability to distribute dividends, and their ability to raise
financing for their current and long-term operations, as well as on financing terms.

The condensed results of the company

The Company concluded the year of 2008 with loss of NIS 249 million, compared with income of NIS 1,874
million in the corresponding period of last year. The loss in the forth quarter of 2008 amounts to NIS 155
million compared with income of NIS 287 million in the corresponding period of last year.
The income that is attributable to the equity holders of the Company and the minority interest in the year of
2008 amounts to NIS 548 million, compared with income of NIS 3,882 million in the year of 2007.
The loss per share of NIS 1 par value is NIS 4.51 in the year of 2008, compared with earnings per share of NIS
32.88 in the year of 2007.
In the year of 2008 the results of the Company (including the minority interest) included a gain from the sale,
revaluation and write-off of investments and assets, net, in the amount of NIS 451 million, compared with a gain
of NIS 2,475 million in the corresponding period of last year.
The Company and its directly held investee companies examine the value of their investments in their directly
held companies in accordance with IFRS. They examine the need to write-down the value of those companies in
which there has been a material long-term difference between their market value and book value. In those
instances that in the opinion of the holding company the recoverable value of the investments in those
companies is lower than their book value, the holding company makes an appropriate write down in the value
recorded in its books. See also Note 2.Q. Information on the book value of the principal investments in investee
companies, compared with market value as at December 31, 2008, appears in Note 3.H. to the financial
statements.


                                                                                                   IDBD Directors' Report 2
                                                                         IDB Development Corporation Limited

1.      Operating Results (cont’d)

1.1     The contribution to business results of the Company of its directly held investee companies
                                                                                  Year ended December 31
                                                                                2008                  2007
                                                                                           NIS millions
          Discount Investment                                                    563(1)(3)(8)(9)       1,423(1)(3)(4)(5)
          Clal Insurance Enterprises Holdings                                    (85)                 332 (2)
                                                                                      (6)
          Clal Industries                                                        (10)                 304 (5)(6)
                                                                                       (3)(8)(9)
          The Company and other investee companies                               (717)                 (185)(3)(5)(7)
          Net income (loss) for the year                                         (249)                 1,874

(1)
        Including a gain on the sale of shares of Cellcom.
(2)
        Including a gain from the issuance of Clal Finance.
(3)
        Including a gain from the issuance/sale of shares of GVT.
(4)
        Including a gain from the sale of shares of Shufersal.
(5)
        Including the effect of selling shares of ECI.
(6)
        Including a write-down of Saifun shares.
(7)
        Including a gain from the issuance of shares of Discount Investment to a third party.
(8)
        Including a gain on the sale of shares of Credit Suisse by Koor.
(9)
        Including a write-down of projects in Las Vegas.


2.      The contribution to the results of the Company and its investees by segment

The Company has chosen to apply early adoption of International Financial Reporting Standard No. 8
concerning operating segments ("IFRS 8") starting on December 31, 2008. As part of the adoption of IFRS 8,
the Company's operating segments were reexamined, based on the Company's managerial and internal reports,
which are based on the Company's investment in each of its investee companies. The contribution to results
takes into account the Company's share in the results of the investee company, the Company's share in the
disposal of the investee company, and negative goodwill recorded in acquisitions, all net of deductions of
surplus costs.


The contribution to the results as follows:

                                                                                     Year ended December 31
                                                                                   2008          2007
                                                                                              NIS millions

  Cellcom                                                                          665                889
  Property and Building and Projects in Las Vegas                                  (187)              45
  Shufersal                                                                        83                 461
  Makhteshim Agan                                                                  122                22
  Credit Suisse                                                                    288                -
  Clal Insurance Enterprises Holdings                                             (85)                328
  Cement (mainly Nesher)                                                           83                 105
  Netvision                                                                        5                  (13)
  Other                                                                           (134)               397
                                                                                   840                2,234
  Financing, management and other                                                  (1,089)            (360)
  Net income (loss) for the year                                                  (249)               1,874




                                                                                                IDBD Directors' Report 3
                                                                          IDB Development Corporation Limited

2.      The contribution to the results of the Company and its investees by segment (cont'd)

2.1     Cellcom Segment

The Company’s share in the results of Cellcom segment amounted to income of NIS 665 million in 2008,
include NIS 310 million in the gain on the sale of 8.7% of the shares of Cellcom by Discount Investment,
compared with income of NIS 889 million in 2007, which include NIS 521 million in the gain on the sale of
22.5% of the share capital of Cellcom.

2.1.1   Cellcom reported revenues of NIS 6.4 billion in 2008, 6.1% higher than in 2007. Cellcom's income of
        NIS 985 million in 2008 compared with NIS 875 million in the previous year, an increase of 12.6%.
        The increase in Cellcom's revenues in 2008 compared with 2007 is due to the increase in revenues from
        services and from end-user equipment. The increase in revenues from services is attributed mainly to
        the increase in revenues from content and added value services (including SMS) and from the
        significant increase in revenues from landline communication and transmission. The increase in
        revenues from services was offset in part by the decrease in interconnect fees, that came into effect on
        March 1, 2008 and by the continuing erosion in air time rates. The increase in revenues from end user
        equipment in 2008 compared to last year is mainly due to an increase in average revenue per instrument,
        which is mainly the result of a larger amount of third generation instruments in the sales mix.
        The improvement in Cellcom's net profit in 2008 compared to corresponding period last year resulted
        from improvement in EBITDA, which increased by 14% and amounted to some NIS 2.4 billion
        compared with last year and due to the growth in revenues, the continuing reduction in costs, a decrease
        in subsidizing instruments and a decrease in the rate of royalties to the Ministry of Communication.
        The results in 2007 include a non-recurring amount that is due to the cancellation of a tax provision in
        the amount of NIS 56 million following the Supreme Court ruling regarding permission for financing
        expenses for tax purposes attributed to dividend distribution.
        Cellcom reported that in 2008 it acquired 114 thousand new customers, net, and accordingly, at the end
        of 2008 it had 3.187 million customers.

2.1.2   In 2008 DIC sold 8.7% of the share capital of Cellcom for the price of NIS 834 million. As a result, the
        Company recorded its share in a gain in the amount of NIS 310 million in 2008 and its rate of holding in
        Cellcom decreased from 56% to 46.9% of its share capital and from 61.5% to 52.3% of its voting
        power.

2.1.3 In February 2007, Cellcom issued a prospectus for an offering of shares to the public in the United
      States. Discount Investments sold shares of Cellcom to the public through this prospectus constituting
      approximately 19.5% of the share capital of Cellcom, in consideration for a total (net of expenses for the
      public offering) of USD 353 million. In addition, in September 2007, Discount Investments sold 3% of
      the issued share capital of Cellcom in consideration for a total of NIS 286 million. The Company
      recorded its share in profit as a result of the aforesaid sales in the amount of NIS 521 million in 2007,
      and Discount Investments' holding in Cellcom decreased from 78.5% to 56% of its issued share capital,
      and from 84% to 61.5% of its voting rights.

        See Note 3.K.1 of the financial statements for further details on the principal changes in holdings in the
        Cellcom segment for the year of 2008.


2.2     Property and Building and Projects in Las Vegas Segment

The Company's share in the results of Property and Building and Projects in Las Vegas segment in 2008
amounted to a loss of NIS 187 million, including the Company's share from recording negative goodwill from
the shares purchased in Property & Building by DIC which amounted to NIS 115 million, compared with
income of NIS 87 million in 2007.




                                                                                             IDBD Directors' Report 4
                                                                          IDB Development Corporation Limited

2.      The contribution to the results of the Company and its investees by segment (cont’d)

2.2     Property and Building and Projects in Las Vegas Segment (cont'd)

2.2.1   Property & Building recorded a loss of NIS 119 million in 2008, compared with an income of NIS 147
        million in 2007.
        In 2008 Property & Building presented an improvement in operating results from all its areas of
        activity, but as a result of the deterioration in the economic crisis in the last quarter of 2008, the
        valuations of all its assets were adjusted, following which impairment losses of some NIS 353 million
        were recorded by Property & Building in the forth quarter (of which some NIS 222 million relates to the
        Las Vegas Plaza project and some NIS 76 million relates to a commercial project in Las Vegas). These
        impairment losses changed the business results of Property & Building into a loss of some NIS 119
        million in 2008.
        The revenues of Property & Building from rental of assets increased by 19% in 2008 to some NIS 514
        million compared to last year. Revenues from the sale of apartments and real estate amounted to some
        NIS 492 million compared with some NIS 245 million last year, due to an increase in the number of
        apartments that were populated in 2008.
        In 2008 the financing expenses of Property & Building totaled NIS 531 million, compared to NIS 358
        million in 2007. The financing expenses increased in 2008 mainly as a result of the rise in inflation and
        a loss on securities compared to 2007.
        In the fourth quarter of 2008 a subsidiary of Property & Building purchased debentures of Property &
        Building and recorded in this respect a prepayment gain of some NIS 126 million.

2.2.2   In 2008 DIC purchased in a number of transactions 18% of the share capital of Property & Building for
        the price of NIS 262 million. The aforementioned includes DIC’s purchase of 10.4% of the issued share
        capital of Property & Building in the framework of two ordinary purchase offers DIC published in May
        and November 2008. After these purchases, DIC holds 83.4% of the equity and voting power in
        Property & Building. As a result of the said purchases, DIC acquired negative goodwill in the amount
        of NIS 156 million, the Company's share in the negative goodwill is approximately NIS 115 million,
        which it recorded as income in the statement of income.

2.2.3   Projects in Las Vegas

        A. In order to examine the recoverable value of the Plaza project in Las Vegas, in November 2008 the
          Company and Property & Building received two valuations in respect of the project, pursuant to
          which the value of the land as at September 30, 2008, as recorded in the financial statements of the
          project company, does not exceed its recoverable value (that was calculated using the value in use
          method on the basis of the discounted cash flows anticipated from the project). In light of the
          situation of the markets, the planning and beginning of construction of Stage A of the project was
          postponed until the end of 2011. In March 2009 the Company and Property & Building received an
          update of one of the aforesaid valuations from November 2008, with regard to the value of the land
          of the project as of December 31, 2008.
          In the fourth quarter of 2008, the Company wrote down its share in the land of the project by a total
          of approximately NIS 334 million (including the Company's share of the write-down performed by
          Property & Building), in accordance with the updated valuation received.


        B. In March 2008, IDBG entered into two agreements to purchase additional rights in three real-estate
          corporations in Las Vegas. A transaction for the purchase of rights in two real-estate corporations in
          consideration for a total of USD 13.5 million was completed in July 2008. The conditions for the
          completion of the purchase of rights in the third real-estate corporation have not yet been fulfilled. In
          addition, the owners of the rights to the aforesaid real-estate corporations signed an agreement of
          understandings and cooperation as well as financing arrangements in connection with the residential
          and commercial real-estate projects in Las Vegas.

           At the end of July 2008, the term of the construction financing loan received by one of the aforesaid
           corporations was extended until the end of May 2009 (the balance of the loan at the date of the
           extension was a total of approximately USD 101 million).
                                                                                              IDBD Directors' Report 5
                                                                          IDB Development Corporation Limited

2.      The contribution to the results of the Company and its investees by segment (cont’d)

2.2     Property and Building and Projects in Las Vegas Segment (cont'd)

2.2.3   Projects in Las Vegas (cont'd)

        B. (cont'd)

           At the end of September 2008, the term of a bank loan received by another real-estate corporation,
           with a balance of USD 65 million, was extended until the end of 2010.

           One of the aforesaid real-estate corporations is constructing a commercial and office project on an
           area of approximately 70,000 sq. meters. Given the difficult economic conditions in the US, which
           have caused the pace of rentals in the project to slow, construction on the project has decelerated and
           its opening has been postponed to 2011. The project was consequently assessed by an independent
           external assessor as of December 31, 2008. As a result of this assessment, the value of the project in
           the balance sheet of the aforesaid real-estate corporation was reduced. The Company's share of this
           write-down is approximately NIS 125 million, which includes the Company's share in the write-
           down performed by Property & Building.

See Note 3.K.2 of the financial statements for further details on the principal changes in holdings in the Property
and Building and Projects in Las Vegas segment for the year 2008.

2.3     Shufersal Segment

The Company’s share in the results of Shufersal segment 2008 amounted to income of NIS 83 million, compared
with income of NIS 461 million in 2007, including the gain of NIS 368 million from the sale of Shufersal shares
by Discount Investment.

2.3.1   Shufersal reported an income of NIS 282 million in 2008, compared with an income of NIS 237 million
        in 2007.
        Shufersal's sales in 2008 amounted to NIS 11 billion, a 10% increase from last year.
        The increase in sales is due, inter alia, to an increase in selling prices following the price increases of
        suppliers, the launching of a new store format, the “Yesh” format, and an increase in the number of the
        company’s stores.
        In 2008 the gross profit of Shufersal amounted to NIS 2.95 billion, an increase of 12% from 2007.
        The increase in total gross profit is mainly due to the increase in sales, as aforementioned.
        The gross profit rate was 27% in 2008 compared with 26.6% in 2007. The increase in gross profit rate is
        mainly due to sales mix and well-timed purchases of inventories.
        The operating profit amounted to some NIS 801 million in 2008, an increase of 18% from 2007.
        The improvement in operating profit resulted from an increase in income. Oppositely, Shufersal
        recorded financing expenses amounted to NIS 204 million in 2008, compared to NIS 103 million in
        2007.
        The increase in financing expenses in 2008 compared to 2007 is mainly as a result of the rise in
        inflation rate, which influenced Shufersal's CPI-linked liabilities.

2.3.2   In June 2007 Discount Investment executed the first part of the transaction for selling part of its holding
        in Shufersal to the Bronfman-Fisher Group, by which it sold 13.9% of the share capital of Shufersal for
        $ 152 million. In September 2007 Discount Investment signed an additional agreement, by which the
        parties moved up execution of the second phase of the transaction from the original date of June 2008 to
        September 2007. As a result, in September 2007 Discount Investment sold an additional 5.7% of the
        issued share capital of Shufersal for $ 66 million.
        Following execution of the first and second phases of the transaction, the Company recorded in 2007 its
        share in the gain of NIS 364 million, and the holding of Discount Investment in Shufersal decreased to
        40%.

See Note 3.K.3 of the financial statements for details on the principal changes in holdings in the Shufersal
segment in the year 2008.

                                                                                              IDBD Directors' Report 6
                                                                           IDB Development Corporation Limited

2.      The contribution to the results of the Company and its investees by segment (cont’d)

2.4     Makhteshim Agan segment
The Company’s share in the results of Makhteshim Agan segment totaled to income of NIS 122 million in 2008,
compared with income of NIS 22 million in 2007.
2.4.1   Makhteshim Agan reported an income of $219 million in 2008, compared with an income of $156
        million in 2007.
        Makhteshim Agan's sales in 2008 amounted to $2.5 billion, a 23% increase from last year.
        The improvement in Makhteshim Agan's results in 2008 compared to last year resulted from several
        factors:
        (a) The increase in the demand for products of Makhteshim Agan as a result of a slight increase
        (throughout most of the year) in grazing areas in most of the geographical areas in which Makhteshim
        Agan operates, and as a result of the high level of prices on a multi-annual basis of many of the
        agricultural products and the need for maximum protection of agricultural crops in those areas. The high
        price level of agricultural products was mainly due to the continued increase in the standard of living
        around the world, particularly in developing areas such as China and India, and a change in the
        nutritional habits of the population in those areas. The increase in demand for products of Makhteshim
        Agan was also affected by the increase in global demand for substitute oil products, manufactured using
        sugar canes, Hirschfeldia and corn. (b) An increase in the average sales prices of part of the products of
        Makhteshim Agan. This trend had a positive effect of increasing both the revenues of Makhteshim Agan
        from the sales of products and the profitability of Makhteshim Agan. (c) Relatively comfortable weather
        conditions in most of the geographical areas in which Makhteshim Agan operates, which caused an
        increase in the demand for plant protection products. (d) Makhteshim Agan reports its results in dollars,
        and therefore the strengthening of the currencies in which Makhteshim Agan operates in relation to the
        dollar, led to an increase in its revenues in dollar terms, as compared with the strengthening of the
        shekel in relation to the dollar that increased local expenses in Israel. (e) Conversely, excess demand for
        raw materials and finished products, together with high prices of oil resulted in a significant increase in
        Makhteshim Agan's cost base and to a shortage in quantities.

        Nevertheless, as a result of the global crisis, the business environment in which Makhteshim Agan
        operates has changed significantly in the last third of 2008 and in the period subsequent to balance sheet
        date and before the approval of these financial statements, and the growth that characterized
        Makhteshim Agan continued but at a lower rate. In the framework of these changes there is a beginning
        of, inter alia, trends that may continue also in 2009, of which the main trends are as follows: (a) A stable
        level of demand for the products of Makhteshim Agan as a result of just a small decrease in grazing
        areas around the world; (b) A decrease in prices of agricultural products (although their prices are still
        relatively high on a multi-annual basis) may lead to a decrease in demand for products of Makhteshim
        Agan; (c) Credit pressures of part of the customers of Makhteshim Agan that have an effect on the
        demand for its products; (d) The strengthening of the dollar in relation to the other currencies in which
        Makhteshim Agan operates, which lowers the dollar value of its sales in the financial statements;
        (e) The existence of excess supply of raw materials particularly in China, and a sharp decline in prices
        of oil around the world, which in the medium and long term are expected to reduce the cost of sales of
        Makhteshim Agan.

        The changes in the market of agricultural products did not have a significant effect on the results of
        Makhteshim Agan in 2008. Due to the continuation of the global crisis, Makhteshim Agan evaluates
        that the aforementioned trends that characterized the last third of 2008 may continue also in the short
        term. Notwithstanding, Makhteshim Agan believes that in the long term the positive trends that
        characterized the years before the global crisis, with respect to the area of operation of Makhteshim
        Agan, will continue insofar as there are no significant negative developments over a long period of time.
        In light of the global uncertainty, and the instability of the financial markets, and particularly the
        developing markets in which a significant part of Makhteshim Agan’s operations take place,
        Makhteshim Agan is unable to assess, as at the date of approval of the financial statements, the possible
        effect of the events described above and the length of the period such matters will continue to have an
        effect.



                                                                                               IDBD Directors' Report 7
                                                                           IDB Development Corporation Limited

2.      The contribution to the results of the Company and its investees by segment (cont’d)

2.5     Credit Suisse segment

The contribution of Credit Suisse segment to the company's results in 2008 totaled to NIS 288 million.
In 2007 the investment in Credit Suisse not yet been executed.
In accordance with the decision of Koor’s board of directors to invest in marketable shares of European
financial institutions, in 2008 Koor purchased and sold shares of Credit Suisse while taking advantage of
opportunities that arose as a result of market fluctuations. The sales created for Koor a gain of NIS 575 million
in 2008.

In October 2008 Koor invested a total amount of 1.2 billion Swiss francs in Credit Suisse. The transaction was
effected by purchasing 34 million shares of Credit Suisse (out of its treasury shares) which after their purchase
constituted 3% of the share capital of Credit Suisse.
As at December 31, 2008 the value of the investment in shares of Credit Suisse, according to their price on the stock
exchange, was NIS 4.1 billion, an amount reflecting a negative difference of NIS 246 million (about 5.7%)
compared to their original cost of NIS 4.346 billion. Since the decline in the fair value of the Credit Suisse shares is
not significant or prolonged, the decline in the fair value of the available-for-sale financial asset was not recognized
in profit or loss but only in equity.
As at the date of publishing this report, the difference in respect of the rest of Koor’s shares in Credit Suisse was a
positive difference of NIS 95 million.

See Note 3.K.4 of the financial statements for details on the principal changes in holdings in the Credit Swisse
segment in the year 2008.


2.6     Clal Insurance Enterprises Holdings segment

The Company’s share in the results of Clal Insurance segment in 2008 totaled loss of NIS 85 million, compared
with income of NIS 328 million in 2007.
2.6.1   Clal Insurance Enterprises Holdings recorded a loss of NIS 479 million in 2008, which includes
        expenses for the decline in value of intangible assets at Clal Finance in the amount of NIS 298 million,
        compared with profit of NIS 659 million in 2007, which included nonrecurring income in the amount of
        NIS 158 million in respect of the issuance of Clal Finance and the sale of Clal Insurance's holdings in
        F.I.S Software. Excluding the aforesaid nonrecurring profits, the loss of Clal Insurance Enterprises
        Holdings totaled NIS 181 million in 2008, compared with profit of NIS 501 million in 2007. The results
        of Clal Insurance Enterprises Holdings in 2008 were adversely affected by the financial crisis in the
        global markets and by the economic, political, and security conditions, which influenced investment
        income at Clal Insurance, sales in various areas, the volume of insurance claims, and operating costs,
        and in particular the volume of life-insurance and long-term savings business. The business results of
        Clal Insurance Enterprises Holdings were materially affected by the crisis.
        In 2008, the results of Clal Insurance Enterprises Holdings included a loss from insurance business
        (general insurance, life insurance, provident funds, and pensions) in the amount of NIS 179 million,
        compared with profit in the amount of NIS 740 million in 2007.

         The loss from life-insurance business totaled NIS 155 million in 2008, compared with profit of NIS 349
         million in the preceding year. The reduction in life-insurance business results mainly from a decrease in
         income from investment of moneys of the insurance risk (non-savings) component, which is included
         in the investment portfolio of profit-participatory policies, and from the non-collection of variable
         management fees in profit-participatory policies, as well as an increase in general and administrative
         expenses and an increase in commissions paid to agents.

         In 2008, as a result of the negative returns in profit-participatory policies, only fixed management fees
         were collected, in the amount of NIS 137 million; whereas in 2007, fixed and variable management
         fees were collected at a volume of NIS 267 million.


                                                                                               IDBD Directors' Report 8
                                                                           IDB Development Corporation Limited

2.      The contribution to the results of the Company and its investees by segment (cont’d)

2.6     Clal Insurance Enterprises Holdings segment (cont'd)

2.6.1   (cont'd)

         Pre-tax loss from general insurance business totaled NIS 22 million in 2008, compared with profit of
         NIS 316 million in the preceding year. Most of the decline in profit resulted from the decrease in
         income from investments and the increase in the CPI, which led to an increase in insurance liabilities.
         Income from investments in general insurance totaled NIS 73 million in 2008, compared with NIS 469
         million in the preceding year. Total expenses amounted to NIS 1,168 million, compared with NIS 1,032
         million in the preceding year.

         Loss in the area of financial services totaled NIS 309 million in 2008, compared with profit of NIS 258
         million in the preceding year, when nonrecurring profit in the amount of NIS 125 million was recorded
         as a result of the issuance of Clal Finance.

         During the reported period, Clal Finance wrote down the value of intangible assets in a total amount of
         NIS 298 million. Of the said write-down, NIS 205 million was attributed to the activity of mutual
         funds, NIS 85 million was attributed to portfolio-management activity abroad, and NIS 8 million was
         attributed to underwriting activity.

         In addition to the write-downs of intangible assets during the reported period, results in the area of
         financial services were influenced by losses in proprietary investment activities, a decrease in the
         profitability of investment banking, a decrease in the profitability of mutual-fund activity, and an
         increase in financing expenses.

2.6.2   During the reported period, the Company included its share of net income in the amount of NIS 189
        million in respect of the cancellation of changes in fair value, the recording of negative surplus cost, and
        profit from early redemption of investments of Clal Insurance Enterprises Holdings held by Clal
        Insurance against profit-participatory policies and by index certificate companies in shares and bonds of
        companies under the control of the Company. For further details, see Note 2.B.10.

See Note 3.K.5 of the financial statements for details on the principal changes in holdings in the Clal Insurance
Enterprises Holdings segment in 2008.

2.7     Cement segment

The Company’s share in the results of Cement segment in 2008 totaled to income of NIS 83 million, compared
with income of NIS 105 million in 2007.

2.7.1   The Cement segment's companies reported revenues from the sales of cement in 2008 of NIS 1.5 billion,
        an increase of 3% from 2007, despite the decrease in quantities marketed to the Palestinian Authority,
        mainly owing to discontinuing the marketing activity to the Gaza Strip.
        The increase in revenues year-on-year in 2008 mainly resulted from an increase in quantities marked to
        the local market and the rise of selling prices in the local and export markets.
        The Cement segment's companies' income totaled NIS 183 million in 2008 compared to income of NIS
        225 million in 2007. The decrease in current income in 2008 compared to 2007 is a result of a
        significant rise in the prices of fuel inputs, a non-recurring expense due to streamlining efforts of NIS 16
        million, an increase in financial expenses due to the high increase rate of the Israeli CPI in 2008
        compared to 2007.




                                                                                                IDBD Directors' Report 9
                                                                          IDB Development Corporation Limited



2.      The contribution to the results of the Company and its investees by segment (cont’d)

2.8     Netvision segment

The Company’s share in the income of Netvision in 2008 totaled to NIS 5 million, compared with loss of NIS
13 million in the corresponding period of last year (the company's share in the result of Netvision includes the
amortization of original cost in respect of this investment).

2.81   In 2008, Netvision's revenues totaled NIS 1.2 billion, compared to revenues of NIS 1.1 billion in the
       same period last year.

       The increase in revenues year-on-year in 2008 mainly resulted from an increase in revenues from the
       provision of Internet connectivity services, as a result of an increase in the volume of customers at
       Netvision, and from the sale of added-value services. This increase was partially offset by a decrease in
       the dollar exchange rate during 2008.

       Netvision reported profit of NIS 87 million in 2008, compared with profit of NIS 19 million in the
       preceding year. Netvision's net profit in 2008 included nonrecurring expenses in the amount of NIS 7
       million in respect of write-downs due to the decline in value of intangible assets attributed to Nana 10, in
       the amount of NIS 14 million, on one hand, and financing income from the revaluation of financial
       liabilities in the amount of NIS 7 million, on the other hand; compared with a nonrecurring expense in
       the amount of NIS 56 million in the preceding year, which included a provision for decline in value of
       goodwill at 013 Netvision STM (formerly Globcall) in the amount of NIS 15 million, and merger and
       restructuring expenses in the amount of NIS 53 million, on one hand, while on the other hand Netvision
       recorded capital gains in the amount of NIS 22 million for the Nana 10 deal.


3.      Analysis of business results on a quarterly basis (in NIS millions)

In the fourth quarter of 2008, the Company recorded loss of NIS 155 million, compared with income of
NIS 287 million in the corresponding quarter in 2007.

Results for the fourth quarter of 2008 included the Company's share of write-downs in respect of the Plaza
project in Las Vegas in the amount of NIS 334 million, and of the commercial project in Las Vegas in the
amount of NIS 125 million; and, by contrast, the Company's share in profits from the sale of 3.36% of the shares
of Cellcom by Discount Investments, in the amount of NIS 101 million; as well as negative goodwill recorded,
including: in respect of the acquisition of Koor shares by Discount Investments – NIS 125 million; in respect of
the acquisition of Property & Building shares by Discount Investments – NIS 95 million; in respect of the
acquisition of Discount Investment shares by the Company – NIS 17 million; and proprietary purchases of
bonds, including: Property & Building – NIS 54 million; Koor – NIS 33 million; Clal Finance – NIS 13 million;
and the Company – NIS 15 million; the disposal of shares of GVT in the amount of NIS 19 million; and the
cancellation of a provision for legal claims in respect of Eli Aroch in the amount of NIS 60 million. Results for
the fourth quarter of 2007 included profit from the disposal of investments, less net write-downs, mainly from
profits of an offering to a third party performed by Discount Investments, and from provisions recorded for
Saifun shares.




                                                                                             IDBD Directors' Report 10
                                                                              IDB Development Corporation Limited

3.       Analysis of business results on a quarterly basis (in NIS millions) (cont'd)

3.1      Company's operating results on a quarterly basis for years 2008 and 2007:

         Key statement of operations items


                                                                              2008
                                                     Annual                        Quarter
                                                      total     4             3            2                  1
                                                                          NIS millions

Sales and services                                    14,880    3,715          3,943       3,668               3,554
Group's share in income (loss), net of affiliated
companies                                                175     (164)           38              55               246
Gain (loss) from realization of investments and
property, net                                            528     (350)          550            124                204
Increase (decrease) in fair value of investment
Property, net                                            226      (28)           86             144                24
Net income (loss) for the period                        (249)    (155)          (23)           (126)               55



                                                                              2007
                                                     Annual                        Quarter
                                                      total     4             3            2                  1
                                                                          NIS millions

Sales and services                                    20,511    3,360          5,984       5,560               5,607
Group's share in income (loss), net of affiliated
companies                                                543         68         (34)           142                367
Gain from realization of investments and
property, net                                          2,475        277         882            538                778
Increase in fair value of investment Property, net       171          9         150             12                  -
Net income for the period                              1,874        287         129            575                883



3.2      The contribution to business results of the Company of its directly held investee companies


                                                                For the three months ended December
                                                                                 31
                                                                      2008                2007
                                                                                NIS millions

 Discount Investment                                                   247                       292
 Clal Insurance Enterprises Holdings                                   (55)                       21
 Clal Industries                                                       (10)                        12
 The Company and other investee companies                             (337)                      (38)
 Net income (loss) for the period                                     (155)                      287




                                                                                                       IDBD Directors' Report 11
                                                                                        IDB Development Corporation Limited

3.      Analysis of business results on a quarterly basis (in NIS millions) (cont'd)

3.3     Contribution to results of Company and investee companies according to operating segment in fourth
        quarter:

                                                                          For the three months ended December
                                                                                           31
                                                                                2008                2007
                                                                                         NIS millions

 Cellcom                                                                         182                     39
 Property and Building and Projects in Las Vegas                                (283)                     9
 Shufersal                                                                        15                     38
 Makhteshim Agan                                                                  62                    (17)
 Credit Suisse                                                                    20                      -
 Clal Insurance Enterprises Holdings                                             (55)                    17
 Cement (mainly Nesher)                                                            5                     29
 Netvision                                                                         -                     10
 Other                                                                            51                    (99)
                                                                                  (3)                    26
 Financing, management and other                                                (152)                   261 (1)
 Income (loss) for the period                                                   (155)                   287

(1)    Includes gain from issuance of shares of Discount Investment to a third party.




                                                                                                           IDBD Directors' Report 12
                                                                       IDB Development Corporation Limited

4.    Financial condition and sources of finance

4.1   Total assets of the Company and its subsidiaries amounted to NIS 104 billion as at December 31, 2008,
      same as at December 31, 2007.

4.2   Equity attributable to the equity holders of the Company and to the minority interest amounted to NIS
      9.9 billion as at December 31, 2008, compared with NIS 13.4 billion as at December 31, 2007.
      Equity attributable to the equity holders of the Company amounted to NIS 3,046 million as at December
      31, 2008, compared with NIS 4,733 million as at December 31, 2007. In the current year, the Company
      distributed dividends totaling NIS 786 million, as provided below:

                                                         Amount per
           Payment date       Dividend amount paid      NIS 1 par value
                                   NIS millions              NIS
       15/05/2008                      270                   4.69
       06/10/2008                      276                   5.18
       05/11/2008                      240                   4.50

      On the approval date of the financial statements, the Company's board of directors resolved to distribute
      a cash dividend of NIS 126 million, representing NIS 2.72 per A share, NIS 1 par value.
      The dividend will be paid on April 26, 2009.

4.3   Shareholders' equity constitutes 2.9% of total consolidated assets as at December 31, 2008, compared
      with 4.6% of total assets as at December 31, 2007. Capital resources, including minority interests,
      constitute 9.5% of total consolidated assets as at December 31, 2008, compared with 13% as at
      December 31, 2007.

4.4   As at December 31, 2008, the net excess of financial liabilities over financial assets of the Company and
      its wholly owned subsidiaries (other than Clal Tourism) amounted to NIS 5.4 billion, compared with
      NIS 4.3 billion as at the December 31, 2007.

4.5   Total liquid assets (cash and cash equivalents, marketable securities and short-term deposits) of the
      Company and its wholly owned subsidiaries (other than Clal Tourism) amounted to NIS 1,147 million
      as at December 31, 2008 as compared to NIS 1,676 million as at December 31, 2007. In 2008, the
      Company received approximately NIS 1.5 billion in dividends from group companies, paid NIS 786
      million in dividends to its shareholders, invested a total of NIS 692 million in group companies,
      purchased its own shares for a total of NIS 354 million and invested a total of approximately NIS 340
      million in projects in Las Vegas.

4.6   The Company's activities are financed mainly from issuances of debentures and from bank loans,
      proceeds from the realization of assets, dividends received from investee companies and from
      management fees. In 2008, the Company received dividends totaling NIS 1,512 million (2007 – NIS
      1,995 million).




                                                                                         IDBD Directors' Report 13
                                                                                                                                                          IDB Development Corporation Limited

4.        Financial condition and sources of finance
4.7       Information regarding the debentures of I.D.B Development
Presented below in the table are details of I.D.B. Development series of debentures. See Appendix I of the board of directors’ report for updated rating
reports of the debentures.
Data on debentures (1), in NIS millions, as at December 31, 2008
                                                                               Carrying                               Repayment dates of
                                                                              amount of                                  principal (2)
                                                                 Amount       balance of
                        Par value                               of interest   debentures                                                                               Trust company –
          Original       on date                    Linked       accrued         as at     Value on     Interest                              Interest                name of person in
           date of          of      Outstanding   outstanding     on the      December     the stock       rate     First date                payment      Linkage   charge, address and
Series    issuance      issuance     par value     par value      books        31, 2008    exchange      (fixed)       (1)       Last date    dates (2)     terms     telephone number

                                                                                                                                                                     Sapanut Trust
                                                                                                                                                                     Services Ltd.
                                                                                                                                                                     23 Menachem Begin
           13/5/2001                                                                             Not                                                      CPI-       St., Tel-Aviv
C                           180.0          75.0          88.8          2.6          91.2                  5.90%    30/6/2009     30/6/2013    30/6
                                                                                           marketable                                                     linked
                                                                                                                                                                     Person in charge:
                                                                                                                                                                     Shlomi Ashkenazi
                                                                                                                                                                     Tel: 03-5673397
           16/5/2002        150.0
          *22/5/2003        230.4
          *18/9/2003        165.0
 E(3)     *31/12/2003       194.4
          *22/4/2004        470.1
          *13/9/2004        561.8
           *6/1/2005        599.2

                                                                                                                                                                     U-Bank Trust
                                                                                                                                                                     Company Ltd. (6)
                                                                                                                                                                     Person in charge:
                                                                                                                                                          CPI-       Sahar Cohen, Adv.
Total E                                   384.1         436.0             -        438.9       429.0      5.70%     31/12/2009   31/12/2010   31/12
                                                                                                                                                          linked     38 Rothschild Blvd.,
                                                                                                                                                                     Tel Aviv 66883
                                                                                                                                                                     Tel: 03-5645205




                                                                                                                                                                               IDBD Directors' Report 14
                                                                                                                                                         IDB Development Corporation Limited

4.        Financial condition and sources of finance (cont'd)
4.7       Information regarding the debentures of I.D.B Development (cont'd)
Data on debentures (1), in NIS millions, as at December 31, 2008 (cont'd)
                                                                                  Carrying                               Repayment dates of
                                                                                 amount of                                  principal (2)
                                                                    Amount       balance of
                          Par value                                of interest   debentures                                                                              Trust company –
                           on date                     Linked       accrued         as at      Value on     Interest                             Interest               name of person in
          Original date       of      Outstanding    outstanding     on the      December      the stock       rate    First date                payment     Linkage   charge, address and
Series     of issuance    issuance     par value      par value      books        31, 2008     exchange      (fixed)      (1)       Last date    dates (2)    terms     telephone number

                                                                                                                                                                       S.A.G. Trust
                                                                                                                                                                       Company Ltd.
                                                                                                                                                                       Person in charge:
                                                                                                     Not                                                     CPI-      David Gotliv, Adv.
F            23/12/2003       200.0         160.0          177.6          6.7         184.3                   5.65%     30/4/2009    30/4/2012        30/4
                                                                                               marketable                                                    linked
                                                                                                                                                                       7 Menachem Begin
                                                                                                                                                                       St., Ramat Gan 52521
                                                                                                                                                                       Tel: 03-7549926
               8/6/2005       100.0
G(4)         *14/6/2006     1,083.2
            *19/12/2006       174.1
             *24/6/2007       789.9
                                                                                                                                                                       Hermatic Trusts
                                                                                                                                                                       (1975) Ltd.
                                                                                                                                                                       Person in charge: Dan
                                                                                                                                                             CPI-      Avnon, Adv.
Total G                                    2,120.6       2,328.0         58.6        2,348.2     1,866.38     4.50%     10/6/2012    10/6/2018        10/6
                                                                                                                                                             linked
                                                                                                                                                                       113 Hayarkon St., Tel
                                                                                                                                                                       Aviv 63573
                                                                                                                                                                       Tel: 03-5274867

                                                                                                                                                                       Aurora Fidelity
                                                                                                                                                                       Trust Company Ltd.
                                                                                                                                                                       (2)
                                                                                                                                                                       Azrieli center 1,
                                                                                                                                                                       round tower, Tel
                                                                                                                                                             CPI-      Aviv
H              8/6/2005        200            200          219.6          5.0         223.3       214.56      4.10%     10/6/2009    10/6/2013        10/6
                                                                                                                                                             linked
                                                                                                                                                                       Person in charge:
                                                                                                                                                                       CEO - Iris Shlevin,
                                                                                                                                                                       Ads
                                                                                                                                                                       Tel: 03-6005946
             19/12/2006       547.5
I
             *24/6/2007       440.2



                                                                                                                                                                              IDBD Directors' Report 15
                                                                                                                                                        IDB Development Corporation Limited

4.         Financial condition and sources of finance (cont'd)
4.7        Information regarding the debentures of I.D.B Development (cont'd)
Data on debentures (1), in NIS millions, as at December 31, 2008 (cont'd)
                                                                                                                                   Repayment dates of
                                                                                                                                      principal (2)
                                                                                     Carrying amount                                                                                Trust company –
                                                                       Amount of       of balance of                                                                                name of person in
               Original     Par value                     Linked         interest    debentures as at    Value on     Interest                              Interest                 charge, address
                date of     on date of   Outstanding    outstanding    accrued on     December 31,       the stock       rate    First date                 payment      Linkage      and telephone
Series         issuance      issuance     par value      par value      the books          2008          exchange      (fixed)      (1)       Last date     dates (2)     terms         number

                                                                                                                                                                                    Kaldan Escrow
                                                                                                                                                                                    Company Ltd.
                                                                                                                                                                                    Person in charge:
Total                                                                                                                                                                    CPI-       Roy Rozen Adv.
                                               987.7         1,061.1           1.9              1,079       674.12      4.95%    18/12/2020   18/12/2025   18/6 ,18/12
I                                                                                                                                                                        linked     7 Menachem Begin
                                                                                                                                                                                    St., Ramat Gan
                                                                                                                                                                                    52681
                                                                                                                                                                                    Tel: 03-6109000

I              16/12/2008         30.9
               17/12/2008         15.0
                                                                                                                                                                                    Kaldan Escrow
Total I                                                                                                                                                                             Company Ltd.
                                                                                                                                                                         CPI-
A self                                                                                                                                                                              7 Menachem Begin
                                                 45.9           49.3           0.1               50.1         31.32     4.95%    18/12/2020   18/12/2025   18/12 ,18/6   linked
Purchase                          45.9                                                                                                                                              St., Ramat Gan
(5)                                                                                                                                                                                 52681
                                                                                                                                                                                    Tel: 03-6109000

                                                                                                                                                                                    Kaldan Escrow
                                                                                                                                                                                    Company Ltd.
Total I
                                                                                                                                                                         CPI-       7 Menachem Begin
Net of self Purchase                           941.8         1,011.8           1.8             1,028.9      642.80      4.95%    18/12/2020   18/12/2025   18/12 ,18/6
                                                                                                                                                                         linked     St., Ramat Gan
                                                                                                                                                                                    52681
                                                                                                                                                                                    Tel: 03-6109000

                                                                                                                                                                                    Strauss, Lazer
                                                                                                                                                                                    Trust Company
                                                                                                                                                                                    (1982) Ltd.
                                                                                                                                                                                    Person in charge:
J               24/6/2007        461.3         461.3           461.3           1.8              461.8       356.85      6.60%    10/12/2012   10/12/2018        10/12    Unlinked   Uri Lazer, CPA
                                                                                                                                                                                    17 Yitzchak Sadeh
                                                                                                                                                                                    St., Tel Aviv 67775
                                                                                                                                                                                    Tel: 03-6237777

Total                                         5,376.4        4,723.1          76.5             4,776.6


                                                                                                                                                                             IDBD Directors' Report 16
                                                                                                                                                IDB Development Corporation Limited


4.       Financial condition and sources of finance (cont'd)
4.7      Information regarding the debentures of I.D.B Development (cont'd)
Notes:
(1)      The Company is in compliance with all the terms of the debentures as well as all the terms of the trust deed.
(2)      Annual payments.
(3)      On June 14, 2006, the Company acquired 755.96 million par value Series E debentures. These debentures expired and were delisted.
(4)      On December 21, 2006, the Company acquired 26.6 million par value Series G debentures from institutional.
(5)      A self purchase of debentures was performed by a wholly-owned subsidiary of the Company.
(6)      On January 7, 2008, a notification was received at the Company's offices from Ubank Trust Company Ltd. ("Ubank") of its resignation from its role as trustee for
         holders of debentures (Series E) of the Company (the "Series E debentures"), pursuant to the provisions of Article 35N(B) of the Securities Law, 1968 (the
         "Securities Law"). The reason for the resignation, as stated by Ubank, was the possible concern that it might find itself in a conflict of interests, as defined in the
         resolution of the plenum of the Israel Securities Authority of July 26, 2005 concerning conflicts of interests of a trustee for holders of debentures (the "ISA
         Directive"), as a result of actions not under its control. Ubank further stated that its resignation would take effect only after the court approved the resignation and
         after an alternate trustee was appointed. On June 26, 2008, a notification was received at the Company's offices from Ubank stating that the District Court of Tel
         Aviv had approved its resignation from its service as a trustee for the holders of the Series E debentures. However, Ubank notified the Company that it would
         continue to serve in this capacity until the appointment of an alternate trustee by the Company. At the reporting date, such an alternate trustee has not yet been
         appointed. On July 24, 2008, notification was received at the Company's offices from Aurora Fidelity Trust Company Ltd. ("Aurora Fidelity") of the expiration of its term of
         service as trustee for holders of debentures (Series H) of the Company ("holders of Series H debentures"), pursuant to the trusteeship certificate and the provisions of Article
         35N(A)3 of the Securities Law. The reason for the expiration of its term of service, as stated by Aurora Fidelity, is that its continued provision of trustee services to the holders of
         Series H debentures would create a conflict of interests, as defined in the ISA Directive. Aurora Fidelity further stated that it would continue to serve in this capacity until the
         appointment of an alternate trustee by the Company, and that the appointment of an alternate trustee required the consent of the holders of Series H debentures and approval by the
         authorized court. In the course of the Company's actions aimed at appointing a trustee to replace Ubank and Aurora Fidelity, the Company sought to appoint as a trustee a trust
         company serving as trustee for holders of debentures of another series of the Company, Hermatic Trust (1975) Ltd. ("Hermatic"). Pursuant to the ISA Directive, on December 9,
         2008 the Company convened a general meeting of holders of debentures (Series G) of the Company (the "Series G debentures"), in order to obtain their consent for Hermatic,
         which serves as their trustee, to also be appointed as a trustee for the holders of the Series E debentures and the holders of the Series H debentures, replacing Ubank and Aurora
         Fidelity, respectively. At the aforesaid meeting, the consent of the holders of Series G debentures was not given for Hermatic to also be appointed as a trustee for the holders of the
         Series E debentures and the holders of the Series H debentures. On March 30, 2009, a meeting of the holders of Series H debentures approved the appointment of Reznik Paz Nevo
         Trust Ltd. as a trustee for the holders of the said debentures, replacing Aurora Fidelity. As noted, this appointment is subject to approval by the authorized court.


*        On this date the series was expanded. The data in the table relate to the entire series after all its expansions.




                                                                                                                                                                     IDBD Directors' Report 17
                                                                                                                                                 IDB Development Corporation Limited

4.       Financial condition and sources of finance (cont'd)
4.7      Information regarding the debentures of I.D.B Development (cont'd)
Details regarding the rating of the debentures, the most recent rating reports and Examination of update of Maalot reports from December 2008 are attached in Annex I of the
board of directors’ report.

                                                                                   Additional ratings between the original date of issuance and the date of this report
         Name of rating
Series     company          Current rating   Rating on date of issuance                            Date                                                    Rating

C        Maalot           AA/CW negative               AA                                            -                                                        -
E        Maalot           AA/CW negative               AA                 13.5.03, 18.9.03, 29.12.03, 22.4.04, 9.9.04, 5.1.05                               AA
F        Maalot           AA/CW negative               AA                                            -                                                        -
G        Maalot           AA/CW negative               AA                             11.6.06, 13.12.06, 17.6.07                                            AA
H        Maalot           AA/CW negative               AA                                            -                                                        -
I        Maalot           AA/CW negative               AA                                        17.6.07                                                    AA
J        Maalot           AA/CW negative               AA                                            -                                                        -




                                                                                                                                                                          IDBD Directors' Report 18
                                                                          IDB Development Corporation Limited

5.     Subsequent events

5.1    See Note 49 of the financial statements regarding the principal changes in investments and in contingent
       and standing claims against investee companies subsequent to the balance sheet date.

5.2    See Note 49.A.7&8 regarding dividend distribution by the company and by investee companies held by
       it.

6.     Contingent liabilities

The auditors' report to the shareholders of the Company draws attention to Note 30.C.1 of the financial
statements, regarding the exposure to class actions against investee companies.

7.     Qualitative reporting on exposure to market risks and methods of managing them
The reporting below relates to the Company and wholly-owned subsidiaries except for Clal Tourism ("the
Company"), as well as the Company's material investees, whose exposure to market risks could have a
significant effect on the Company.
7.1    The Company official responsible for the management of risks in the Company is Dr. Eyal Solganik,
       Executive Vice-President and Chief Financial Officer. See Regulation 26A of Chapter D of the periodic
       report for additional details.
7.2    The market risks to which the Company is exposed, including changes in market value of the holdings,
       changes in interest rates, foreign currency and indexation, could have a negative effect on business
       results, shareholders' equity, cash flows and the Company's value. Generally, it is not the Company's
       practice to execute hedging transactions against these risks, except for the hedging of some indexation
       risks or currency exposure.
       7.2.1   Exposure to fluctuations in the market values of investee companies
               Most of the Company's assets are invested in three companies whose shares are traded on a
               stock exchange: Discount Investment, Clal Industries and Clal Insurance. These investments
               are generally for the long-term and are not stated in the balance sheet at their stock exchange
               value. Changes in the prices of the shares of these companies and of companies held by them
               can influence the business results, shareholders' equity, cash flows, the Company's value and/or
               reporting equity value; as a result, inter alia, of a decrease in the capital gains of the Company
               and the investee holding companies, of a decrease in the profitability of the investee operating
               companies and the write-downs posted by the Company and its investee companies on their
               investments in investee companies.
               It is not the Company's practice to protect itself against these exposures. These changes could
               also impact the covenants undertaken with banks and the parameters taken into account when
               evaluated by a rating company.
               The domestic and global security and economic situations could also adversely affect the
               business results of the investee companies, and thereby, also the business results, shareholders'
               equity, cash flows and value of the Company.
       7.2.2   Direct exposure to increase in the CPI
               As at the report date, the Company has liabilities for CPI-linked debentures totaling NIS 4.7
               billion with an average duration of 5.4 years.
               The Company hedges this exposure partially, through the purchase of forward contracts on the
               CPI. As at the report date, such contracts totaled NIS 1.7 billion, with an average duration to
               maturity of 8.5 months. Moreover, the Company executed swap transactions to exchange CPI
               liabilities with nominal liabilities for a certain series of debentures totaling NIS 0.25 billion. It
               is noted that these kinds of contracts are measured in the balance sheet according to fair value,
               which is affected not only by the actual increase in the CPI, but also by the market’s
               anticipations for the rest of the period (which may change from one point of measurement to the
               other) – and this fact may result in the economic hedge obtained by using these contracts not
               reducing the fluctuations in the accounting result, and sometimes even increasing it.



                                                                                              IDBD Directors' Report 19
                                                                         IDB Development Corporation Limited

7.    Qualitative reporting on exposure to market risks and methods of managing them (con't)

7.2   (continued)

      7.2.3   Additional exposures
              The Company is exposed to changes in interest rates and foreign currency exchange rates that
              directly impact its liquid assets, liabilities, business results and value of the Company.

      7.2.4   The Company is exposed indirectly and mainly through its principal investments – Discount
              Investment, Clal Industries, Clal Insurance and their investee companies are exposed to changes
              in the prices of raw materials, prices of securities, to other prices and other economic indices
              that could have a material effect on the assets and liabilities of the companies, including the
              companies' liabilities to suppliers, customer debts to the companies, the value of the inventories
              they possess and other assets and liabilities. Moreover, the Company is exposed to risks of
              interest, inflation and exchange rates. The principal companies affecting the Company's market
              risks are the direct investee companies – Discount Investment, Clal Industries, Clal Insurance
              and several of their investee companies: Cellcom, Koor, Makhteshim Agan, Shufersal, Property
              and Building and Nesher.

              Presented below is summarized information according to the reports of the principal
              consolidated companies whose exposure to market risks could have material effect on the
              Company:

              Discount Investment – is exposed directly to market risks as a result of changes in exchange
              rates and the inflation rate in Israel, and a result of market variables that influence those markets
              in which their holdings are traded, and consequently on their results. Additionally, Discount
              Investment is exposed indirectly to various market risks that influence the performance of their
              investee companies.
              The vast majority of the debt of Discount Investment is in CPI-linked shekel debentures bearing
              fixed quarterly interest, the fair value of which is affected from time to time by changes in the
              market interest rate. Discount Investment has liabilities in respect of CPI-linked debentures in
              the amount of NIS 5.3 billion for an average term of 5.12 years.
              Discount Investment partially hedges this exposure by acquiring forward contracts on the CPI.
              The contracts are usually for one year and as at the date of the report amount to a total of NIS
              1.75 billion and have an average term of 5 months.
              Discount Investment periodically sells or purchases holdings, the proceeds of which are
              denominated in a foreign currency, generally the U.S. dollar. The exposure in these transactions
              relates to periods prior to the closing of the transactions, which periodically also involve a lack
              of absolute certainty as to realization of the transactions.
              Discount Investment is also subject to accounting exposure deriving from financial assets or
              liabilities denominated in foreign currency, including debts and including foreign currency
              balances (usually deriving from sales of holdings).
              Likewise, Discount Investment is subject to the effect of changes in exchange rates on the
              shekel value of its investee companies that operate overseas and/or also mainly in foreign
              currency. When examining future investment possibilities, Discount Investment considers
              overseas investments and assesses that it is possible that some of these investments will indeed
              be made overseas.

              Clal Industries– operates as an investment company and therefore is exposed to a range of
              market risks in the ordinary course of business, mainly changes in the prices of marketable
              securities, which may have material impact on its value, and could also influence its business
              results and shareholders' equity. Moreover, Clal Industries is exposed to changes in interest
              rates, inflation and exchange rates, which, directly and indirectly, impact its business results and
              the value of its assets and liabilities.
              The investee companies of Clal Investments: Nesher, Golf, Ta'avura and Kitan are exposed to
              various market risks, such as fluctuations in the prices of raw materials and energy and changes
              in exchange, interest and inflation rates that impact the revenues and expenses of these
              companies.
                                                                                             IDBD Directors' Report 20
                                                                          IDB Development Corporation Limited

7.    Qualitative reporting on exposure to market risks and methods of managing them (continued)

7.2   (continued)

      7.2.4   (continued)

      Clal Insurance Enterprises Holdings and its subsidiaries ("Clal Insurance Enterprises Holdings") –
      Directly and through subsidiaries, Clal Insurance Enterprises Holdings is engaged in various sectors of
      the capital market that are characterized by high volatility, inter alia, due to the effects of diplomatic,
      political, security and economic factors in Israel and globally, over which Clal Insurance Enterprises
      Holdings has no control. This volatility impacts the volume of public trading in the capital market as
      well as the prices of securities, and accordingly, also influences the volume of activity, assets, liabilities
      and business results of Clal Insurance Enterprises Holdings.The assets of the insurance companies
      overseas are invested in financial instruments, which are exposed to fluctuations in capital markets
      abroad, primarily bonds, shares, investment funds, and index certificates in the US, and bonds in the
      UK. These portfolios also include exposure to mortgage-backed bonds of US government agencies.
      Erosion in the value of these assets may impair these companies' profitability and capital.
      The business results of the Clal Finance Group are directly influenced by changes in the value of the
      investment portfolios, mutual funds, index certificates, and debt certificates managed by the Clal
      Finance Group, and by the value of its nostro portfolio. Declines in prices of securities in the nostro
      portfolio and in the assets under management of the Clal Finance Group, or full or partial insolvency of
      companies in which Clal Finance has invested or to which it has extended credit, may impair the
      business results of Clal Finance. Companies in the Clal Finance Group invest part of their shareholders'
      equity in the equity and debentures markets, and are therefore exposed to volatility in the prices of these
      assets.
      Clal Finance owns several companies engaged in the issuance of index certificates and/or liability
      certificates, with the amounts derived from the offerings invested in backing assets in order to cover the
      liabilities arising from their activity. In cases in which a substantial portion of the holders of index
      certificates of a particular series request conversion of the certificates at a time not expected by the
      group in advance, there is a risk ofimpairment of the group's ability to convert the backing assets in full.
      Clal Insurance Enterprises Holdings has exposure up to the level of the shareholders' equity of those
      companies. The main exposure of Clal Insurance Enterprises Holdings to changes in interest rates is to
      changes in the dollar interest rate, mainly due to exposure primarily arising from debentures holdings of
      the insurance companies overseas. This presentation does not take into account offsetting effects that
      changes in the dollar interest rate may have on the insurance liabilities of those companies. Note that
      despite the increase in the fair value of the assets exposed to the dollar interest rate during 2008, mainly
      due to an increase in the fair value of government agencies and municipal authorities in the US, the
      sensitivity to the dollar interest rate did not change materially, due to the low absolute level of the dollar
      interest rate as of December 31, 2008.
      In addition to financial investments, Clal Insurance Enterprises Holdings has other currency exposure in
      its foreign insurance activities. Clal Insurance Enterprises Holdings's holding in Broadgate is exposed
      to the pound sterling. Its holding in Guard is exposed to the dollar. The activities in Clal Insurance
      Romania are exposed to the exchange rate of the Romanian currency.
      For the activities of Broadgate, Clal Insurance Enterprises Holdings furnished in favor of Lloyd's a bank
      letter of credit to secure the liabilities and underwritings of Broadgate that now amount to NIS 226
      million. The holding in Broadgate is recorded in the books of Clal Insurance Enterprises Holdings at
      NIS 21 million. The value of the holding in Broadgate and the amount that Clal Insurance Enterprises
      Holdings could be demanded to pay under the letter of credit, are exposed to changes in the exchange
      rate of the pound sterling.
      Clal Insurance is engaged in underwriting through Clal Finance Underwriting, a subsidiary of Clal
      Finance (77%-owned by Clal Insurance Enterprises Holdings). This activity is influenced by the
      volatility that characterizes the market of public offerings. Within the scope of compliance with
      underwriting commitments, Clal Finance Underwriting may required purchase securities, the prices of
      which could change drastically based on the condition of the market and the situation of the relevant
      company. Dollar exposure in Clal Underwriting is neutralized as policy. For the most part,
      neutralization of the exposure is facilitated by derivatives.



                                                                                             IDBD Directors' Report 21
                                                                           IDB Development Corporation Limited

7.    Qualitative reporting on exposure to market risks and methods of managing them (continued)

7.2   (continued)

      7.2.4    (continued)

      Clal Finance Underwriting issued, through special purpose companies (SPC), different types of
      debentures to the public, including dollar-linked, CPI-linked and shekel debentures. The debentures
      that were issued are backed by financial assets whose terms are not inferior to those of the debentures
      that were issued and by derivatives, as is required to achieve maximum correlation between assets and
      liabilities. In the upcoming quarters, additional issuances of debentures as well as the expansion of
      existing series are expected. In all cases, the special purpose companies operate and are planned to be
      operated on a basis of maximum correspondence between assets and liabilities.
      Batucha, through the establishment of SPC, is engaged in the issuance of ETF's and the investment of
      the issuance amounts to cover liabilities deriving from their activity. ETF's that were issued include
      ERF's linked to various share indices, exchange rates and to government bonds. During the upcoming
      quarters, additional issuances of ETF's are planned for various indices. Although in all the cases, the
      SPC's act or are planned to act with maximum correlation between assets and liabilities, there is the
      possibility, anchored in a prospectus, to keep the exposure to market fluctuations within a range limited
      to up to NIS 10 million per ETF.
      In the ordinary course of business, for profit purposes, companies in the Clal Finances Group write and
      purchase Maof options, shekel-dollar options and other financial assets. In some of the transactions,
      there is off-balance sheet exposure in addition to the liability recorded in the books (recorded at market
      value) for potential loss due to changes in market prices, the degree of price fluctuation, and changes in
      interest rates and in exchange rates.
      Clal Finance Batucha executes trades (Nostro account for customers) in marketable and non-marketable
      assets (OTC trades), in Israel and overseas, and could be exposed to changes in the prices of these assets
      which include shares, government and/or corporate bonds, commercial paper and derivatives on the
      various underlying assets traded on the stock exchange and in the dealing rooms of banks in Israel and
      overseas.
      The Group companies, as part of their business activities, furnish credit and guarantees in favor of
      customers. The credit and guarantees are backed by collateral comprised of marketable securities, the
      prices of which could decline, so that the collateral would not be sufficient to cover the credit.
      A company in the Clal Insurance Enterprises Holdings Group is engaged in the borrowing and lending
      of securities for its own account and for its customers, and is exposed to the effect of changes in the
      prices of the loaned assets on the repayment ability.

      Koor – Koor is directly exposed to market risks due to changes in exchange rates and inflation rates in
      Israel, and as a result of market variables that influence the markets in which its holdings are traded, and
      consequently, on their value. Moreover, Koor is indirectly exposed to various market risks that influence
      the performances of its investee companies.
      In the second half of 2008 most of Koor’s debt (about 75%) was CPI-linked debt in NIS bearing a fixed
      rate of interest and part of it (25%) was in Swiss francs bearing variable interest, the fair value of which is
      affected by changes in the exchange rate of the NIS in relation to the Swiss franc.On the other hand, Koor
      held cash denominated mainly in NIS and bearing variable interest, and available-for-sale financial assets
      denominated in Swiss francs. Koor makes partial hedges by acquiring forward contracts on the CPI, and in
      most cases the contracts are for one or two years. As at the date of this report, Koor does not have ay
      hedges against exposures relating to the value of foreign currency assets and/or against indirect exposures
      that affect the performance of investee companies. Nevertheless, it is possible that Koor will execute
      hedges against these exposures in the future. In addition, Koor is subject to the effect of the exchange rate
      of the shekel against the Swiss franc on the shekel-denominated value of the investment in assets available
      for sale (shares of Credit Suisse, at a cost of approximately NIS 4.41 billion as of the date of this report),
      and to the effect of the exchange rate of the shekel against the dollar on the balance of its shekel-
      denominated investments in investee companies operating overseas and/or the main part of whose
      operations is conducted in foreign currency. These effects are presented under capital (with the exception
      of sharp and/or prolonged declines in value).



                                                                                              IDBD Directors' Report 22
                                                                        IDB Development Corporation Limited

7.    Qualitative reporting on exposure to market risks and methods of managing them (continued)

7.2   (continued)

       7.2.4   (continued)

      Cellcom – is a cellular telephone operator and is exposed in the ordinary course of business to market
      risks for fluctuations in exchange rates, interest rates and inflation. It is Cellcom's practice to use
      financial instruments to hedge against exchange rate fluctuations.

      Property and Building – Property and Building together with its subsidiaries and affiliated companies, is
      engaged in all segments of the real estate industry. Most of the activity is focused on the initiation,
      development, construction, management and rental of buildings for industrial, commercial and office
      uses, as well as residential construction.
      The activities of Property and Building, to the degree carried out in Israel, are financed mainly through
      long-term CPI-linked shekel loans. Almost all of the revenues of Property and Building are CPI-linked,
      and surplus cash is invested for short periods in shekel deposits. Accordingly, Property and Building is
      exposed to market risks deriving mainly from changes in the CPI, in the construction inputs index and
      in the interest level in the economy.
      Regarding exposure to changes in exchange rates on its overseas investments, Property and Building
      acts to reduce the exposure by investing in companies that are managed autonomously, and by matching
      the linkage basis of these investments to the revenues from those properties to the local currency.

      Nesher – The cement manufacturer is exposed to fluctuations in prices of raw materials and energy and
      to changes in exchange rates that affect Nesher's profitability.


7.3   Company's market risk management policy

      7.3.1    The Company views its investment in the shares of its main investee companies, Discount
               Investment, Clal Insurance and Clal Industries, as long-term investments. Therefore, it does not
               execute hedge transactions against changes in their value, or against a decline in the value or
               profitability of these companies.
               According to the Company's Board of Directors and the Audit Committee:

          7.3.1.1 The Company's management is allowed to periodically execute, at its discretion, hedging
                  transactions, including forwards, options and other financial instruments (for principal or
                  interest), in order to reduce or totally neutralize exposures that arise from time to time, as a
                  result of the Company's financial structure and/or to reduce financing expenses.

          7.3.1.2 Regarding CPI exposure – the Company will aspire, subject to the availability of hedging
                  transactions in the market, to their terms and to CPI forecasts, to reduce the CPI exposure.

          7.3.1.3 These hedge transactions will be held until they expire or until the debt's expiration date, so
                  that in any event, the hedge transactions will be at an amount and for a period that does not
                  exceed the amount and period of the CPI-linked debt.

          7.3.1.4 With respect to foreign currency exposure and in order to reduce financing expenses, only
                  against the underlying asset and/or projected cash flow – the Company's management will
                  be allowed periodically to purchase/write foreign currency forwards and options.




                                                                                            IDBD Directors' Report 23
                                                                        IDB Development Corporation Limited

7.    Qualitative reporting on exposure to market risks and methods of managing them (continued)

7.3   Company's market risk management policy (cont'd)


      7.3.2   The Company's management invests any surplus liquid assets, in order to achieve a favorable
              return on them, while maintaining a suitable balance of risk-return levels. The Company's
              policy is to invest surplus liquidity primarily in low-risk investments, mainly in the shekel
              sectors, as well as in CPI-linked investments. However, situations may occur from time to time
              when short-term investments are made from time to time in other sectors. Regarding liabilities,
              it is the Company's policy to issue mainly CPI-linked and shekel liabilities.
              From time to time, the Company may use derivative financial instruments in order to hedge
              against risk from its financial structure.

      7.3.3   The Company's risks management policy, as described above, is carried out only for the
              Company itself and its wholly-owned subsidiaries, except for Clal Tourism. The Company
              does not prescribe policy and does not manage risks for its investee companies. The investee
              companies prescribe their own policies. Moreover, the Company does not hedge against market
              risks deriving from the activities of its investee companies and their investee companies.
              Furthermore, the Company does not manage the aggregate risks of the investee companies
              and/or of their investee companies.

              Presented below is a summary of the policies of the principal subsidiaries that impact the
              Company's risks:

              Discount Investment – Discount Investment acts in accordance with the overall considerations
              and circumstances to adjust the gaps in its foreign currency linkage balances, and in order to do
              so it uses, inter alia, financial instruments and derivatives (forward contracts and/or option
              combinations).
              It is also the practice of Discount Investment to execute, at its discretion under the
              circumstances, the advance acquisition or sale of foreign currency in anticipation of an expected
              closing (even when it is not certain) of a purchase or sale of a holding denominated in foreign
              currency. Discount Investment holds a material part of its cash balances in US dollars, even
              though the amounts of such balances, the means in which they are held and their currency
              distribution may change from time to time according to business developments and as decided
              by Discount Investment.
              As at the reporting date, Discount Investment does not execute hedges against exposures involving
              the shekel value of foreign currency holdings (except in the situation of a sale or purchase) and/or
              against indirect exposures that influence the performance of the investee companies.
              Discount Investment does not execute hedge transactions against exposure to fluctuations in the
              market value of its assets and the effect of market variables on these values. However, in the
              past such hedges were executed, in specific cases, and it is possible that they will be executed
              again in the future.
              In the past, Discount Investment did not execute hedge transactions against valuation exposure
              deriving from the fixed interest rates on debentures, and this is the situation at the date of this
              report. Regarding exposure to Libor interest rates, hedge transactions were executed in the past
              through swaps of variable interest for fixed interest, and this type of hedge could be executed with
              discretion in the future. However, at the report date, there is no hedge against such exposure.
              Likewise, Discount Investment executes transactions in financial derivatives only through banks
              and institutions required to maintain a level of collateral based on regulations. According to the
              policy of Discount Investment's board of directors, the management of Discount Investment
              invests its surplus liquidity in order to achieve a favorable return on them, with a suitable risk-
              reward ratio. The person responsible for risk management in DIC is responsible for handling
              financial exposures, formulating hedging strategies, supervising their implementation and
              providing an immediate response to unusual developments in the various markets and he consults
              with DIC’s Head Finance Manager, the President of DIC in charge of them and the members of
              DIC’s audit committee.


                                                                                            IDBD Directors' Report 24
                                                                           IDB Development Corporation Limited


7.    Qualitative reporting on exposure to market risks and methods of managing them (continued)
7.3   (continued)

      7.3.3   (continued)

              Clal Industries– holds a large quantity of the securities of its investee companies. Generally, Clal
              Industries does not purchase hedges on its investments in marketable securities, due to reasons
              including the large volume of its investments in marketable securities, the dispersal of the
              investments in Israel and overseas, dispersal of the investments over different operating segments,
              dispersal of the investments in different securities, as well as legal restriction on the purchase of
              various derivatives.
              Clal Industries matches, to the extent possible, the linkage basis of its financial assets and
              liabilities and the average duration of its financial assets to the average duration of its liabilities.
              Clal Industries' board of directors authorizes, from time to time, the volume of hedging
              transactions allowed for execution and the authorities of the managers of Clal Industries.
              According to the board of directors' decision, the management of Clal Industries is authorized,
              at its discretion, to execute hedge transactions, including forwards, options and other financial
              instruments (for principal or interest), in order to reduce or totally neutralize exposures, that
              may arise as a result of its financial structure. In addition, Clal Industries' board of directors has
              authorized management to execute hedge transactions in order to reduce the CPI exposure of
              Clal Industries.
              Regarding the subsidiaries of Clal Industries: Nesher, Golf and Ta'avura – they match the
              currencies of the revenue and expense sources. Golf occasionally executes foreign currency
              derivative transactions, in order to reduce exposure.
              Nesher uses contracts for a period of up to one year in commodities and various energy products,
              in order to hedge against unexpected price increases in global markets. In addition, Nesher and
              Ta'avura execute hedge transactions in order to reduce their CPI exposure.

              Clal Insurance Enterprises Holdings – The key policies for managing market risks are
              prescribed by the appropriate organs of each of the companies in the Clal Insurance Enterprises
              Holdings Group, which meet from time to time. Likewise, the senior investment forum, headed
              by the CEO meets regularly, with the participation of senior employees of Clal Insurance
              Enterprises Holdings ("the Forum"). These bodies designate the exposure rates in the different
              investment alternatives and receive regular reports and forecasts. The management of
              investments and execution of the Forum's instructions is carried out through Canaf – Clal
              Financial Management and by appropriate officials at Clal Finance.
              For subsidiaries of Clal Insurance Enterprises Holdings, which invest in financial assets, a
              specific investment policy was prescribed that is relevant to the nature and activity of the
              company. This policy is determined by the subsidiary's board of directors and is subject to the
              general policy of Clal Insurance. According to the policy of the board of directors of Clal
              Insurance Enterprises Holdings, the management of Clal Insurance Enterprises Holdings invests
              its surplus liquidity in order to achieve a favorable return, with a suitable level of risk-reward.
              Additionally, the board of directors of Clal Finance Batucha prescribed the investment policy for
              the nostro portfolio according to areas at activity and exposure limits for each area. The areas at
              activity prescribed include trading in debentures, shares, share indices, marketable securities, the
              CPI and exchange rates. In some of the areas at activity, derivatives are used. The areas at
              activity relate to trading in Israel and overseas. Likewise, the board of directors of Clal Finance
              Batucha is engaged in distributing securities to investors.
              The board of directors of Clal Finances Batucha and the board of directors of the stock
              exchange limit the volume of OTC trading executed for customers. The customers opposite
              which the OTC trades derivative trading are executed, furnish collateral in favor of Batucha,
              based on the stock exchange's regulations and on risk assessments made by Batucha. The
              Forum is responsible for dealing with the area of financial risks, formulation of hedging
              strategies, monitoring their implementation and providing an immediate response to exceptional
              developments in a given market.


                                                                                               IDBD Directors' Report 25
                                                                       IDB Development Corporation Limited

      7.      Qualitative reporting on exposure to market risks and methods of managing them
              (continued)

7.3   (continued)

      7.3.3   (continued)

              Property and Building – The policy of Property and Building is to hedge its economic exposure
              and it reached the conclusion that most of the financial risks discussed previously may be
              hedged by matching the linkage basis of the expenses to those of its revenues and by
              diversifying the financing sources and types of credit. Therefore, Property and Building
              regularly examine the credit terms in the different alternatives and the assessments for changes
              in the projected inflation rates and the level of market interest rates.
              According to the current degree of exposure, Property and Building, it is not appropriate to use
              financial derivatives to hedge market risks. According to the nature of its activities in Israel,
              Property and Building is exposed to market risks deriving from changes in outside factors, such
              as the activity of the real estate industry in the economy, changes in the CPI, the index of
              construction inputs and changes in the level of interest in the economy.
              In a situation of positive inflation, nominal accounting reporting generally causes a negative
              effect on the net income of Property and Building, as a result of the recording of financing
              expenses that include, according to reporting principles, the element of the inflationary expense.
              This negative effect could be moderated by an increase in the fair value of investment real
              estate, from which most of the revenues are CPI-linked.
              Likewise, Property and Building is exposed to changes in exchange rates within the scope of its
              investments overseas, exposure deriving from the day-to-day activities of the overseas investee
              companies and from the way the investments are financed.

              Koor – The policy for investment of cash balances in Koor and hedging against financial
              exposure is implemented by Koor's management and by the investment committee of Koor's
              executive, which includes the Chief Financial Officer and capital market consultants. In
              November 2007, Koor's board of directors appointed a board of directors' investment
              committee, which includes four members of the board of directors, among them the public
              directors. Management reports to the board of directors' investment committee about the
              policies for investing the cash balances and hedging exposure. The investment committee
              evaluates and approves this policy. In addition, at all meetings of the audit committee and board
              of directors of Koor, the management of Koor reported to the audit committee and the board of
              directors on the exchange-rate exposure of Koor, and the linkage balance sheet of Koor was
              discussed.

7.4   Means of monitoring and implementing policy

      The monitoring of policy implementation and response to exceptional market developments is the duty
      of the Company official responsible for risk management.
      Compliance with the Company's policy is monitored through quarterly reporting by the Risks Manager.

7.5   Linkage balance sheet as at the year-end

      7.5.1   Consolidated linkage balance sheet:

              As noted in Par. 7.3.3 above, the Company does not manage the risks of its investee companies,
              except for wholly-owned subsidiaries (not including Clal Tourism) ("wholly-owned
              subsidiaries"). See the consolidated linked balance sheet of the Company in Note 29 of the
              financial statements.




                                                                                          IDBD Directors' Report 26
                                                                                 IDB Development Corporation Limited

7.      Qualitative reporting on exposure to market risks and methods of managing them (continued)

7.5     Linkage balance sheet as at the year-end (continued)

        7.5.2    Linkage balance sheet of the Company (includes wholly-owned subsidiaries):

                                                                    As at December 31, 2008
                                                                                              Non-
                                       CPI-           Dollar-       Other                     monetary
                                       linked         linked        currency   Unlinked       items          Total
                                                                          NIS millions

 Investments in investee companies                -             -            -            -        7,028         7,028
 Loans and capital notes to investee
 Companies                                      42        1,191              -         85                -       1,318
 Other investments include
 derivatives                                      -             -            -            -          150             150
 Fixed assets                                     -             -            -            -           91              91
 Employee benefit fund                            -             -            -            -            8               8
 Current investments include
 derivatives                                    226           1             -         138             12           377
 Short-term loans and deposits                    -           -             -           -              -             -
 Receivables                                      -           -             1           4              -             5
 Cash and cash equivalents                        -          88             1         693              -           782
 Total assets                                   268       1,280             2         920          7,289         9,759

 Financial liabilities                     4,537            475              -       1,506             -         6,518
 Non-current derivatives                       -              -              -           -             9             9
 Deferred tax liabilities                      -              -              -           5             -             5
 Employee benefits                             -              -              -           -            14            14
 Payables                                     95              2              -          46             -           143
 Derivatives – current                         -              -              -           -            24            24
 Total liabilities                         4,632            477              -       1,557            47         6,713

 Balance as at December 31, 2008          (4,364)           803             2        (637)         7,242         3,046


With regard to the period beginning on October 1, 2008 and ending at the date of publication of these reports,
the board of directors and the balance sheet committee of the company held discussions regarding financial risks
which the company exposes to.

7.6    See Annex A of this report regarding derivative positions as at December 31, 2008.

7.7    See Annex B of this report for an analysis of sensitivity in respect of market factors.

7.8    See Annex C of this report for disclosure regarding financial assets available for sale.




                                                                                                    IDBD Directors' Report 27
                                                                               IDB Development Corporation Limited

8.      Details on internal audit of the Company
Particulars of the Internal Auditor:
Name:                                  Ilan Amit
Commencement of tenure:                August 31, 2000
Qualifications for position:           Graduate of Accounting from the Hebrew University in Jerusalem, CPA,
                                       Member of the Institute of Internal Auditors in Israel, 35 years of
                                       experience and training in auditing, financial management and system
                                       analysis.
                                       The Internal Auditor is not an interested party in the Company, an officer
                                       in the Company (except as Internal Auditor) or a relative of any of these,
                                       and is not the independent auditor or his representative.
Status of employment:                  Is a full-time employee of the Company. Also serves as Internal Auditor
                                       of the Company's parent company and of other Group companies. Does
                                       not serve in any other capacity in the Group aside from internal audit.
Organizational superior of the         The Chairman of the Board
internal auditor:
Appointment of Internal Auditor        Approved by the audit committee of the board of directors, after considering
                                       his education, skills and experience of the Internal Auditor, and considering
                                       the type, scope and complexity of the Company's operations.
Professional standards that guide the Internal Auditor's work
As advised by the internal auditor, the internal audit work was based upon generally accepted professional
standards for internal audit and professional directives and guidelines as authorized and published by the
Institute of Internal Auditors in Israel.
The main considerations that guided the Internal Audit in formulating the audit program that was
approved by the audit committee
a)    Audit of the Company itself (conformity to procedures, cost and operating controls, administration of
      Company funds, reporting procedures, compliance with laws and follow-up on implementation of
      decisions).
      This audit is performed partially by the internal auditor himself, and partially through Rozenblum
      Holzman CPA, an outside firm that specializes in internal auditing.
b)    Regular monitoring of the existence and propriety of the internal audit activity in the investee companies,
      while emphasizing the companies in which the holding is material.
      The Internal Auditor also serves as the Internal Auditor for three of the Company's subsidiaries – Clal
      Industries and Investments Ltd., Clal Tourism Ltd., and K.B.A. Kvutzat Bonay Arim Ltd.
      In other companies: Clal Insurance, Discount Investment and subsidiaries of the Clal Industries Group:
      Nesher, Golf and Kitan Industries, the Internal Auditor participates as an observer in the audit committee's
      meetings.
      The content of the work plan was provided, inter alia, while relying on a risks assessment survey that was
      prepared for the Company.
      The Internal Auditor has discretion in deviating from the work plan, subject to reporting to the Audit
      Committee and receiving its approval for changing the proposal.
      The Company's board of directors and management guide and instruct the Company's representatives on
      the boards of directors of the investee companies to put emphasis on proper performance of the internal
      audit work.
Hours spent on internal audit
Company                        Hours worked     Comments
The Company                              600    150 hours by an outside internal audit firm
Clal Insurance Enterprises            20,600    Audit department provides internal audit services to the entire
Holdings                                        insurance group (not include Clal Finance, which has separate
                                                audit set)
Discount Investment                     1,000   Outside auditor
Clal Industries                           700   Performed by the Internal Auditor
Clal Tourism                              500   Performed by the Internal Auditor (not include Diesenhaus-
                                                unitours, which has separate auditor)

                                                                                                    IDBD Directors' Report 28
                                                                           IDB Development Corporation Limited

8.      Details on internal audit of the Company (continued)

In the opinion of the Company's board of directors, the Internal Auditor's work plan, as well as the scope of the
hours provided to carry out this plan, correspond with the Company's needs. The Company is able to expand
the scope of the hours if necessary.
Audit overseas
The Group corporations operating overseas have their own internal audit system.
In 2008 the internal audit includes an audit in held corporation which activity is out side of Israel.
Access to information
The Internal Auditor is given access to information held by the Company, as noted in Section 9 of the Internal
Audit Law, and to such information held by the Company's investee companies, in which he serves as Internal
Auditor, including continuous and direct access to IT systems, including financial data. In other investee
corporations, the Internal Auditor is access to information through the audit system of those corporations.
Internal Auditor's report
Internal Auditor's reports are submitted in writing. During the year, audit reports were submitted that were
discussed on the following dates: 17.3.2008, 27.5.2008, and 21.8.2008. Audit reports are distributed regularly to
the chairman of the board of directors, the chairman and members of the audit committee and the Company's
management.
Board of Directors' evaluation
The Board of Directors maintains that the extent, characteristics and continuity of the activities and work plan of
the internal auditor are reasonable in the circumstances and achieve the aims of an internal audit of an entity.
Remuneration
The internal auditor is employed as a full-time Company employee as mentioned above, and receives a monthly
salary including social benefits and an annual bonus.
The Board of Directors is of the opinion that the remuneration of the internal auditor is appropriate for the scope
of his activities and performance and is not exceptional for companies of the size and type of the Company, for
the level of the Company's activity and the scope of responsibility of the internal auditor, and that this should
not affect the professional judgment of the internal auditor.

9.      Disclosure regarding auditors' fees

For details regarding required disclosures in respect of auditors' fees of the Company and principal Group
companies, see Appendix I to this report.

10.     Directors with accounting and financial expertise

The Company's Board of Directors has decided that the Company the minimum number of directors with
accounting and financial expertise should be two (including at least one outside director), taking into account
the nature of the accounting and control issues that arise when preparing the financial statements of the
Company in light of the Company’s areas at activity, and the size and complexity of its operations, and taking
into consideration the composition of the Company's board of directors in general, which includes people with
business, management and professional experience that allows them to deal with the management duties of the
Company, including reporting duties.

In the opinion of the Board of Directors, and after it has taken into consideration declarations of the directors, in
which they detailed their relevant education and experience for the purpose of examining whether they comply
with the conditions and tests of the Companies Regulations (Conditions and Tests for a Director with
Accounting and Financial Expertise and a Director with Professional Skills) - 2005, the members of the
Company's Board who have accounting and financial expertise and the facts showing that they can be
considered as such are as follows:

Nochi Dankner - a law graduate, Chairman of the Board and CEO of IDB Holding Corporation Ltd. Serves as
the Chairman of the Board of the Company, Clal Industries and Investments Ltd. and Discount Investment
Corporation Ltd. Serves and\or served as the Chairman of the Board and director of public and private
companies in the IDB Group and the Ganden Group. Served as a director and chairman of the credit committee
of Bank Hapoalim B.M.



                                                                                               IDBD Directors' Report 29
                                                                          IDB Development Corporation Limited

10.     Directors with accounting and financial expertise (cont'd)

Eliahu Cohen - Holds a master's degree in law. Serves as the CEO of the Company, and a director of public and
private companies of the IDB Group. Served as Chairman of the Board of Clal Insurance Enterprises Holdings
Ltd. until March 21, 2008. Also served as chairman of the management committee of Israel Discount Bank Ltd.

Isaac Manor - Holds a master's degree in business administration. Serves as the Deputy Chairman of the Board
of IDB Holding Corporation Ltd. and as a director of public and private companies in the IDB Group. Serves as
the Chairman of the Board of the auto segment companies of the David Lubinski Group Ltd. and as a director
and member of the balance sheet committee of Union Bank of Israel Ltd.

Professor Yoram Margaliot - Professor of law (specializing in taxation) and a lawyer by qualification. Serves as
a professor, specializing in taxation, in the Law Faculty of Tel Aviv University and as guest professor in NYU.
Served as short-term adviser to the World Bank. Served as deputy program director of the international taxation
program of Harvard University and as guest professor in NU. Served as a lecturer in the law school of the
Herzliya Interdisciplinary Center and as external lecturer in the law faculty of the Hebrew University in
Jerusalem. Participated in courses on accounting and finance. Served as tax adviser in a law firm and worked in
the fiscal department of the State Prosecutor's office. Has published many articles on tax, accounting, economic
and various business subjects.

Dori Manor - Holds a master's degree in business administration. Serves as the CEO and a director of the auto
segment companies of the David Lubinski Group Ltd. Serves as a director of private companies and as a
director of public companies of the IDB Group. Served as an assistant to the CEO and as the Deputy CEO of the
Lubinski Group.

Irit Isaacson – Holds a degree in economics and a master's degree in management-performance research
sciences. Director of Bank Hapoalim Ltd., chairman of the balance sheet committee, chairman of the risks
management and control committee for implementation of the Basel 2 provisions, a member of the credit
committee, the audit committee, the business and budget committee and the expense control and efficiency
committee of the board of directors of Bank Hapoalim Ltd. Chairman of Isracard Ltd., chairman of Europay
(Eurocard) Ltd., chairman of Aminit Ltd. And chairman of Poalim Express Ltd.. Serves as a director and
member of committees of Arison Holdings (1998) Ltd., Arison Investments Ltd., Housing and Construction -
Holdings Ltd., The Israel Corporation Ltd., Israel Chemicals Ltd., Dead Sea Bromine Ltd., Bromine
Compounds Ltd., member of the board of trustees of the Ben Gurion University. Served for the last five years as
a director of Nisko Industries Ltd., Koor Industries Ltd., The Israel Corporation Ltd. (outside director),
Mehadrin Ltd., Meshulam Levinstein Ltd and Eurocom Communications Ltd. Previously, she filled a number
of positions in Bank Leumi le-Israel B.M. over a period of 17 years. Among other positions, she served as the
manager of assets and liabilities in Israeli currency. In her last position with Bank Leumi, she served as the head
of the industrial sector in the business division.

11.     Independent directors
The Company did not include in its articles an instruction regarding the number of independent directors, within the
meaning of this term in Section 219(e) of the Companies Law – 1999.

12.     Critical accounting assumptions

Preparation of the financial statements of the Company and its subsidiaries in accordance with generally
accepted accounting principles in Israel requires their managements to make estimates and assumptions that
affect the amounts presented in the financial statements. Among these are estimates that require exercising
discretion in an environment of uncertainty and which significantly affect the data presented in the financial
statements.
Presented below is a description of the critical accounting estimates that were used in preparing the financial
statements, which required making assumptions regarding significantly uncertain circumstances and events. The
discretion exercised by the Company or the investee company, as relevant, when making the estimates is based
on past experience, the various facts, external factors and reasonable assumptions according to the pertinent
circumstances of each estimate. Actual results may differ from such estimates.

                                                                                             IDBD Directors' Report 30
                                                                         IDB Development Corporation Limited

12.     Critical accounting assumptions (cont'd)

12.1    Investment Property
The Group presents its investment property according to the fair value model. As from January 1, 2007 changes in
fair value are recorded as income or expense. The fair value is determined by independent appraisers having
relevant professional skills and is examined at least once a year and any time there are indications of a material
change in value.

12.2    Contingent liabilities

When assessing the chances of legal claims that were filed against the Group's companies, the Group's
companies relied on the opinion of their legal counsel. The opinion of their legal counsel is based on the best of
their professional judgment, and takes into consideration the current stage of the proceedings and the legal
experience accumulated with respect to the various matters. As the results of the claims will ultimately be
determined by the courts, they may be different from such estimates.

12.3    Impairment in value of assets

The Group examines on every balance sheet date whether there have been any changes in circumstances which
would indicate impairment in the value of one or more of the non-monetary assts. When there are signs of
impairment in value, it examines whether the amount by which the investment in the asset is presented can be
recovered from the discounted cash flows anticipated to be derived from the asset, and if necessary, it records a
provision for impairment up to the amount of the recoverable value. The estimated future cash flows are
discounted to their present value, in some cases with assistance of external assessors, using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. The
estimates regarding cash flows are based on past experience with respect to this asset or similar assets, and on
the best possible evaluations of the Group regarding the economic conditions that will exist during the
remaining useful life of the asset.
The Group uses the estimates of an appraiser when determining the net selling price of part of the assets. With
respect to real estate, the estimates also take into consideration the situation of the market where the asset is
located.
The deepening of the competition in the market may significantly affect forecasts regarding cash flows, the
remaining useful life and the net selling price of the assets.

12.4    Allocation of shares acquisition cost and evaluation of intangible assets and goodwill

The group is required to allocate the cost of the acquisition of investments in investee companies (excluding
acquisitions of minority rights) to the assets and liabilities of those companies, based on their estimated fair
values. In material acquisitions, the group contracts with independent assessors who assist it in determining the
fair value of these assets and liabilities. These assessments necessitate the use of significant estimates and
assumptions by management. The material intangible assets recognized with the assistance of the assessors
include customer relationships, commercial names, and brands. Critical estimates used in evaluating the useful
life of these intangible assets include, among others, estimates of the duration of customer relationships and
other intangible assets, and expected developments in the market. Critical estimates used to evaluate certain
assets include, among others, expected cash flows from customer relationships and replacement costs of brands
and fixed assets. Management's estimates of fair value and useful life are based on assumptions found to be
reasonable by management, however, these assumptions involve inherent uncertainty, and actual results may
therefore differ.

Goodwill is allocated at the acquisition date to each of the cash-generating units or groups of cash-generating
units of the acquired company which are expected to benefit from the synergies of the acquisition. Goodwill is
subsequently examined for the purpose of decline in value at the level of those cash-generating units or groups
of cash-generating units of the acquired company to which it was attributed. In attributing goodwill to the cash-
generating units or groups of cash-generating units of the acquired company, the Company prepared estimates
regarding the expected synergies between the existing and acquired activities. Each unit or group of units to
which goodwill was allocated, as noted, represents the lowest level of the company at which goodwill is
monitored for internal administration purposes, and is not larger than a reportable segment.

                                                                                            IDBD Directors' Report 31
                                                                          IDB Development Corporation Limited



12.     Critical accounting assumptions (cont'd)

12.5    Employment benefits

The liability in respect of defined benefit plans after the completion of employment is determined using
actuarial valuations. The calculation of the liability involves making assumptions, among others, regarding
discount rates, expected rates of return on assets, future salary increases and employees’ replacement rates. Due
to the long-term nature of these plans, such estimates are subject to significant uncertainty.

12.6    Trade receivables

These financial statements include an allowance for doubtful accounts in respect of trade receivables, which the
Group estimates adequately reflects the potential loss from uncollected amounts. The allowance was calculated
based on past debt collection experience as well as on information regarding specific debtors.

12.7    Deferred tax assets

Deferred tax assets are recognized for unutilized carry forward tax losses and temporary differences to the
extent that it is probable that taxable profit will be available against which the losses can be utilized. The
management’s judgment is required in order to determine whether it is possible to recognize deferred tax assets
and the amount of deferred tax assets that can be recognized, based on the existence, timing and amount of
future taxable profits together with future tax planning strategies.

12.8    Determination of the recoverability of deferred Acquisition expenses of life assurance policies

Acquisition expenses of life assurance policies are deferred and written-off over the policy’s term. The
recoverability of deferred acquisition costs is examined once a year while using the assumptions regarding the
cancellation rates, mortality and morbidity rates and other variables. If these assumptions are not materialized it
might be necessary to accelerate the write-offs or even to cancel the deferred acquisition costs.

12.9   Liabilities in respect of insurance contracts

Liabilities in respect of insurance contracts are based on the actuarial valuation method and on actuarial
assumptions.
The actuarial valuations and the various assumptions are based on past experience and are mainly based on the
fact that past behavioral patterns and claims represent future behavior. Change in the risk factors, frequency of
events or their severity, as well as a change in the legal situation, might have a significant influence on the
volume of liabilities for insurance contracts.

13.    Remuneration to senior employees

The Company’s Board of Directors decides once a year to grant bonuses to senior executives on the basis of, inter
alia, the Company’s performance in the preceding year. In determining the annual bonus for 2008 that will be paid
to the senior executives in respect of 2008, the Company's Board of Directors took into consideration, inter alia, the
base salary of each senior executive, the total compensation package, the complexity of the executive’s position, the
responsibility imposed on the executive, special efforts made by the executive in the relevant period, the necessity
of preserving the executive as human capital, the additional grants as far as being paid to senior executive in respect
of the passing year, the scope and complexity of the Company’s business and the personal contribution of each one
of the senior executives to the success of the Company’s business. In the opinion of the Company’s Board of
Directors, the said bonuses reflect the contribution of the said officers to the Company and they are fair and
reasonable.
It is noted that five of the people who receive the highest amounts of compensation as described in rule 21 to
Chapter D of the periodic report are employees of companies controlled by the Company who received their
compensation from such companies in respect of their service in such companies.


                                                                                             IDBD Directors' Report 32
                                                                           IDB Development Corporation Limited

13.     Remuneration to senior employees (cont'd)

On November 12, 2008, Mr. Nochi Dankner, the Chairman of the Company's Board of Directors, announced to
the chairmen and general managers of companies of the IDB Group that under the trend of continuing to
properly prepare for the crisis in global economy and in order to take streamlining measures, he and Mr. Yitzhak
Manor (a director in the Company), and Messrs. Avi Fisher and Zvi Livnat, (Deputies to the Chairman of the
Company's Board of Directors), have decided to waive 25% of their salaries and overall remuneration to which
they are entitled for a period commencing in November 2008 through the end of 2009. Mr Dankner asked the
chairmen and general managers of the Group companies to join this step and waive 10% of their remuneration
and the members of management in all the Group companies were also asked to waive 8% of their remuneration
for the abovementioned period. The company's CEO consented to the request and announced that he was
waiving 25% of his remuneration for the abovementioned period and the members of the Company's
management also consented to the request and announced that they were waiving 8% of their remuneration for
the abovementioned period (starting in February 2009, one of the members of management of the Company
undertook a waiver at a higher rate, of unlimited period, applicable to benefits as well). The aforesaid waivers
do not apply to benefits (or payment substituted for such benefits), incidentals not derived from wages, and
certain terms and rights. In addition, the directors entitled to directors' compensation (with the exception of the
two external directors) gave notice that they would waive 15% of the directors' compensation (participation
compensation and annual compensation) to which they would be entitled for the period from November 2008 to
the end of 2009. Some Group companies have also begun implementation the aforesaid request.

14.     Disclosure regarding the process of approving the financial statements
The Company’s Board of Directors is the corporate organ with ultimate responsibility for corporate governance
and for approval of its financial statements.

The Company’ Board of Directors has appointed the Company’s audit committee to act also as the “balance
sheet committee” that presents its recommendations to it with respect to approval of the financial statements
before they are approved by the Board of Directors. The balance sheet committee is comprised of four members,
and includes one director who has accounting and financial expertise, Ms. Irit Isaacson, one director who has
accounting and financial expertise, Professor Yoram Margaliot, one director who has professional expertise, Mr.
Amos Malca, and one other director, Mr. Avraham Ben Yosef. The Company’s Internal Auditor and
independent auditor are invited to participate in the meetings of the balance sheet committee as well as the
meetings of the Board of Directors in which the financial statements are discussed and approved. In these
meetings the independent auditor is required to present the principal findings, if any, that arose from the audit or
review process.

The balance sheet committee examines, by means of detailed presentations of officers and other Company
personnel, including the Company’s CEO, Mr. Eliahu Cohen, the Executive Vice President and Chief Financial
Officer, Dr. Eyal Solganik, and the Vice President and Comptroller, Mr. Haim Tabouch, the significant matters
in the financial report, including any transactions not in the ordinary course of business, the material evaluations
and critical estimates that were implemented in the financial statements, the reasonability of the data, the
accounting policy that was applied and any changes in it, and implementation of the proper disclosure principle
in the financial statements and in the accompanying information. The balance sheet committee examines various
aspects of control and risk management, both those reflected in the financial statements (such as the reporting on
financial risks) and those that affect the reliability of the financial statements. If necessary, the balance sheet
committee requests to receive comprehensive reviews of matters having a particularly material effect.
Approval of the financial statements may require a number of meetings, as necessary: one is held several days
before the approval date of the financial statements and includes a comprehensive discussion of the material
reporting issues, and another is held proximate to the date of approval by the Board of Directors and is mainly
regarding the results (note that Mr. Amos Malca participated in one of two meetings of the balance-sheet
committee convened in order to discuss these reports).




                                                                                              IDBD Directors' Report 33
                                                                                IDB Development Corporation Limited

    15.    Corporate philanthropy and support for the community

    15.1   The IDB group views contributions and assistance to the community in Israel as an important aspect of
           its business vision and believes that it has responsibility towards society in Israel, while recognizing that
           business leadership has to go hand in hand with social value leadership. Therefore, alongside the desire,
           aspiration and actions of IDB to increase value for its shareholders stands assistance to the community
           in Israel as a second-level strategic principle.

           As part of the Company's vision, it is guided by the belief that the fate of the State of Israel depends, first
           and foremost, on the unity of its people and the readiness to mobilize and donate towards the
           improvement of life systems and strengthen society's resilience and durability, this from a belief that the
           society we are living in important as much as the companies we are managing.

           As part of the continuing commitment to donate to the development of the State and strengthen it, and as
           part of IDB's social and moral obligation to work for Israeli society, Group companies themselves and
           through the IDB Fund for the Community, a non-profit organization that coordinates donations from key
           group companies, donate to projects in various sectors which the Group, in its vision and social policy
           drive, has placed as goals on which it is interested to focus. Within this framework, preference is given
           to donations in the education, health, welfare and culture sectors.

           In light of the crisis experienced by the population in the north of the country as a result of the second
           Lebanon war, and the continued difficult situation of the populations surrounding the Gaza strip, IDB
           Group has decided, to continue to provide extensive assistance to the populations bordering with hostile
           territories in the north and in the south so as to show its empathy, strengthen, be involved and show
           unity.

           In the last two years and a half, the IDB Group's employees and executives devote a great deal of time in
           active assistance and broad involvement in activities for the residents in the north and south. Under
           these activities tours and meetings are held frequently with mayors, council heads, teachers, students,
           volunteers, non-profit foundation activities and residents in order to hear about the residents' needs and
           discuss future cooperation. The Group is involved in dozens of diverse programs in the fields of
           education, health, welfare, culture and sport – all in the confrontation areas.

           In 2008 the Company, Discount Investments, Clal Industries, Clal Insurance Enterprises Holdings,
           Elron, Shufersal, Koor, Property and Building, Makhteshim Agan, Cellcom, Hadera Paper ("the
           contributing companies") donated a total of NIS 54,893 thousand (part of these companies' contributions
           were transferred through the IDB Fund).

           In 2008 and *2007 amounts were donated for various purposes, as follows:
                                                                                             2008             *2007
                                                                                            NIS thousands

            Welfare                                                                       15,367            10,887
            Health                                                                         5,674            11,977
            Education                                                                     22,340            24,374
            Culture                                                                        8,660            12,943
            Other                                                                          2,852             2,160

            Total                                                                         54,893            62,341



*    In 2007 contributions were donated by the Company, Discount Investments, Clal Industries, Clal Insurance
    Enterprises Holdings, Elron, Shufersal, Koor, Property and Building, Cellcom, Makhteshim Agan, Gav-Yam
    and Taavura.




                                                                                                   IDBD Directors' Report 34
                                                                          IDB Development Corporation Limited

15.     Corporate philanthropy and support for the community (cont'd)

15.2.   On July 31, 2006 the Board of Directors of the Company resolved that the annual donations budget of
        the Company would be determined annually by the Board of Directors and would represent 1.5% of the
        annual net income of the Company according to is audited consolidated financial statements for the
        previous year. Utilization of the donations budget of the Company for donations not to the IDB Fund for
        the Community ("the Fund") would be implemented by periodic decisions of the Company's
        management.

        In addition and at the same time, the Company's Board of Directors decided, following receipt of
        approval of the Company's Audit Committee, that as part of the donations granted by the Company to
        non-profit public institution organizations who have approvals under Section 46 of the Income Tax
        Ordinance, to approve donations by the Company to the Fund.
        The Fund has such an approval. The donation of the Company to the Fund in each calendar year would
        be of up to 100% of the donations budget of the Company and not more than 1.5% of the net annual
        profit of the Company according to the audited consolidated financial statements of the previous year
        ("the framework of the donations to the Fund"). Utilization of the framework of the donations to the
        Fund, in total or partially, will be made in accordance with periodic decisions of the Company's Board
        of Directors.
        The decisions in respect of the approval of the framework of the donations to the Fund granted by the
        Company to the Fund as mentioned, were approved by the General Meeting of the Company which took
        place on September 6, 2006.

        On March 21, 2007, the Board of Directors of the Company resolved that the donations budget of the
        Company for 2007 would be NIS 16.11 million (1.5% of the net income of the Company for 2007,
        according to its audited consolidated financial statements), of which NIS 15 million would be donated
        to the Fund.

        On March 30, 2008, the Company's Board of Directors resolved that the donations budget of the
        Company would be NIS 27.6 million (up to 1.5% of the Company's net income for the year 2008,
        according to its audited consolidated financial statements), and also resolved that NIS 13.8 million of
        the aforementioned amount would be donated to the Fund.

        See Note 45.I(2) to the financial statements for additional information related to donations to
        institutions in which the controlling shareholders and/or officers of the Company, or their relatives serve
        as officers.

        The Board of Directors and Management of the Company express their great appreciation to the
        managers of the Group's companies and their employees for dealing with difficult challenges which
        faced up the Group in 2008.




        Eliahu Cohen                                                 Nochi Dankner
        Director and General Manager                                 Chairman of the Board of Directors




        Tel Aviv, March 31, 2009




                                                                                             IDBD Directors' Report 35
                    IDB Development Corporation Limited




Appendixes to the Report of


  the Board of Directors




                                    IDBD Directors' Report 36
                                                                             IDB Development Corporation Limited




Contents:                                                                                                     Page


Appendix A - Positions in Derivatives as at December 31, 2008                                                 38-44

Appendix B - Qualitative Report on Exposure to Market Risks and their Methods of Management                   45-56

Appendix C - Disclosure Regarding Financial Assets Available for Sale                                         57-58

Appendix D - Required details regarding material valuation in respect of the Plaza Project in Las Vegas           59

Appendix E - Required details regarding material valuation in respect of Project in Las Vegas                     60

Appendix F - Required details regarding material valuation in respect of the Mutual-fund activity                 61

Appendix G – Disclosure regarding the fair value of assets and financial liabilities that were used to
             finance acquisitions of assets                                                                   62-63

Appendix H – Disclosure regarding fair value of the investment property                                       64-68

Appendix I - Disclosure regarding the Auditors’ Fee                                                           69-71

Appendix J – Rating reports regarding the Company's debentures.                                                   72




                                                                                                IDBD Directors' Report 37
                                                                             IDB Development Corporation Limited


Appendix A(1) - Positions in Derivatives as at December 31, 2008

1.     Derivative positions of the Company
                                                                CPI/NIS
                                                Par value                     Fair value
                                        Up to one       Over one                        Over one
                                          year            year      Up to one year       year
                                         Long             Long          Long             Long
       Futures contracts –
        Not recognized as hedge
        for accounting purposes*        1,455          205             (11)             (9)
        Swaps**                           -            250               -              10
       The highest value during
       the year                         1,861         1,010              -               -
       *        Long – Hedging against an increase in the CPI; Short - The opposite.
       **       These futures contracts convert the CPI-linked flow of liabilities into nominal shekel flows
                bearing a fixed rate of interest over the lives of two series of debentures in a specified
                amount.
                                                                  Dollar/NIS
                                                Par value                            Fair value
                                                                 Over one year
                                                   Long                                   Long

       Futures contracts –
       Not recognized as hedge
       for accounting purposes:
       Cross Currency SWAP*                     475                             27
       *       These futures contracts convert the dollar flow of liabilities in variable interest into nominal
               shekel flows bearing a fixed rate of interest over the lives of two banking loans.
               These balances also constitute the highest value during the year.

2.     Derivative positions of investee companies
       a.      Discount Investment and its subsidiaries
                                                                      CPI/NIS
                                                  Par value                            Fair value
                                                              Over one          Up to one       Over one
                                       Up to one year          year               year            year
                                           Long                Long              Long             Long
       Futures contracts -
       Not recognized as hedge
       for accounting purposes            3,800                 750                (16)           (14)
                                                                      Dollar/NIS
                                                  Par value                       Fair value
                                                                  Up to one year
                                            Long               Short           Long          Short
       Futures contracts-
       Not recognized as hedge for
       accounting purposes:
       Future purchases of dollars -        562                 -                  10              -
       Put options                          487                138                  7             (1)
       Call options                         157                444                  2             (3)




                                                                                                   IDBD Directors' Report 38
                                                                              IDB Development Corporation Limited


Appendix A(1) - Positions in Derivatives as at December 31, 2008 (cont'd)

2.     Derivative positions of investee companies (cont'd)
       a.      Discount Investment and its subsidiaries (cont'd)
                                                                       Dollar/NIS
                                                  Par value                       Fair value
                                                                  Up to one year
                                            Long               Short           Long          Short
       Futures contracts-
       Recognized as hedge for
       accounting purposes:
       Future purchases of dollars -        262                  -                  12             -

                                                                 Libor/interest
                                                Par value                             Fair value
                                                                Up to one year
                                                   Long                                    Long

       Futures contracts –
       Not recognized as hedge
       for accounting purposes:
       IRS*                                    320                          (12)
       *       The aforesaid contract is designed to change the Libor interest rate from a floating rate to a
               fixed rate.
                                                                     Dollar/JPY
                                                Par value                             Fair value
                                                                Up to one year
                                                                    Long


        Not recognized for
       accounting purposes,
       Future purchases of
       dollars                                     19                                      (1)

                                                                     Euro/Dollar
                                                Par value                             Fair value
                                                                Up to one year
                                                                    Long


        Not recognized for
       accounting purposes,
       Future purchases of euro                     4                                       -

       b.      Clal Industries and its subsidiaries
                                                                       CPI/NIS
                                                  Par value                             Fair value
                                                              Over one           Up to one       Over one
                                       Up to one year          year                year            year
                                                                      Long
       Futures contracts -
       Not recognized as hedge
       for accounting purposes            1,450                 190                 (15)           (7)



                                                                                                    IDBD Directors' Report 39
                                                                          IDB Development Corporation Limited


Appendix A(1) - Positions in Derivatives as at December 31, 2008 (cont'd)

2.     Derivative positions of investee companies (cont'd)

       b.      Clal Industries and its subsidiaries (cont'd)
                                                                   Dollar/NIS
                                                  Par value                           Fair value
                                                                 Up to one year
                                           Long               Short           Long                 Short
       Futures contracts-
       Not recognized as hedge for
       accounting purposes:
       Future contract (forward)            43                 -                (1)                 -

                                                                   Euro/NIS
                                                  Par value                      Fair value
                                                                 Up to one year
                                           Long               Short           Long          Short
       Futures contracts-
       Not recognized as hedge for
       accounting purposes:                 22                 -                1                   -

       c.      Clal Tourism and its subsidiaries
                                                                   Dollar/NIS
                                                  Par value                      Fair value
                                                                 Up to one year
                                           Long               Short           Long          Short
       Futures contracts-
       Recognized as hedge for
       accounting purposes:
       Forward transactions                  4                 -                -                   -
       Options                              44                47                1                   -

       d.      Hadera Paper
                                                                   Euro/NIS
                                                  Par value                      Fair value
                                                                 Up to one year
                                           Long               Short           Long          Short
       Forward contract to buy
       Euro                                 139                -                2                   -
       Forward contract to sell
       Euro                                  -                27                 -                 (1)

                                                                   Dollar/NIS
                                                  Par value                      Fair value
                                                                 Up to one year
                                           Long               Short           Long          Short
       Forward contract to buy
       Dollars                              11                 -                1                   -
       Forward contract to sell
       Dollars                               -                 5                 -                  -




                                                                                                     IDBD Directors' Report 40
                                                                        IDB Development Corporation Limited


Appendix A(2) - Positions in Derivatives as at December 31, 2007

1.     Derivative positions of the Company as at December 31, 2007:

                                                                CPI/NIS
                                               Par value                       Fair value
                                       Up to one       Over one                          Over one
                                         year            year        Up to one year       year
                                        Long             Long            Long             Long
        For hedging purposes –
        Not recognized for
       accounting purposes(1)           1,955           535                12               9
        Swap(2)                           -             250                 -               3
       The highest value during
       2007                             1,995          1,010

       (1)     Long – Hedging against an increase in the CPI; Short - The opposite.
       (2)     The aforesaid future contract designed to convert the CPI-linked flows bearing a linked rate
               of interest into nominal flows bearing a nominal rate of interest.

2.     Derivative positions of investee companies as at December 31, 2007:

       a.      Discount Investment
                                                               CPI/NIS
                                       Par value       Fair value      Par value     Fair value
                                            Up to one year                  Over one year
                                         Long            Long            Long           Long
       Futures contracts for
       hedging purposes -
       Not recognized for
       accounting purposes               2,225             26               200             4

                                                                Dollar/NIS
                                                               Up to one year
                                               Par value                      Fair value
                                           Long          Short             Long          Short
       Derivatives for hedging
       purposes – not recognized
       for accounting purposes:
       Future purchases of dollars -       189            204                   -         (1)

       The highest value of Discount Investment's derivatives in 2007:

                                                Par value                       Par value
                                             Up to one year                  Over one year
                                           Long           Short            Long           Short
       Futures contracts on the CPI       2,225            -               200             -
       Call options                        715            540               -              -
       Put options                         581            665               -              -
       Future purchases of dollars
       Swaps on the Libor                  86              -                    -          -




                                                                                            IDBD Directors' Report 41
                                                                               IDB Development Corporation Limited


Appendix A(2) - Positions in Derivatives as at December 31, 2007 (cont'd)

2.     Derivative positions of investee companies as at December 31, 2007: (cont'd)

       a.      Discount Investment's subsidiaries (cont'd)

                                                                         CPI/NIS
                                                  Par value                               Fair value
                                                              Over one             Up to one       Over one
                                      Up to one year           year                  year            year
                                          Long                 Long                 Long             Long
       For hedging purposes -
       Not recognized for
       accounting purposes                2,180                 780                   26              (11)

                                                                 Dollar/NIS
                                                  Up to one year                                Over one year
                                           Par value          Fair value                   Par value    Fair value
                                         Long     Short     Long     Short                           Long
       For hedging purposes -
       Not recognized for
       accounting purposes:
       Call options                      352           65            -         -               -             -
       Put options                        95           18            1         -               -             -
       Future purchases of dollars:
       Not recognized for
       accounting purposes               443            -        (27)          -             117             2
       Recognized for accounting
       Purposes                           59           (1)           -         -              -               -
       CCS(1)                              -            -            -         -             392            (66)

                                                                 Libor/interest
                                               Par value                                Fair value
                                                                 Up to one year
                                                                     Long

        IRS(2)                                  400                            5
        (1)    The aforesaid contract designed to convert the dollar flow into shekel flow.
        (2)    The aforesaid future contract designed to convert the Libor interest rate from a floating rate
               to a fixed rate.

       b.      Clal Industries Ltd.

                                                                         NIS/CPI
                                                  Par value                               Fair value
                                                    Long                                     Long
                                                              Over one             Up to one       Over one
                                      Up to one year           year                  year            year
       For hedging purposes -
       Recognized for accounting
       purposes                           1,095                  -                    13                -

The highest value during 2007 of all CPI/NIS future contracts totaled par value NIS 1,212 million (LONG).



                                                                                                        IDBD Directors' Report 42
                                                                                 IDB Development Corporation Limited


Appendix A(2) - Positions in Derivatives as at December 31, 2007 (cont'd)

2.     Derivative positions of investee companies as at December 31, 2007: (cont'd)

       b.      Clal Industries Ltd. (cont'd)

                                                                        NIS/CPI
                                                    Par value                              Fair value
                                                                         Short
       For hedging purposes -
       Not recognized for
       accounting purposes                           462*                                      3
       * Constitute the highest value in 2007.

       c.      Subsidiaries (including proportional consolidation) of Clal Induatries and Investments Ltd.

                                                                        NIS/CPI
                                                                         Long
                                              Up to one year                           Up to one year
                                        Par value        Fair value               Par value      Fair value
       For hedging purposes-
       Recognized for accounting
       purposes                           1,975                   26                 100                1

                                                              NIS/Dollar
                                               Par value                    Fair value
                                             Up to one year                Up to one year
                                           Long          Short           Long          Short
       For hedging purposes-
       Not recognized for
       accounting purposes                     -                 130                  -                 3
       For hedging purposes-
       Recognized for accounting
       purposes                                62                  -                 (4)                -

                                                                        NIS/Euro
                                                    Par value                            Fair value
                                                                Over one          Up to one       Over one
                                      Up to one year             year               year            year
                                          Long                   Long              Long             Long
       For hedging purposes -
       Recognized for accounting
       purposes                            10                      -                  1                 -

                                                                       Dollar/Euro
                                                    Par value                            Fair value
                                                                Over one          Up to one       Over one
                                      Up to one year             year               year            year
                                          Long                   Long              Long             Long
       For hedging purposes -
       Recognized for accounting
       purposes                            19                      -                  1                 -




                                                                                                        IDBD Directors' Report 43
                                                                         IDB Development Corporation Limited


Appendix A(2) - Positions in Derivatives as at December 31, 2007 (cont'd)

2.     Derivative positions of investee companies as at December 31, 2007: (cont'd)

       d.      Hadera Paper

                                                                   CPI/NIS
                                                Par value                          Fair value
                                             Up to one year                     Up to one year
                                           Long           Short               Long            Short
       Futures contracts-
       Recognized as hedge for
       accounting purposes                120*                -                2               -

       * The aforesaid contract expired in January 2008. In January-February 2008, AIPM entered into
         additional future contracts in a total amount of NIS 140 million, as a hedge against the increase in
         the CPI.

                                                                   Euro/NIS
                                                 Par value                      Fair value
                                                                Up to one year
                                           Long              Short           Long          Short
       Forward contract to buy
       Euro                                115                -                2               -
       Forward contract to sell
       Euro                                 -                109               -              (1)

       e.      Netvision Ltd.

                                                              Dollar/NIS
                                               Par value                      Fair value
                                             Up to one year                Up to one year
                                          Long           Short           Long           Short
       Future contracts for hedging
       purposes - not recognized
       for accounting purposes:
       Call options                        38                 -                -               -
       Put options                         38                 -               (2)              -

       f.      Koor Industries Ltd.

                                                                CPI/NIS
                                                 Par value                    Fair value
                                                   Long                          Long
                                         Up to one       Over one      Up to one      Over one
                                           year            year          year            year
       Future contracts for hedging
       purposes – recognized for
       accounting purposes                 100               400               2              10
       The highest value during
       2007                                800               400




                                                                                                   IDBD Directors' Report 44
                                                                             IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes

The tables below show the sensitivity to various market changes of the market value of financial instruments
held by the Group.
The tables below should be perused in light of the following notes:
1. The instruments recorded are not necessarily stated in the financial statements at fair value. This mainly
     refers to liabilities of the group.
2. Changes in the fair value of instruments which are stated at fair value affect both the reported results and
     the shareholders' equity of the Company, as a result of capital reserves recorded in respect of financial
     instruments available for sale.
3. The changes in foreign currency rates have an effect on both the Company’s reported results and its
     equity, as a result of including translation differences deriving from the translation of financial
     statements of investee companies that were prepared in foreign currency.
4. The balances do not include balances from insurance activity.

a.   Sensitivity of balances as at December 31, 2008 (in NIS millions)

                                             Sensitivity test to changes in shekel interest rates
The instrument                  Gain (loss) from change                              Gain (loss) from change
                               Increase of      Increase of Fair value as at Decrease of            Decrease of
                                   10% in              5% in      December 31,            5% in          10% in
                                  interest           interest              2008         interest        interest
Long-term deposits and
 loans including current
 maturities                            (3)              (1)              407                 1                3
Other investments,
 including derivatives                 (1)              (1)               60                1                 1
Investment in marketable
 debentures                           (15)              (7)              895                 7              15
Short-term loans and
 deposits                                -                -              74                  -                -
Cash and cash equivalents              (4)              (1)           1,296                  1               4
Debentures (including
 maturities)                          694              352         (20,341)             (362)            (734)
Bank loans (including
 maturities)                            80               40         (3,676)              (41)             (85)
Other long-term liabilities
 (including maturities)                  6                3            (390)               (3)              (7)
Current financial
 liabilities                             3                1             (40)               (1)              (3)
Trade and other
 receivables                            1                -              (8)                 -               1
Total                                 761              386         (21,723)             (397)            (805)




                                                                                                   IDBD Directors' Report 45
                                                                            IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes (cont'd)
a.   Sensitivity of balances as at December 31, 2008 (in NIS millions) (cont'd)

                                            Sensitivity test to changes in dollar interest rates
The instrument                 Gain (loss) from change                               Gain (loss) from change
                              Increase of      Increase of Fair value as at Decrease of             Decrease of
                                  10% in             5% in       December 31,            5% in           10% in
                                 interest          interest              2008          interest         interest
Long-term deposits and
 loans including current
 maturities                             (5)              (2)            525                  2                5
Other investments,
including derivatives
(including maturities)                   -                -               15                 -                -
Investment in marketable
 debentures                           (20)             (10)           1,699                10               20
Short-term loans and
 deposits                         -                       -               70                -                 -
Cash and cash equivalents               (1)               -               53                -                 1
Bank loans (including
 maturities)                           18               10           (1,504)               (10)             (18)
Current financial
Liabilities                              -                -              (17)                -                -
Overdraft                                -                -               (7)                -                -
Financing lease contracts
  for service lines                      -                -             (72)           -                      -
Total                                   (8)             (2)             762                  2                8


                                           Sensitivity test to changes in pound sterling interest rates
The instrument                  Gain (loss) from change                                  Gain (loss) from change
                               Increase of         Increase of Fair value as at           Decrease of     Decrease of
                                   10% in                5% in      December 31,                5% in          10% in
                                  interest             interest              2008             interest        interest

Long term loans to
equity-basis investees
(including maturities)                (1)                      -                96                  -                1
Other investments
including derivatives                   -                     -                 48                  -                -
Cash and cash equivalents              -                      -                  6                  -                -
Total                                 (1)                     -                150                  -                1




                                                                                                   IDBD Directors' Report 46
                                                                               IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes (cont'd)
a.   Sensitivity of balances as at December 31, 2008 (in NIS millions) (cont'd)

                                                 Sensitivity test to changes in dollar exchange rate
The instrument                     Gain (loss) from change                                Gain (loss) from change
                                   Increase of      Increase of Fair value as at         Decrease of      Decrease of
                                       10% in            5% in        December 31,            5% in          10% in
                                exchange rate exchange rate                    2008 exchange rate exchange rate
Value of investment in
 foreign companies                         71               35                706              (35)               (71)
Long-term deposits and
 loans including current
  maturities                               54               27                542              (27)               (54)
Other investments not
including derivatives                       5                2                 48                (2)               (5)
Trade and other
 receivables                               38               19                384              (19)               (38)
Short term investments,
 not including derivatives                  7                3                 66                (3)               (7)
Short-term loans and
 deposits                                  22              11                221              (11)               (22)
Marketable debentures                       5               2                 45               (2)                (5)
Cash and cash equivalents                 176              88              1,756              (88)              (176)
Bank loans                               (218)           (109)            (2,178)             109                218
Long term payables                         (2)             (1)               (18)               1                  2
Trade, payables and
 current liabilities                      (47)             (23)              (469)              23                47
Current financial liabilities             (19)              (9)              (186)               9                19
Overdraft                                  (1)               -                 (7)               -                 1
Firm contractual
  engagement -
  communication line
  usage rights                             (7)              (4)               (72)               4                  7
Firm contractual
  engagement - rent                        (1)              (1)               (13)               1                  1
Total                                      83               40                825              (40)               (83)




                                                                                                       IDBD Directors' Report 47
                                                                               IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes (cont'd)
a.   Sensitivity of balances as at December 31, 2008 (in NIS millions) (cont'd)

                                                   Sensitivity test to changes in euro exchange rate
The instrument                      Gain (loss) from change                                 Gain (loss) from change
                                   Increase of        Increase of Fair value as at           Decrease of     Decrease of
                                       10% in              5% in        December 31,              5% in          10% in
                                exchange rate      exchange rate                2008       exchange rate exchange rate
Long-term deposits and
loans including current
maturities                                  8                  4                  76                  (4)              (8)
Trade and other
receivables                                18                   9               182                   (9)            (18)
Short term investments,
not including derivatives                  15                   8               151                   (8)            (15)
Short-term deposits and
 loans                                      4                  2                 37                  (2)              (4)
Cash and cash equivalents                    5                 2                 48                  (2)              (5)
Bank loans                                 (4)                (2)               (36)                  2                4
Trade and other payables                  (20)               (10)              (199)                 10               20
Current financial liabilities              (4)                (2)               (41)                  2                4
Total                                      22                 11                218                 (11)             (22)

                                               Sensitivity test to changes in pound sterling exchange rate
The instrument                      Gain (loss) from change                                  Gain (loss) from change
                                   Increase of         Increase of Fair value as at           Decrease of     Decrease of
                                       10% in                5% in      December 31,               5% in          10% in
                                exchange rate      exchange rate                 2008       exchange rate exchange rate
Value of investment in
 foreign companies                          2                   1                 21                  (1)              (2)
Long term loans to
equity-basis investees
 (including maturities)                    10                   5                 97                  (5)            (10)
Trade and other
 receivables                                2                   1                 15                  (1)              (2)
Short term loans and
 deposits                                   -                   -                 2                    -               -
Marketable debentures                       1                   -                 8                    -              (1)
Cash and cash equivalents                   2                   1                16                   (1)             (2)
Trade and other payables                    -                   -                (2)                   -               -
Current financial liabilities              (1)                  -                (3)                   -               1
Total                                      16                   8               154                   (8)            (16)

                                                  Sensitivity test to changes in Swiss franc exchange rate
The instrument                      Gain (loss) from change                                    Gain (loss) from change
                                   Increase of        Increase of Fair value as at            Decrease of        Decrease of
                                       10% in               5% in        December 31,              5% in             10% in
                                exchange rate      exchange rate                  2008     exchange rate       exchange rate
Other investments                        410                 205              4,100                (205)              (410)
Current financial liabilities            (89)                (45)              (891)                45                  89
Total                                    321                 160              3,209                (160)              (321)




                                                                                                     IDBD Directors' Report 48
                                                                                IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes (cont'd)
a.   Sensitivity of balances as at December 31, 2008 (in NIS millions) (cont'd)

                                                        Sensitivity test to changes in CPI
The instrument                    Gain (loss) from change                               Gain (loss) from change
                                  Increase of     Increase of Fair value as at        Decrease of        Decrease of
                                       2% in           1% in      December 31,             1% in              2% in
                                         CPI             CPI                 2008            CPI                CPI
Other long-term deposits
and loans                                    -                -                   5               -                   -
Long term Trade and other
receivables                                11                6                 572              (6)               (11)
Trade and other
receivables                                  -                -                   1               -                   -
Current tax assets                           -                -                   6               -                   -
Short term investments,
not including derivatives                   2                1                   78             (1)                (2)
Marketable debentures                       1                -                   38               -                (1)
Debentures (including
maturities)                               (7)              (4)               (372)               4                   7
Bank loans                               (23)             (11)             (1,149)              11                  23
Trade and other payables                    -                -                 (1)               -                   -
Current tax liabilities                     -                -                 (6)               -                   -
Current financial liabilities               -                -                 (1)               -                   -
Total                                   (16)               (8)               (829)               8                  16

                                       Sensitivity test to changes in market quotations, domestic and foreign,
                                                                of marketable securities
The instrument                    Gain (loss) from change                                Gain (loss) from change
                                  Increase of     Increase of       Fair value as at     Decrease of      Decrease of
                                      10% in           5% in         December 31,             5% in           10% in
                                   quotations      quotations                  2008       quotations       quotations

Current marketable
 portfolio                                90                45                 899              (45)              (90)
Investment in derivatives                   -                -                   1                 -                 -
Marketable portfolio -
 non current                                3                2                  30                (2)              (3)
Investment in financial
  assets available for sale              498              249                4,977             (249)             (498)
Total                                    591              296                5,907             (296)             (591)

                                                   Sensitivity test to changes in dollar exchange rate
The instrument                      Gain (loss) from change                                   Gain (loss) from change
  Dollar options for hedging       Increase of         Increase of Fair value as at            Decrease of     Decrease of
  purposes- not recognized             10% in                5% in       December 31,               5% in          10% in
  for accounting purposes       exchange rate       exchange rate                 2008       exchange rate exchange rate

Call – long                               10                   4                   2                  (2)             (2)
Put - long                                (6)                 (4)                  7                  10              26
Call – short                             (20)                 (8)                 (5)                  4               5
Put – short                                1                   1                  (1)                 (2)             (4)
Total                                    (15)                 (7)                  3                  10              25



                                                                                                      IDBD Directors' Report 49
                                                                              IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes (cont'd)
a.   Sensitivity of balances as at December 31, 2008 (in NIS millions) (cont'd)

                                                  Sensitivity test to changes in standard deviation
The instrument                    Gain (loss) from change                                  Gain (loss) from change
  Dollar options for hedging       Increase of Increase of 5% Fair value as at         Decrease of 5% Decrease of 10%
  purposes- not recognized     10% in standard     in standard       December 31,         in standard         in standard
  for accounting purposes            deviation        deviation               2008           deviation          deviation

Call – long                                  -                 -                  2                  -                   -
Put – long                                   1                1                   7                (1)                (1)
Call – short                               (1)                -                 (5)                  -                  1
Put – short                                  -                -                 (1)                  -                  -
Total                                        -                1                   3                (1)                   -

                                                          Sensitivity test to changes in CPI
The instrument                     Gain (loss) from change          Fair value as at       Gain (loss) from change
                                   Increase of       Increase of      December 31,        Decrease of       Decrease of
CPI forward                        2% in CPI         1% in CPI                  2008       1% in CPI         2% in CPI

Not recognized as
accounting hedge                           147               74               (70)             (74)             (147)

                                                  Sensitivity test to changes in dollar exchange rate
The instrument                     Gain (loss) from change                                  Gain (loss) from change
                                    Increase of      Increase of Fair value as at          Decrease of       Decrease of
                                        10% in            5% in        December 31,             5% in            10% in
Dollar forward                   exchange rate exchange rate                    2008 exchange rate         exchange rate
Recognized as accounting
hedge                                       27               14                 12             (14)               (27)
Not recognized as
accounting hedge                            61               31                  9             (31)               (61)
Total                                       88               45                 21             (45)               (88)

                                                  Sensitivity test to changes in Euro exchange rate
The instrument                     Gain (loss) from change                                Gain (loss) from change
                                    Increase of      Increase of Fair value as at        Decrease of       Decrease of
                                        10% in            5% in        December 31,           5% in            10% in
Euro forward                     exchange rate exchange rate                    2008 exchange rate       exchange rate
Recognized as accounting
hedge                                       12                7                  1              (4)                (9)
Not recognized as
accounting hedge                             5                3                  -              (1)                (3)
Total                                       17               10                  1              (5)               (12)




                                                                                                   IDBD Directors' Report 50
                                                                                   IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes (cont'd)
a.   Sensitivity of balances as at December 31, 2008 (in NIS millions) (cont'd)

                                            Sensitivity test to changes in dollar exchange rate
The instrument               Gain (loss) from change                                   Gain (loss) from change
                            Increase of         Increase of      Fair value as at     Decrease of       Decrease of
                                10% in               5% in        December 31,             5% in            10% in
Cross currency swap      exchange rate       exchange rate                  2008 exchange rate        exchange rate
Not recognized as
accounting hedge                      48                  24                  27              (24)                (48)

                                              Sensitivity test to changes in shekel interest rates
The instrument                 Gain (loss) from change                                   Gain (loss) from change
                              Increase of        Increase of      Fair value as at      Decrease of       Decrease of
                                  10% in               5% in        December 31,              5% in           10% in
Interest rate swap               Interest            Interest                2008          Interest          Interest
Not recognized as
accounting hedge                        2                   -                (2)                 -                 (2)

b.   Sensitivity of balances as at December 31, 2007 (in NIS millions)

                                                 Sensitivity test to changes in shekel interest rates
The instrument                      Gain (loss) from change                              Gain (loss) from change
                                   Increase of      Increase of Fair value as at Decrease of            Decrease of
                                       10% in              5% in      December 31,            5% in          10% in
                                      interest           interest              2007         interest        interest
Long-term deposits and
 loans including current
 maturities                                 (7)             (5)              355                 5                7
Investment in marketable
 debentures                                 (7)             (3)              548                 3                7
Trade and other
 receivables                                 2                  1             14               (1)              (2)
Short term loans and
 deposits                                     -                  -           121                 -                -
Cash and cash equivalents                     -                  -           945                 -                -
Debentures (including
 maturities)                                505            260         (23,065)             (235)            (488)
Convertible debentures                        1              -            (113)                 -              (1)
Bank loans (including
 maturities)                                 49                 23      (2,722)              (22)             (49)
Other long-term liabilities
 (including maturities)                       -                  -          (52)                 -                -
Current financial
 Liabilities                                  7              4             (60)               (4)              (7)
Trade and other payables                      -              -              (9)                 -                -
Total                                       550            280         (24,038)             (254)            (533)




                                                                                                       IDBD Directors' Report 51
                                                                            IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes (cont'd)
b.   Sensitivity of balances as at December 31, 2007 (in NIS millions) (cont'd)

                                            Sensitivity test to changes in dollar interest rates
The instrument                 Gain (loss) from change                               Gain (loss) from change
                              Increase of      Increase of Fair value as at Decrease of             Decrease of
                                  10% in             5% in       December 31,            5% in           10% in
                                 interest          interest              2007          interest         interest
Long-term deposits and
 loans including current
 maturities                           (2)               (1)             249                  1                2
Other investments,
including derivatives
(including maturities)               (27)             (13)            1,560                11               23
Investment in marketable
 debentures                              -                -               21                 -                -
Short-term loans and
 deposits                               -                 -             287                  -                -
Cash and cash equivalents               1                 1             318                (1)              (1)
Bank loans (including
 maturities)                            2                 1           (971)                (2)              (6)
Other long term liabilities
 (including maturities)                 1                 -           (150)                  -              (1)
Current financial
 liabilities                            -                -            (127)                  -               -
Overdraft                               2                1             (15)                  -               -
Total                                (23)             (11)            1,172                  9              17


                                           Sensitivity test to changes in pound sterling interest rates
The instrument                  Gain (loss) from change                                  Gain (loss) from change
                               Increase of         Increase of Fair value as at           Decrease of     Decrease of
                                   10% in                5% in      December 31,                5% in          10% in
                                  interest             interest              2007             interest        interest

Long term loans to
equity-basis investees
(including maturities)                (1)                     -                151                  -                1
Other investments
including derivatives                   -                     -                 11                  -                -
Total                                 (1)                     -                162                  -                1




                                                                                                   IDBD Directors' Report 52
                                                                               IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes (cont'd)
b.   Sensitivity of balances as at December 31, 2007 (in NIS millions) (cont'd)

                                                 Sensitivity test to changes in dollar exchange rate
The instrument                     Gain (loss) from change                                Gain (loss) from change
                                   Increase of      Increase of Fair value as at         Decrease of      Decrease of
                                       10% in            5% in        December 31,            5% in          10% in
                                exchange rate exchange rate                    2007 exchange rate exchange rate
Value of investment in
foreign companies                          42               21                419             (21)             (42)
Long-term deposits and
loans including current
maturities                                 29               15                293             (15)             (29)
Other investments not
including derivatives                       1                 -                 9                 -              (1)
Long term trade and other
receivables                                  -                -                 2                 -                -
Trade and other
receivables                                45               22                449             (22)             (45)
Short term investments,
not including derivatives                  17                8                167              (8)             (17)
Short-term loans and
deposits                                  57                29               573             (29)              (57)
Marketable debentures                       3                 2               30              (2)                (3)
Cash and cash equivalents                398               199             3,976            (199)             (398)
Bank loans                             (157)              (79)           (1,574)               79               157
Long term payables                        (2)               (1)             (19)                1                  2
Trade, payables and
current liabilities                      (35)             (18)             (353)               18                35
Current financial liabilities            (95)             (48)             (951)               48                95
Total                                    303              150              3,021            (150)             (303)

                                                   Sensitivity test to changes in euro exchange rate
The instrument                      Gain (loss) from change                                 Gain (loss) from change
                                   Increase of        Increase of Fair value as at           Decrease of     Decrease of
                                       10% in              5% in        December 31,              5% in          10% in
                                exchange rate      exchange rate                2007       exchange rate exchange rate

Long-term deposits and
loans including current
maturities                                 23                 12                232                (12)             (23)
Trade and other
receivables                                 7                     4              71                   (4)               (7)
Short-term deposits and
 loans                                      1                   -                 7                     -            (1)
Cash and cash equivalents                   5                   3                50                   (3)            (5)
Bank loans                                (2)                 (1)              (21)                     1              2
Trade and other payables                 (14)                 (7)             (136)                     7             14
Current financial liabilities             (4)                 (2)              (41)                     2              4
Total                                      16                   9               162                   (9)           (16)




                                                                                                      IDBD Directors' Report 53
                                                                               IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes (cont'd)
b.   Sensitivity of balances as at December 31, 2007 (in NIS millions) (cont'd)

                                               Sensitivity test to changes in pound sterling exchange rate
The instrument                      Gain (loss) from change                                  Gain (loss) from change
                                   Increase of         Increase of Fair value as at           Decrease of     Decrease of
                                       10% in                5% in      December 31,               5% in          10% in
                                exchange rate      exchange rate                 2007       exchange rate exchange rate
Value of investment in
 foreign companies                          8                    4               81                  (4)             (8)
Long term loans to
equity-basis investees
 (including maturities)                    15                    8              151                  (8)           (15)
Trade and other
 receivables                                1                  -                  9                  -              (1)
Marketable debentures                       3                  2                 33                (2)              (3)
Cash and cash equivalents                   -                  -                  3                  -                -
Current financial liabilities             (1)                  -                (9)                  -                1
Total                                     26                  14               268                (14)             (26)


                                                        Sensitivity test to changes in CPI
The instrument                    Gain (loss) from change                               Gain (loss) from change
                                  Increase of     Increase of Fair value as at        Decrease of        Decrease of
                                       2% in           1% in      December 31,             1% in              2% in
                                         CPI             CPI                 2007            CPI                CPI
Other long-term deposits
and loans                                    -               -                  7                -                   -
Long term Trade and other
receivables                                10                5               515               (5)               (10)
Trade and other
receivables                                 1                -                 40                -                (1)
Short term investments,
not including derivatives                   2                1               124               (1)                (2)
Marketable debentures                       2                1               119               (1)                (2)
Debentures (including
maturities)                               (9)              (4)             (445)                 4                  9
Convertible debentures                   (12)              (6)             (609)                 6                 12
Bank loans                                (8)              (4)             (392)                 4                  8
Long term payables                          -                -               (1)                 -                  -
Current financial liabilities             (2)              (1)              (82)                 1                  2
Firm contractual
 engagement - rent                          -                -              (13)                 -                  -
Total                                   (16)               (8)             (737)                 8                 16




                                                                                                     IDBD Directors' Report 54
                                                                               IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes (cont'd)
b.   Sensitivity of balances as at December 31, 2007 (in NIS millions) (cont'd)

                                      Sensitivity test to changes in market quotations, domestic and foreign,
                                                               of marketable securities
The instrument                   Gain (loss) from change                                Gain (loss) from change
                                 Increase of     Increase of       Fair value as at     Decrease of      Decrease of
                                     10% in           5% in         December 31,             5% in           10% in
                                  quotations      quotations                  2007       quotations       quotations

Current marketable
 portfolio                              177                89               1,774              (89)             (177)
Investment in derivatives                  -                -                   2                 -                 -
Investment in convertible
 debentures                               69               34                 688              (34)              (69)
Liabilities in respect of
  convertible debentures                 (3)              (4)                (73)                 4                 3
Total                                   243              119                2,391             (119)             (243)

                                                  Sensitivity test to changes in dollar exchange rate
The instrument                     Gain (loss) from change                                   Gain (loss) from change
  Dollar options for hedging      Increase of         Increase of Fair value as at            Decrease of     Decrease of
  purposes- not recognized            10% in                5% in       December 31,               5% in          10% in
  for accounting purposes      exchange rate       exchange rate                 2007       exchange rate exchange rate

Call – long                               11                   3                  1                (1)              (1)
Put - long                               (3)                 (3)                  5                 9                22
Call – short                            (17)                 (5)                 (3)               (2)              (4)
Put – short                                -                   -                   -                 -              (1)
Total                                    (9)                 (5)                   3                 6               16

                                                          Sensitivity test to changes in CPI
The instrument                     Gain (loss) from change          Fair value as at       Gain (loss) from change
                                   Increase of       Increase of      December 31,        Decrease of       Decrease of
CPI forward                        2% in CPI         1% in CPI                  2007       1% in CPI         2% in CPI

Not recognized as
accounting hedge                           129               64                 113            (64)              (129)

                                                 Sensitivity test to changes in dollar exchange rate
The instrument                    Gain (loss) from change                                  Gain (loss) from change
                                   Increase of      Increase of Fair value as at          Decrease of       Decrease of
                                       10% in            5% in        December 31,             5% in            10% in
Dollar forward                  exchange rate exchange rate                    2007 exchange rate         exchange rate
Recognized as accounting
hedge                                       42               21                 (27)           (21)                (42)
Not recognized as
accounting hedge                             8                4                  (2)            (4)                 (8)
Total                                       50               25                 (29)           (25)                (50)




                                                                                                    IDBD Directors' Report 55
                                                                               IDB Development Corporation Limited


Appendix B – Qualitative Report on Exposure to Market Risks and their Methods of Management
Sensitivity tests to market changes (cont'd)
b.   Sensitivity of balances as at December 31, 2007 (in NIS millions) (cont'd)

                                               Sensitivity test to changes in Euro exchange rate
The instrument                  Gain (loss) from change                                Gain (loss) from change
                                 Increase of      Increase of Fair value as at        Decrease of       Decrease of
                                     10% in            5% in        December 31,           5% in            10% in
Euro forward                  exchange rate exchange rate                    2007 exchange rate       exchange rate

Not recognized as
accounting hedge                            6                4                   1              (8)                 (4)


                                          Sensitivity test to changes in dollar exchange rate
The instrument             Gain (loss) from change                                   Gain (loss) from change
                          Increase of         Increase of      Fair value as at     Decrease of       Decrease of
                              10% in               5% in        December 31,             5% in            10% in
Cross currency swap    exchange rate       exchange rate                  2007 exchange rate        exchange rate
Not recognized as
accounting hedge                  33                  16                (66)             (16)               (33)

                                          Sensitivity test to changes in shekel interest rates
The instrument             Gain (loss) from change                                   Gain (loss) from change
                          Increase of        Increase of      Fair value as at      Decrease of       Decrease of
                              10% in               5% in        December 31,              5% in           10% in
Interest rate swap           Interest            Interest                2007          Interest          Interest
Not recognized as
accounting hedge                  82                  41                  5              (41)               (82)




                                                                                                  IDBD Directors' Report 56
                                                                          IDB Development Corporation Limited


Appendix C – Disclosure Regarding Financial Assets Available for Sale

The following table shows a summary of the decline in value in respect of financial instruments available for
sale, which was allocated to shareholders' equity according to the rate of decline in fair value of the asset
relative to its original cost, at the date of the financial statements, and during the total time in which the fair
value of the asset was lower than its cost (disregarding the rate of decline after the balance-sheet date), in
millions of NIS.

Capital instruments:
              Up to          6-9        9-12    Over
              6 months       months      months 12 months         Total
Up to 20%     *(124)          (2)       -       -                 (126)


Debt instruments:
             Up to           6-9        9-12      Over
             6 months        months      months   12 months       Total
Up to 20%    (34)            (15)       (1)       (5)             (55)
20%-40%      (45)             (13)      (6)       (9)             (73)
Over 40%     (38)             (26)      (10)      (6)             (80)


Total capital and debt instruments:
                 Up to       6-9       9-12       Over
                 6 months months months           12 months       Total
Up to 20%        (158)       (17)      (1)        (5)             (181)
 20%-40%         (45)         (13)     (6)        (9)             (73)
Over 40%         (38)         (26)     (10)       (6)             (80)
* Most of it in respect of Credit Suisse.
The following reasons and considerations underpin the allocation of declines in the fair value of financial
assets directly to shareholders' equity, rather than to profit and loss:
In examining decline in value of financial assets available for sale that are capital instruments, the gap
between the fair value of the asset and its original cost was also examined, taking into account the standard
deviation of the rate of the instrument; the time period in which the fair value of the asset was lower than its
original cost; and changes in the technological, economic, or legal environment, or in the market
environment in which the company that issued the instrument operates.
In addition to the aforesaid, decline in value of tradable capital instruments at a rate of 20% or more at the
date of the financial statements, or extending over more than 9 months (even if at a lower rate), is allocated
to profit and loss.

In examining declines in value of financial assets available for sale that are debt instruments, the following
factors are taken into consideration:

1.    Intention and financial ability to keep the bonds to maturity; and
2.    That as far as is known, the decline in value does not meet the criteria described in IAS 39, Section
      59(F), listed below:
      a)     Significant financial difficulties of the issuer or of the debtor;
      b)      Breach of contract, such as default or arrears on interest or principal payments;
      c)     For economic or legal reasons related to financial difficulties of the borrower, the lender grants
            eased terms to the borrower which would not be considered by the lender under other
            circumstances;
      d)    It becomes expected that the borrower will enter bankruptcy proceedings or other financial
             restructuring;



                                                                                             IDBD Directors' Report 57
                                                                       IDB Development Corporation Limited


Appendix C – Disclosure Regarding Financial Assets Available for Sale (cont'd)

     e)    There is no active market for the financial asset, due to financial difficulties; or

     f)   There is a measurable decline in the estimated future cash flows from a group of financial assets
          since the first-time recognition of these assets, although it is not yet possible to assign the decline
          to individual financial assets within the group, including:

                     -   Negative changes in the payment status of borrowers in the group; or

                     -   National or local economic conditions correlated with failures with regard to
                         assets in the group (e.g. an increase in the unemployment rate in the geographical
                         region of the borrowers, a decrease in real-estate prices with respect to mortgages
                         in a relevant area, a decline in oil prices with respect to assets of a loan to oil
                         producers, or negative changes in conditions in the industry that affect borrowers
                         in the group).

          In September till December 2008, prices of corporate bonds in Israel dropped sharply, including
          bonds held by the group. The group believes that under the unusual conditions that arose in the
          market, due to an international financial crisis of exceptional extent and a sharp change in the
          investing public's risk appetite, material declines in prices of specific debt instruments classified
          as available for sale do not in themselves necessarily constitute evidence of a decline in value of
          the debt instruments requiring allocation of losses to the statement of profit and loss.
          This assessment also based on the correction recorded in the debentures prices in the first
          months of 2009.

           The group routinely conducts procedures aimed at identifying problematic and sensitive debts,
           performed by the units engaged in investment management. The Risk Management Area
           performs control over this process, including with the assistance of automated models. The
           findings of these processes are discussed individually by the management teams within the
           group.

           The group conducted an individual examination of financial instruments available for sale that
           are debt instruments in which significant declines in value were recorded as of the date of the
           report, in order to assess, on a specific basis, whether circumstances existed requiring such
           declines in value to be allocated to profit and loss. The individual examination included
           reference to the full extent of information available with regard to the debt, including
           information regarding the external rating of the debtor and/or the debt, the external rating
           outlook, ratings based on models, sectoral risk, the current settlement status of the debt,
           collateral, evaluation of sources for expected repayments, and an evaluation of the debtor's
           business activity. In addition, changes in the price of the asset up to the end of January 2009
           were taken into consideration. In debts where, based on these examinations, the group estimates
           that there is a high probability of settlement of the debt on time, declines in value were allocated
           directly to equity.




                                                                                           IDBD Directors' Report 58
                                                                          IDB Development Corporation Limited


Appendix D – Required details Regarding material valuation of the company in accordance
to Section 8B of the Securities Regulations (Periodic and Immediate Reports) – 1970
in respect of the Plaza project in Las Vegas

The Company attached to these financial statements (by reference to the financial statements of Property &
Buildings) valuation in respect of the Plaza project in Las Vegas of the Company and of Property &
Building, which were published in the MAGNA website of the Israeli Securities Authority on March 22,
2009, in reference number 2009-01-063468. See also Note 3.K.2.(d)(1).


Presented hereunder are the principal data included in these valuations:
      1.     Identity of valuation object – Plaza project in Las Vegas.
      2.     Date of valuation – as at December 31, 2008.
      3.     Value of valuation object on the books of the Company and Property & Building as at
             December 31, 2008 – US$ 734.4 million.
      4.     The value of the object according to the valuation – US$ 1,250 million (the Company and
             Property & Building’s share – US$ 625 million**), so accordingly the asset was written-down
             to the amount of US$ 625 million (about NIS 2,376 million as at December 31, 2008). As a
             result of this, the Company and Property & Building recorded an impairment loss of NIS 416
             million in the statement of income for 2008. (The share of the Company in the impairment loss
             is NIS 334 million).
      5.     Identity and qualification of the appraiser – GVA Marquette Advisors (see pages number 14-15
             of the valuation for more details). There is no dependence between the appraiser and the
             companies that requested the valuation.
      6.     The valuation model that was used by the appraiser – Discounted Cash Flows (DCF).
      7.     The assumptions on which the valuation was based:
             a.    Annual discount rates (before tax)
                    In respect of net* revenues from hotel/casino/conventions/commerce       About 15.6%
                    In respect of net revenues from sale of apartments                       About 26%
            * After deduction of the construction costs.

             b.    Growth rate – about 5%.

             ** The Company and Property & Building hold the property in equal parts.




                                                                                          IDBD Directors' Report 59
                                                                         IDB Development Corporation Limited


Appendix E – Required details Regarding material valuation of the company in accordance
to Section 8B of the Securities Regulations (Periodic and Immediate Reports) – 1970
in respect of the commercial and business project in Las Vegas

The Company attached to these financial statements (by reference to the financial statements of Property &
Buildings) valuations in respect of the commercial and business project in Las Vegas, held by the Company
and by Property & Building in equal parts. These valuations were published in the MAGNA website of the
Israeli Securities Authority on March 22, 2009, in four completing reports in references number 2009-01-
063522, 2009-01-063528, 2009-01-063534 and 2009-01-0563543.
Presented hereunder are details of the valuation that was used by the Company and by Property & Building
to determine the value of the commercial and business project in Las Vegas following which the Company
and Property & Building recorded an impairment loss of NIS 153 million (the share of the Company in the
impairment loss is NIS 125 million). See also Note 3.K.2(d)(3) to the financial statements


Presented hereunder are the principal data included in the valuation:
      1.     Identity of valuation object – Tivoli project in Las Vegas.
      2.     Date of valuation – as at December 31, 2008.
      3.     Value of valuation object on the books of the affiliated company Great Wash Park LLC as at
             December 31, 2008 – US$ 231 million.
      4.     The value of the object according to the valuation – US$ 200 million. As a result of the
             valuation the asset was written-down in the financial statements of the affiliated company as at
             December 31, 2008. Accordingly, the impairment loss of NIS 125 million that was recorded on
             the books of the Company (which includes the share of the Company in the impairment loss
             performed by Property & Building) was included in the Company’s share in the earnings of
             investee companies in the statement of income for 2008.
      5.     Identity and qualification of the appraiser – GVA Marquette Advisors (for more details see
             pages 21-22 of the Hebrew version of the valuation). There is no dependence between the
             appraiser and the companies that requested the valuation.
      6.     The valuation model that was used by the appraiser – Discounted Cash Flows (DCF).
      7.     The assumptions on which the valuation was based:
             a.    Annual discount rates (before tax)
                    In respect of net* revenues from commerce                                    9%
                    In respect of net revenues from sale of apartments                          20-25%
            * After deduction of the construction costs.

             b.    Growth rate – zero.




                                                                                         IDBD Directors' Report 60
                                                                         IDB Development Corporation Limited


Appendix F – Required details Regarding material valuation of the company in accordance
to Section 8B of the Securities Regulations (Periodic and Immediate Reports) – 1970
in respect of the mutual-fund activity of Clal Finance Batucha Investment Management Ltd.


The following are details regarding the valuation used by Clal Finance in order to evaluate the activity of the
mutual funds, in which Clal Finance recorded a write-down in the amount of NIS 103 million in the fourth
quarter of 2008 and a write-down in the amount of NIS 80 million in the third quarter of 2008 (the
Company's share of the aforesaid write-downs is NIS 83 million).

Presented hereunder are the principal data included in this valuation:
      1.     Identity of valuation object – mutual-fund activity of Clal Finance.
      2.     Date of valuation – as at December 31, 2008.
      3.     Value of valuation object on the books of Clal Finance as at December 31, 2008 –
            $ 409 million.
      4.     The value of the object according to the valuation –$ 306 million. Following the valuation Clal
             Finance recorded a write-down in the financial statements for 2008 regarding the activity value.
             The Company’s share of the aforesaid write-downs is NIS 83 million

      5.    Identity of the appraiser – Brightman Almagor Zohar Deloitte Financial Services and Consulting
            (1986) Ltd., under the ownership of Brightman Almagor Zohar Accounting Partnership. There is
            no dependence between the appraiser and the companies that requested the valuation.
      6.     The valuation model that was used by the appraiser – Discounted Cash Flows (DCF).
      7.     The assumptions on which the valuation was based:
             - Discount rate before tax 16.2%.
             - Long term growth rate 3%.




                                                                                         IDBD Directors' Report 61
                                                                                   IDB Development Corporation Limited


Appendix G - Disclosure regarding the fair value of assets and financial liabilities that were used to
finance acquisition of assets

Disclosure regarding the fair value of assets and financial liabilities that were used to finance acquisition of
the assets, and which are presented according to different measurement bases:

                                                                                               December 31
                                                                                                2008           2007
                                                                                               NIS millions

Fair value and carrying amount

Investment property
Value on date of initial recognition                                                             368            368
Cumulative change in fair value that was carried to statement of income                         (29)              -
Cumulative change carried to translation reserve                                                (36)           (33)
Total carrying amount                                                                            303            335
Total fair value                                                                                 303            335

Shares of Credit Suisse that are pledged in favor of the credit provider
Value on the date of initial recognition                                                      2,668                -
Carried directly to equity under reserve for available-for-sale financial assets              (151)                -
Total carrying amount                                                                         2,517                -
Total fair value                                                                              2,517                -

Financial liabilities that were used to finance acquisition of the assets

Investment property
Valued on the date of initial recognition                                                     (320)           (320)
Carried to statement of income                                                                    -               -
Carried to translation reserve                                                                   31              28
Total carrying amount                                                                         (289)           (292)
Total fair value                                                                              (258)           (292)

Shares of Credit Suisse
Valued on the date of initial recognition                                                     (811)                -
Carried to statement of income                                                                 (77)                -
Total carrying amount                                                                         (888)                -
Total fair value                                                                              (888)                -

Changes in fair value and changes in carrying amount

Investment property
Changes in fair value that were carried to statement of income                                  (29)              -
Carried to equity under translation reserve                                                      (3 )          (30)
Total carried to statement of income and equity                                                 (32)           (30)
Total changes in fair value                                                                     (32)           (30)




                                                                                                    IDBD Directors' Report 62
                                                                            IDB Development Corporation Limited


Appendix G - Disclosure regarding the fair value of assets and financial liabilities that were used to
finance acquisition of assets (cont'd)


                                                                                        December 31
                                                                                         2008           2007
                                                                                        NIS millions



Shares of Credit Suisse
Carried directly to other items of equity                                              (151)                -
Total carried to the statement of income and equity                                    (151)                -
Total changes in fair value                                                            (151)                -

Financial liabilities that were used to finance acquisition of the assets
Investment property
Carried to statement of income                                                             -               -
Carried directly to equity                                                                 3              26
Total carried to statement of income and equity                                            3              26
Total changes in fair value                                                               34               -

Shares of Credit Suisse
Carried to statement of income                                                           (77)               -
Carried directly to equity                                                                  -               -
Total carried to statement of income and equity                                          (77)               -
Total changes in fair value                                                              (77)               -




                                                                                             IDBD Directors' Report 63
                                                                      IDB Development Corporation Limited


Appendix H - Disclosure regarding fair value of the investment property

Disclosure regarding fair value of the investment property of the Company.
In order to implement the guideline, the Company considered it appropriate to provide disclosure regarding
the following assets:
A.      Gav-Yam Center Herzliya Pituach
Gav-Yam (a subsidiary of Property & Building) owns the rights in Gav-Yam Center in Herzliya Pituach, an
area located in the industrial zone of Herzliya Pituach alongside the coast highway. The Center is located on
21 dunams of land and includes six buildings comprised of 52 thousand square meters aboveground and an
underground parking facility of 61 thousand square meters, which is intended mainly for the use of the
Center’s residents and their guests.
Gav-Yam owns leasehold rights in most of the Center, other than the sixth building in which it has
ownership rights (of which about 1,600 square meters is owned by partners).
The Center in mainly designated for know-how intensive industries and for offices, other than an
aboveground area of 5,700 square meters which is intended for commerce and is located for the most part
on the ground levels of the various buildings.
The buildings were constructed over a period of 15 years, with the construction of the first building ending
in 1994 and the construction of the last building being completed in September 2008.
The fair value was assessed in respect of each separate building, and each building in itself does not meet
the definition of a “material asset”, as stated in Section 1 of the guideline. Nevertheless, the management of
Gav-Yam believes that because of the geographical proximity, the characteristics of the buildings, their
designation and the quality of the lessees, they should be considered having “similar characteristics”, and
therefore be reported as one asset just for the purpose of the guideline.
Most of building 5 of the Center was occupied upon its completion, during the first quarter of 2008, as was
the underground parking facility that was constructed beneath it. The rest of the area in building 5 is
expected to be occupied during 2009. The construction of building 6 was completed in September 2008 and
it too was occupied.
Buildings 5 and 6 that were completed and occupied in 2008, as aforementioned, were assessed by an
independent appraiser on the date they were occupied; the rest of the Center was assessed for the first time
by an appraiser at the end of the third quarter of 2007, and two other times at the end of the second quarter
of 2008 and at the end of 2008.
As at December 31, 2008 the fair value of the entire Center, including the underground parking facility, is
estimated to be NIS 663 million.
Presented hereunder are the details required in Paragraph G of the guideline:
1.      The main reasons for changes in the fair value of the asset:
-       The increase in fair value from March 31, 2008 to September 30, 3008 derives as aforementioned
        from completing the construction of buildings 5 and 6 and the parking facility, and the occupation
        of the buildings as aforementioned.
-       The increase in fair value as at June 30, 2008 derived from the valuation made in respect of all the
        assets of Property & Building. This valuation was made as a result of the significant change in cash
        flows from its assets because of the assets being leased under CPI-linked lease contracts and as a
        result of the increase in lease payments in real terms.
-       The decrease in fair value as at December 31, 2008 derived from the valuation that was made in
        respect of all the assets of Property & Building. In that valuation, the appraiser raised the discount
        rates, and also revalued the lease payments at the various sites of Property & Building that it
        anticipates to collect upon the end of the existing lease agreements, as a result of anticipations for
        future price reductions.
2.      The principal assumptions on the basis of which the representative NOI was calculated:
        The representative NOI includes anticipated revenues from the lease of available areas, whereas net
        revenues from management fees were not included in the representative NOI, on the assumption
        that this activity may be executed differently by various entrepreneurs and is separate from the
        value of the asset itself.




                                                                                         IDBD Directors' Report 64
                                                                        IDB Development Corporation Limited


Appendix H - Disclosure regarding fair value of the investment property (cont'd)
A.      Gav-Yam Center Herzliya Pituach (cont'd)
3.       The representative rate of return is different from the actual rate of return, because of the difference
         between the representative NOI and the actual NOI, see explanation under item 2 above.
B.      MTM Park
Gav-Yam is the controlling shareholder of MTM - Scientific Industries Center Haifa Ltd. (hereinafter –
MTM), which owns the rights in a park spread over an area of 224 dunams that is located in the southern
approaches to Haifa.
The MTM Park includes 22 buildings comprised of an aboveground area of 135 thousand square meters and
59 thousand square meters of parking facilities. The park also includes a number of buildings that are owned
by the park’s residents.
MTM owns leasehold rights to the real estate on which the park was constructed, mainly from the Israel
Lands Administration and the rest from the Haifa municipality.
The first buildings of the park were constructed in the 1970s, and since then MTM has continued to
construct new buildings in the park.
The fair value was assessed in respect of each separate building, and each building in itself does not meet
the definition of a “material asset”, as stated in Section 1 of the guideline. Nevertheless, the management of
MTM believes that because of the geographical proximity in a closed park, the characteristics of the
buildings, their designation and the quality of the lessees, they should be considered having “similar
characteristics”, and therefore be reported as one asset just for the purpose of the guideline.
The construction of MTM Tower 3 was completed in the third quarter of 2007 and was occupied gradually
as from the end of 2007, in 2008 and even at the beginning of 2009. In addition, the construction of the
MTM parking facility was completed at the beginning of the third quarter of 2008.
The new buildings mentioned above were assessed by an external appraiser on the date they were occupied;
the rest of the buildings in the park were assessed for the first time by an external appraiser at the end of the
third quarter of 2007, and two other times at the end of the second quarter of 2008 and at the end of 2008.
As at December 31, 208 the fair value of the entire park is estimated to be NIS 1,014 million.
Presented hereunder are the details required in Paragraph G of the guideline:
1.      The main reasons for changes in the fair value of the asset:
-        The increase in fair value as at June 30, 2008 derives as aforementioned from the completion and
         operation of the parking facility.
-        The increase in fair value as at June 30, 2008 derived from the valuation made in respect of all the
         assets of Property & Building. This valuation was made as a result of the significant change in cash
         flows from its assets because of the assets being leased under CPI-linked lease contracts and as a
         result of the increase in lease payments in real terms.
-        The decrease in fair value as at December 31, 2008 derived from the valuation that was made in
         respect of all the assets of Property & Building. In that valuation, the appraiser raised the discount
         rates, and also revalued the lease payments at the various sites of Property & Building that it
         anticipates to collect upon the end of the existing lease agreements, as a result of anticipations for
         future price reductions.
2.      The principal assumptions on the basis of which the representative NOI was calculated:
         The representative NOI includes anticipated revenues from the lease of available areas.




                                                                                            IDBD Directors' Report 65
                                                                                      IDB Development Corporation Limited


         Appendix H - Disclosure regarding fair value of the investment property (cont'd)

         Table 1 – General Information on Investment Property


                            Reference
                            to section    The area
                            in the        of the asset                                                              Fair value
                The         description   (in square                                                                as at the
 Name of        entity's    of the        meters)                       Contractual                    Cost of      date of the
 asset and      share in    entity's      and its        End of         rights in                      the          financial
 its location   the asset   business      designation    construction   the asset       status         asset (1)    statements

 Gav-Yam        100% (2)    (d)12.10.2    About 113      2008           Leasehold,      No             About        About
 Center                                   square                        other than      buildings      NIS 358      NIS 663
 Herzliya                                 meters,                       ownership       under          million      million
                                          principal                     right to        construction
                                          designation:                  building 6
                                          know-how
                                          intensive
                                          industries




 MTM            100% (3)    (d)12.10.2    About 194      2008           Leasehold       No             About        About
 Park                                     square                                        buildings      NIS 606      NIS 1,014
 Haifa                                    meters,                                       under          million      million
                                          principal                                     construction
                                          designation:
                                          know-how
                                          intensive
                                          industries



(1)      The cost of the asset: The amount in this column reflects the depreciated cost of assets constructed over the
         years by the Company as at December 31, 2006 (the date of adopting for the first time Accounting Standard
         16 – Investment Property and its presentation at fair value), with the addition of the actual cost of assets that
         were constructed after that date and until December 31, 2008.
(2)      Other than 1,600 square meters in building 6 of the Center that are owned by partners.
(3)      MTM – Scientific Industries Center Haifa Ltd. holds 100% of the said asset and Gav-Yam holds 50.1% of
         MTM.




                                                                                                        IDBD Directors' Report 66
                                                                                                                                                                                                  IDB Development Corporation Limited


         Appendix H - Disclosure regarding fair value of the investment property (cont'd)
         Table 2 – Quantitative Information on Investment Property (Valued by External Appraiser)


                                 Fair value – in NIS thousands                                       Occupation rate – in percentage                         Actual NOI – in NIS thousands                      Actual rate of return – in percentage*
      Name of
                   31.12         30.9              30.6            31.3           31.12         31.12      30.9       30.6      31.3      31.12    31.12        30.9      30.6       31.3       31.12     31.12        30.9       30.6     31.3          31.12
      asset
                   2008          2008              2008            2008           2007          2008       2008       2008      2008      2007     2008         2008      2008       2008       2007      2008         2008       2008     2008          2007

      Valued by independent appraiser

      Gav-Yam
      Center       663,027       667,657           613,202         575,356        451,490       98         98         99        98        99       55,085       54,027    49,169     46,210     39,409    8.3          8.1        8.0      8.0           8.7
      Herzliya

      MTM
      Park         1,014,041     1,017,750         976,628         953,785        953,785       99         99         99        99        99       88,556       87,737    82,822     81,536     80,119    8.7          8.6        8.5      8.6           8.4
      Haifa




                                                                                             Representative NOI – in NIS thousands                                                                       Representative rate of return – in percentage*
      Name of                  31.12. 08                                  30.9.08                               30.6.08                           31.3.08                           31.12.07
      asset
                   Based on                               Based on                               Based on                              Based on                          Based on                        31.12.08 30.9.08       30.6.08    31.3.08       31.12.07
                   contract    Forecast    Total          contract        Forecast   Total       contract       Forecast     Total     contract   Forecast    Total      contract    Forecast   Total

      Valued by independent appraiser

      Gav-Yam
      Center       54,222      1,930       56,152         53,142          1,750      54,892      54,889         1,750        56,639 45,435        1,760       47,195     38,653      300        38,953    8.5          8.2        8.2        8.2          8.6
      Herzliya

      MTM Park
                   88,556      300         88,856         87,737          300        88,037      82,822         300          83,122 81,536        720         82,256     80,119      720        80,839    8.8          8.7        8.5         8.6         8.5
      Haifa



(*)      Gav-Yam Center Herzliya – The decline in the rate of return between the fourth quarter of 2007 and the first three quarters of 2008 is due to the occupation of buildings 5 and 6 in 2008 which were valued by the
         appraiser at a lower discount rate than the discount rate by which the existing buildings 1.4 of the Gav-Yam Center were valued. The increase in the rate of return in the fourth quarter of 2008 is due to an increase in the
         discount rates used by the external appraiser as at December 31, 2008.




                                                                                                                                                                                                                               IDBD Directors' Report 67
                                                                                                       IDB Development Corporation Limited


Appendix H - Disclosure regarding fair value of the investment property (cont'd)

Table 3 – Information on Investment Property that was Valued by the Discounted Cash Flows Method


 Name of asset              31.12.08            30.9.08              30.6.08          31.3.08          31.12.07

 Valued by
 independent appraiser


 Gav-Yam Center             7.75%-10%           7.75%-10%            7.75%-10%        7.75%-10%        8.25%-10%
 Herzliya                   (mainly 8.4%)       (mainly 8.25%)       (mainly 8.25%)   (mainly 8.25%)   (mainly 8.25%)


 MTM Park Haifa             8%-10.5%            8%-10%               8%-10%           8%-10%           8%-10%
                            (mainly 8.7%)       (mainly 8.6%)        (mainly 8.6%)    (mainly 8.6%)    (mainly 8.6%)




                                                                                                                        IDBD Directors' Report 68
                                                                                                                                          IDB Development Corporation Limited


Appendix I – Disclosure regarding the Auditors’ Fee

                                                                                          2008                                                               2007
                                                                  Fee (NIS thousands)                  Number of hours               Fee (NIS thousands)                   Number of hours
                                                                 Audit and            Other         Audit and           Other       Audit and            Other          Audit and           Other
Name of company              Name of auditor                  tax services*        services       tax services        services   tax services*        services        tax services        services

The Company and its
wholly owned                 Somekh Chaikin                           1,238                 659        5,656            2,063          1,217              174                4,710             701
Subsidiaries                 Ziv Haft                                     -                  38            -              210              -                 -                   -                -

IDBG                         Kost Forer Gabbay &
                             Kasierer                                     -                   -            -                 -           214                -                 455                -
                             Somekh Chaikin                             119                   -          507                 -             -              576                   -              687
Discount Investment
and wholly owned             Somekh Chaikin                           1,247                 17         5,105               51            666               20                2,596              35
companies                    Brightman Almagor                            -                  -             -                -             17                -                   56               -
Discount Investment
and wholly owned             KPMG NY +
companies                    Netherlands                                245                 189          164              130            454              121                 314               90
Other subsidiaries:
Shufersal Ltd. and
subsidiaries/principal
companies                    Somekh Chaikin                               -                   -            -                -          2,097              764                9,482           2,929
Property and Building        Somekh Chaikin                           1,120                 445        6,598            1,235            786              428                4,950           1,258
Corporation Ltd. and         Kesselman & Kesselman                       35                   -          220                -            272              218                  383             510
subsidiaries/principal       Kost Forer Gabbay &
companies                    Kasierer                                   340                   -        2,520                -            244                -                1,800               -
                             Ezra Shemesh                               276                  16        1,061               53            186                 -                 928                -
                             Ziv Haft                                   344                   -        1,700                -           300                  -               1,500               -
Cellcom Israel Ltd.          Somekh Chaikin                           2,733                   -        7,182                -          1,606              872                6,465           1,429

* Audit services – fees for audit services and services related to audit and tax services




                                                                                                                                                                 IDBD Directors' Report 69
                                                                                                                                             IDB Development Corporation Limited


Appendix I – Disclosure regarding the Auditors’ Fee (cont'd)

                                                                                        2008                                                                    2007
                                                                Fee (NIS thousands)                       Number of hours               Fee (NIS thousands)                   Number of hours
                                                               Audit and            Other              Audit and           Other       Audit and            Other          Audit and           Other
Name of company             Name of auditor                 tax services*        services            tax services        services   tax services*        services        tax services        services
Clal Insurance              Somekh Chaikin                              -                  -                   -                -           283                -                1,265               -
Enterprises Holdings        Kost Forer Gabbay &
                            Kasierer                                  200                  -              1,012                -             50                -                  219              -
Clal Insurance and          Somekh Chaikin                          1,934                 77             15,349              254          2,033              105                9,627            350
subsidiaries                Kost Forer Gabbay &
                            Kasierer                                1,937                168              8,183              541          2,000              885                8,406           3,662
Clal Finance and
subsidiaries                Somekh Chaikin                          1,121                244              9,229              808          1,238              363                6,128            529
Clal Agency Holdings        Somekh Chaikin                            316                  -              2,126                -            205                -                1,715              -
and subsidiaries            Kost Forer Gabbay &
                            Kasierer                                  175                  -                900                 -           255                -                1,119               -
Broadgate and Clal          KPMG + Ernst & young
Rumania                     UK                                      1,785                  -                   -                -         1,978                -                2,000              -
Other companies             Somekh Chaikin                              -                  -                   -                -           100                 -                 752               -
                            Kost Forer Gabbay &
                            Kasierer                                  195                  -              1,000                 -           110                -                 482                -
Clal Industries and
wholly owned                Kost Forer Gabbay &
companies                   Kasierer                                1,005                255              3,022              191            884              273                3,246            362
Other subsidiaries:
Mashav and wholly             Kost Forer Gabbay &
owned companies                Kasierer                                  520               -              2,802                -            267              115                1,000            430
                              Somekh Chaikin                             210              75                750              350            462               25                2,400            129
Taavura and owned             Mualem Glazer, Inbar,
Companies**                    Junio & Co.                               327               -              2,543                 -           296                -                1,950               -
                              Brightman Almagor & Co.                    394               -              3,030                 -           418                -                1,759               -
                              Kesselman & Kesselman                      305               -              2,565                 -             -                -                    -               -
                              Other accountants                          246               -              1,421                 -             -                -                    -               -
* Audit services – fees for audit services and services related to audit and tax services
** Jointly controlled entities – hours and amounts are included at the Company's relative portion.




                                                                                                                                                                    IDBD Directors' Report 70
                                                                                                                                             IDB Development Corporation Limited


Appendix I – Disclosure regarding the Auditors’ Fee (cont'd)

                                                                                        2008                                                                    2007
                                                                Fee (NIS thousands)                       Number of hours               Fee (NIS thousands)                   Number of hours
                                                               Audit and            Other              Audit and           Other       Audit and            Other          Audit and           Other
Name of company             Name of auditor                 tax services*        services            tax services        services   tax services*        services        tax services        services

Kitan Industries Ltd. and
wholly owned                Kost Forer Gabbay &
companies                    Kasierer                                 372                 25              1,355               91            330                -                1,700              -
Golf                        Kost Forer Gabbay &
                             Kasierer                                 315                  -              1,600                 -           244                -                1,300              -
CBI and owned               Kost Forer Gabbay &
companies                    Kasierer                                 212                  -              1,242                -            371                -                1,357               -
                            Kesselman & Kesselman                     244                  -              2,059                -            337                -                2,128               -
K.B.A                       Brightman Almagor                         154                 76                580              200            153                -                  890               -
Fundtech**                  Brightman Almagor
                            (deloitte abroad)                         921                 18              3,269               64               -               -                    -               -
                            Ziv Haft (bdo abroad)                     691                  -                964                -               -               -                    -               -
CureTech                    Kost Forer Gabbay &
                             Kasierer                                  63                  -                411                 -            88                -                 259                -
Global wind energy ltd.
(pwc abroad)***             Kesselman & Kesselman                      80                378                402                 -             -                 -                   -               -
AIPM                        Kesselman & Kesselman                   1,169                  -              7,190                -          1,282                -                7,800               -
Netvision                   Kost Forer Gabbay &
                            Kasierer                                  735                100              4,500                -            521              550                5,381              -
Koor, staff companies       Somekh Chaikin                            889                254              3,736              443          1,253              253                5,049            934
and wholly owned            Yosef Shimoni                             118                 78                532              386            178              134                  657            525
companies of Company

* Audit services – fees for audit services and services related to audited and tax services
** Jointly controlled entities – hours and amounts are included at the Company's relative portion.
*** Established in 2008, other fees relate to tax expenses for establishing companies abroad.




                                                                                                                                                                    IDBD Directors' Report 71
                                                             IDB Development Corporation Limited


                Annex J to the Board of Directors’ Report as at December 31, 2008

Updated rating reports of the rating company Standard & Poor’s Maalot Ltd. regarding the debentures.




                                                                               IDBD Directors' Report 72
                                                                                         ‫.‪12 Aba Hillel Silver Rd‬‬
                                                                                             ‫60525 ‪Ramat-Gan‬‬
                                                                                                           ‫‪Israel‬‬
                                                                                            ‫‪+972 3 7539700 Tel‬‬
                                                                                           ‫‪+972 3 7539710 Fax‬‬


‫8002.11.03‬

                                        ‫הודעה לציבור‬

‫‪ S&P Maalot‬מודיעה בזאת, כי הדירוגים של אג"ח שהונפקו על ידי חברות ההחזקה, שיפורטו להלן, מצויים‬
                                  ‫בתהליך בחינה מחדש עם השלכות שליליות )‪.(Credit Watch Negative‬‬


‫תהליך הבחינה מחדש הוא תהליך שיכול להסתיים בשינוי הדירוג ו/או שינוי ב"תחזית הדירוג". דירוג אג"ח מושם ב-‬
‫‪ ,Credit Watch‬כאשר מתרחש/צפוי אירוע מהותי או חריגה ממגמה צפויה )עסקי ו/או פיננסי(, שבגינם ייתכן שינוי‬
‫בדירוג, אך יש צורך בהשלמת נתונים ו/או בחינה על מנת לנקוט בפעולת שינוי הדירוג. ה- ‪ Credit Watch‬הינו‬
‫‪ Negative‬כאשר קיימת סבירות של מעל %05 שהדירוג ירד )ייתכן ב-‪ notch‬ואף יותר בחלק מהחברות(, אם כי‬
                                                               ‫תוצאה אפשרית הנה שהדירוג יישאר על כנו.‬



‫הסיבות המרכזיות להליך הבדיקה בסקטור חברות ההחזקה הנן: ירידה בשווי החברות המוחזקות )ציבוריות‬
‫ופרטיות(, ובשל כך, עליה במנוף הפיננסי ; חשש לקיטון בהיקף חלוקת הדיבידנדים של חלק מהחברות‬
‫התפעוליות, בחלק מחברות ההחזקה, בין היתר, בשל ההאטה הצפויה בפעילות הכלכלית בעולם ובמשק‬
                            ‫הישראלי ; הערכתנו כי חלה עליה בסיכון האשראי של חלק מהחברות המוחזקות.‬



                             ‫רשימת החברות שדירוג האג"ח שלהן נמצא בתהליך בחינה מחדש )לפי סדר א-ב(:‬
               ‫הערות בנוסף לאמור לעיל‬                           ‫דירוג נוכחי‬               ‫שם החברה‬
                                                           ‫‪AA-/CW Negative‬‬            ‫אי די בי אחזקות‬
                                                           ‫‪AA / CW Negative‬‬             ‫אי די בי פיתוח‬
                                                           ‫‪AA -/ CW Negative‬‬     ‫אלון חב' הדלק לישראל‬
                                                           ‫‪AA -/ CW Negative‬‬             ‫אלקו החזקות‬
                                                            ‫‪A / CW Negative‬‬               ‫גאון אחזקות‬
                                                           ‫‪AA / CW Negative‬‬          ‫דיסקונט השקעות‬
                                                           ‫‪AA / CW Negative‬‬           ‫החברה לישראל‬
                                                           ‫‪A+ / CW Negative‬‬               ‫כור תעשיות‬
                                                           ‫‪AA / CW Negative‬‬               ‫כלל תעשיות‬
‫תמונת נזילות מאתגרת לשנים הקרובות )צורך ב-‪ re-finance‬של‬
‫מרבית החוב הפיננסי(. עמידה בסמוך לגבול של אחת מההתניות‬      ‫‪A / CW Negative‬‬           ‫צור שמיר אחזקות‬
                                     ‫הפיננסיות הבנקאיות.‬
                                                           ‫‪AA / CW Negative‬‬                  ‫קבוצת דלק‬
                                                           ‫‪A - / CW Negative‬‬                      ‫קמור‬
                    ‫הורדת דירוג של חברת האם )קרדן ‪.(NV‬‬     ‫‪A / CW Negative‬‬                  ‫קרדן ישראל‬




                                                                                       ‫עמוד 1 מתוך 1‬
                           IDB Development
                           Corporation Ltd.

                        Financial Statements

                     As at December 31, 2008




TRANSLATION FROM HEBREW - IN THE EVENT OF ANY DISCREPANCY THE HEBREW SHALL PREVAIL
                                                                       IDB Development Corporation Limited

Periodic Report for 2008



Contents:                                                                                                Page

Auditors’ Report                                                                                           1-2

Consolidated Balance Sheet                                                                                 3-4

Consolidated Statement of Income                                                                             5

Consolidated Statement of Recognized Income and Expense                                                      6

Consolidated Statements of Cash Flows                                                                      7-9

Notes to the Financial Statements                                                                       10-280

Appendix to the Financial Statements                                                                  281-284




Attached documents:

- The valuations as at December 31, 2008 of the Las Vegas Plaza project and of the commercial and business
  project in Las Vegas of the Company and Property & Building. These valuations are included in the financial
  statements by reference to the valuations attached to the financial statements of the Company and of Property
  & Building for 2008,


- Declarations by the actuaries of Clal Insurance Company Ltd. and Clal Health Insurance Company Ltd.
Auditors' Report to the Shareholders of
I.D.B. Development Corporation Ltd.

We have audited the accompanying consolidated balance sheets of I.D.B. Development Corporation Ltd. (the
Company) as at December 31, 2008 and 2007 and the consolidated statements of income, consolidated
statements of recognized income and expenses, and the consolidated statement of cash flows, for each of the
years then ended. These financial statements are the responsibility of the Company's Board of Directors and of
its Management. Our responsibility is to express an opinion on these financial statements based on our audits.

We did not audit the financial statements of certain subsidiaries and companies consolidated by the
proportionate consolidation method, whose assets constitute 14% and 10% of the total consolidated assets as at
December 31, 2008 and 2007, respectively, and whose revenues constitute 25%, 16% of the total consolidated
revenues for the years then ended, respectively.
Furthermore, we did not audit the financial statements of equity accounted investees the investment in which
amounted to NIS 2,009 million and NIS 2,426 million as at December 31, 2008 and 2007, respectively, and the
Group’s share in their losses amounted to NIS 315 million and NIS 50 million for the years then ended,
respectively.
The financial statements of those companies were audited by other auditors whose reports thereon were
furnished to us. Our opinion, insofar as it relates to amounts emanating from the financial statements of such
companies, is based solely on the said reports of the other auditors.

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

In our opinion, based on our audits and on the reports of the abovementioned other auditors, the consolidated
financial statements referred to above present fairly, in all material respects, the consolidated financial position
of the Company and its consolidated subsidiaries as at December 31, 2008 and 2007 and its consolidated results
of operations and consolidated cash flows, for each of the years ended on such dates in accordance with
International Financial Reporting Standards (International Financial Reporting Standards) and in accordance
with the Securities Regulations (Preparation of Annual Financial Statements) – 1993, insofar as these
regulations apply to the insurance subsidiaries.


Without qualifying our above mentioned opinion, we call attention to Note 30.C.1 of the financial statements
regarding exposure to class actions and to the certification of class actions against investee companies.


Somekh Chaikin
Certified Public Accountants (Isr.)

March 31, 2009
                                                                           IDB Development Corporation Limited
Consolidated Balance Sheet


                                                                             December 31
                                                                             2008                     *2007
                                                      Note                   NIS millions

Non-current assets
Investments in affiliates                                 3                 6,910                   7,105
Financial investments in respect of
performance- based contracts                             4                 17,658                  21,104
Reinsurance assets                                       5                  2,503                   2,603
Other investments                                        6                  9,500                   7,876
Other pledged investments                                6                  2,517                       -
Loans and receivables                                    7                 14,903                  12,430
Fixed assets                                             8                  6,168                   5,306
Investment property                                      9                  7,683                   6,852
Investment property under construction                  10                    228                     155
Long-term trade receivables                             11                    553                     488
Non-current inventory                                   12                  1,837                   1,895
Deferred expenses                                       13                  2,530                   2,571
Deferred tax assets                                     43                    362                     192
Intangible assets                                       14                  6,805                   6,877
                                                                           80,157                  75,454

Current assets
Current investments, including
derivatives                                              6                  5,537                   6,214
Short-term loans and deposits                            7                  1,004                   1,536
Debtors and debit balances                              15                  1,879                   2,250
Current tax assets                                                            307                     291
Trade receivables                                       11                  4,207                   3,645
Inventory                                               12                  1,374                   1,273
Inventory of buildings held for sale                    16                    676                     703
Cash and cash equivalents pledged
for holders of index certificates
and liabilities                                                               683                   1,037
Cash and cash equivalents                               17                  7,992                  11,489
                                                                           23,659                  28,438


Total assets                                                              103,816                103,892
Total assets for performance-based
contracts, in insurance subsidiaries
which included in those
aforementioned items                                                       19,679                  22,810


*   Reclassified, see Note 2.DD.

The notes to the consolidated financial statements are an integral part thereof.




                                                                                            IDBD Financial Statements 3
                                                                    IDB Development Corporation Limited
Consolidated Balance Sheet


                                                                      December 31
                                                                      2008                     *2007
                                                   Note               NIS millions

Equity                                                18
Share capital                                                            61                      61
Share premium                                                         2,146                   2,146
Capital reserves                                                      (302)                      35
Treasury shares                                                       (374)                    (37)
Retained earnings                                                     1,515                   2,528
Equity attributable to the equity
holders of the Company                                                3,046                   4,733
Minority interest                                                     6,865                   8,737
                                                                      9,911                  13,470

Non-current liabilities
Liabilities in respect of
nonperformance-based insurance
 contracts and investment contracts               19(A)              25,926                  22,318
Liabilities in respect of
performance-based insurance
 contracts and investment contracts               19(B)              19,475                  21,634
Financial liabilities at amortized cost              21              28,643                  27,652
Financial liabilities at fair value                  22                 273                     468
Deferred income                                      23                 124                      81
Provisions                                           24                  26                      21
Deferred tax liabilities                             43               1,357                   1,371
Employee benefits                                    25                 508                     434
                                                                     76,332                  73,979

Current liabilities
Financial liabilities at amortized cost               21              6,486                   4,670
Financial liabilities at fair value                   22                202                     275
Liabilities for liability certificates,
index certificates, reverse tracker
certificates, and complex certificates                26              4,108                   4,794
Creditors and credit balances                         27              4,411                   3,938
Trade payables                                        28              1,860                   2,028
Current tax liabilities                               43                242                     341
Overdraft                                             17                 20                      15
Deferred income                                       23                 45                      22
Provisions                                            24                199                     360
                                                                     17,573                  16,443

Total equity and liabilities                                        103,816                103,892



        Nochi Dankner                          Eliahu Cohen                        Dr. Eyal Solganik
     Chairman of the Board                     Director and                   Executive Vice President and
                                          Chief Executive Officer               Chief Financial Officer
Date of approval of the financial statements: March 31, 2009


                                                                                     IDBD Financial Statements 4
                                                                           IDB Development Corporation Limited
Consolidated Statements of Income


                                                                    For the year ended December 31,
                                                                              2008                  *2007
                                                      Note                    NIS millions



Revenues
Sales and services                                      31                 14,880                 20,511
Revenues from insurance and finance
business                                                32                  8,489                 13,535
Company’s share in earnings of
 affiliated companies, net                              33                    175                    543
Gain on sale and revaluation of assets                  34                  1,118                  2,696
Increase in fair value of investment
 property                                               35                    230                    171
Other income                                            36                    492                     19
Financing income                                        37                    920                    877
                                                                           26,304                 38,352

Expenses
Cost of sales and services                              38                  9,291                 13,771
Cost of insurance business                              39                  5,357                  9,924
Costs and expenses relating to insurance
 business and finance services                          40                  3,128                  2,617
Selling and marketing expenses                          41                  1,432                  2,859
General and administrative expenses                     42                  1,614                  1,446
Loss from sale and write-off
of investments and assets                               34                    590                    221
Decrease in fair value of investment
property                                                35                      4                      -
Other expenses                                          36                     64                     47
Financing expenses                                      37                  3,545                  2,668
                                                                           25,025                 33,553

Income before taxes on income                                               1,279                  4,799
Taxes on income                                         43                  (731)                  (917)

Income for the period                                                         548                  3,882

Income (loss) for the period attributable
to:
The equity holders of the Company                                           (249)                  1,874
Minority interest                                                             797                  2,008
                                                                              548                  3,882
Earnings (loss) per share of the
company’s equity holders (NIS)                          44
Basic earnings                                                              (4.51)                 32.88
Diluted earnings                                                            (4.67)                 32.48

*   Reclassified, see Note 2.DD.

The notes to the consolidated financial statements are an integral part thereof.



                                                                                          IDBD Financial Statements 5
                                                                           IDB Development Corporation Limited

Consolidated Statement of Recognized Income and Expenses

                                                                       For the year ended December 31,
                                                                                 2008                  *2007
                                                                                 NIS millions



Reserve from revaluation of net assets following rise to
control                                                                             62                    91

Foreign currency translation differences for foreign
operations, net of tax                                                        **(23)                  (300)

Foreign currency translation differences for foreign
operations, allocated to profit and loss, net of tax                               (41)                     -

Effective portion of changes in fair value of cash flow
hedges, net of tax                                                                 (18)                 (29)

Net change in fair value of cash flow hedges, transferred
to profit and loss, net of tax                                                      35                    24

Net change in fair value of available-for-sale financial assets,
net of tax                                                                     (274)                    (13)

Net change in fair value of available-for-sale financial assets,
transferred to profit and loss, net of tax                                     (568)                    (96)

Loss from decline in value of available-for-sale financial
assets, transferred to profit and loss, net of tax                                 347                    32

Revaluation of fixed assets transferred to investment
 property, net of tax                                                               42                      -

Company's share of recognized income of affiliated
 companies, net of tax                                                      **(180)                   (338)

Net recognized expense for the period                                          (618)                  (629)

Profit for the period                                                              548                3,882

Total recognized income (expense) for the period                                   (70)               3,253

Attributable to:***
Equity holders of the Company                                                  (569)                  1,555
Minority interest                                                                499                  1,698

Total recognized income (expense) for the period                                   (70)               3,253


* Reclassified, see Note 2.DD.
** Reclassified.
*** See also Note 18.A.

The notes to the consolidated financial statements are an integral part thereof.


                                                                                           IDBD Financial Statements 6
                                                                 IDB Development Corporation Limited


Consolidated Statements of Cash Flows


                                                                       For the year ended December 31,
                                                                                                        (1)
                                                                                   2008                       2007
                                                                                   NIS millions


Cash flows from operating activities
Income for the period                                                              548                   3,882

Adjustments:

Company’s share in net profit of affiliated companies, net                     (175)                     (543)
Dividends received                                                               585                       183
Gain on sale and write-off of investments and assets, net                      (528)                   (2,475)
Increase in fair value of investment property, net                             (226)                     (171)
Impairment of fixed assets and deferred expenses                                 938                     1,074
Impairment of intangible assets                                                  865                       468
Other income in respect of negative goodwill                                   (410)                         -
Financing expenses, net                                                        1,910                     1,726
Income tax expense, net                                                          731                       917
Income tax paid, net                                                         (1,001)                   (1,060)
Share-based payment transactions                                                   80                       69
Payments in respect of settlement of derivatives                                  (2 )                    (40)
Change in liabilities for nonperformance-based
insurance contracts and investment contracts                                   2,037                     1,603
Change in liabilities for performance-based
insurance contracts and investment contracts                                 (2,159)                     2,416
Changes in deferred acquisition expenses, lease
fees and prepaid expenses in insurance companies                                   (33)                       (44)
Change in reinsurance assets                                                         20                       131


Change in value of liability certificates, reverse tracker
certificates, index certificates and complex certificates                           79                         83
Change in impairment of investments in affiliated
and other companies in the finance branch                                             2                       (19)
Change in fair value of investment property in
insurance companies                                                                (38)                  (119)

Receipts from (investment in) sale of available for sale
financial assets and investment property in insurance
business
Debt investments                                                             (1,377)                     (426)
Shares                                                                           157                     (121)
Other                                                                              8                      (68)
Investment property                                                            (176)                      (98)
                                                                               1,835                     7,368


(1) Reclassified, see Note 2.DD.

The notes to the consolidated financial statements are an integral part thereof.




                                                                                   IDBD Financial Statements 7
                                                                 IDB Development Corporation Limited



Consolidated Statements of Cash Flows (cont'd)


                                                                       For the year ended December 31,
                                                                                                        (1)
                                                                                   2008                       2007
                                                                                   NIS millions


Changes in other balance sheet items
Change in debtors and debit balances (including long term
amounts)                                                                         181                     (325)
Change in trade receivables (including long term amounts)                      (155)                     (487)
Change in inventory                                                                57                    (435)
Change in non-current inventory                                                   (5 )                    (78)
Change in provisions and employee benefits                                         43                     (29)
Change in deferred income                                                         (5 )                       4
Change in other long-term liabilities                                              68                       72
Change in trade payables                                                       (342)                       453
Change in other payables                                                         346                       914
Change in financial investments for performance- based
contracts                                                                      2,370                   (2,976)
Change in securities held for trade, net, by companies in the
finance branch                                                                     858                 (2,630)
Change in cash and cash equivalents pledged for holders of
index certificates and liabilities                                               354                     (199)
                                                                               3,770                   (5,716)
Net cash flows provided by operating activities                                5,605                     1,652

Cash flows from investing activities
Long-term deposits, loans and investments granted                               (43)                      (21)
Current investments, net                                                       (333)                   (1,293)
Investments in investee companies                                            (2,122)                   (1,676)
Non-current investments                                                      (8,289)                         -
Investment in investment property, fixed assets, non-current
 inventory and intangible assets                                             (2,135)                   (5,210)
Payments in respect of hedge transaction of acquisition of
 fixed assets                                                                      (17)                       (12)
Acquisition of subsidiaries, net of acquired cash,
consolidated for the first time(2)                                             (289)                     (789)
Acquisition of new business                                                        -                     (666)
Receipts from realization of subsidiaries, net of cash
 expended following deconsolidation                                                -                     (179)
Receipts from sale of non current investments and dividends                    6,485                     5,155
Receipts from sale of fixed and other assets                                     275                       269
Repayment of long-term deposits and loans granted                                140                        49
Interest received                                                                406                       412
Net cash flows used in investing activities                                  (5,922)                   (3,961)

(1) Reclassified, see Note 2.DD.
(2) See also Note 3.M.

The notes to the consolidated financial statements are an integral part thereof.




                                                                                   IDBD Financial Statements 8
                                                                 IDB Development Corporation Limited


Consolidated Statements of Cash Flows (cont'd)


                                                                       For the year ended December 31,
                                                                                                          (1)
                                                                                   2008                         2007
                                                                                   NIS millions


Cash flows from financing activities
Non-current liabilities received                                                  4,634                   10,789
Current liabilities, net                                                            698                      310
Issuance of shares to minority by subsidiaries, including
  realization of options                                                         930                        1,886
Repayment of non-current liabilities                                         (3,949)                      (2,487)
Interest paid                                                                (1,496)                      (1,320)
Dividend paid                                                                  (784)                      (1,058)
Acquisition of the company's shares
   (treasury shares)                                                              (354)                          (5)
Consideration from realization of the company's shares
  (treasury shares)                                                               17                            -
Dividend paid to outside shareholders in subsidiaries                        (1,640)                      (1,385)
Receipts from (repayment to) outside shareholders in
  subsidiaries, net                                                                (42)                            9
Consideration (payments) from settlement of derivatives                             187                         (96)
Issuance of reverse tracker certificates, complex certificates
 and liability certificates (net of issuance expenses)                             401                          887
Forced conversion of reverse tracker certificates                                    -                          (39)
Change in liability in respect of debentures of liability
  certificates                                                                    (155)                           5
Acquisitions by the public, net, in respect of liability for
  liability certificates, reverse tracker certificates and
  complex certificates                                                       (1,122)                       1,808
Change in deposit certificates in special purpose company                      (165)                          12

Net cash flows provided by (used in) financing activities                    (2,840)                       9,316

Change in cash and cash equivalents                                          (3,157)                       7,007
Balance of cash and cash equivalents as at the beginning
 of the period                                                               11,474                        4,815
Effect of exchange rate fluctuations on cash and cash
 equivalents                                                                      (345)                    (348)
Balance of cash and cash equivalents as at the end of
                                                                            (2)                     (2)
  the period                                                                      7,972                   11,474

(1) Reclassified, see Note 2.DD.
(2) After offsetting an overdraft in the amount of NIS 20 million and NIS 15 million in 2008 and 2007,
    respectively.

The notes to the consolidated financial statements are an integral part thereof.




                                                                                   IDBD Financial Statements 9
                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008


Note 1- General

A. IDB Development Corporation Ltd. ("The Company") is an Israeli resident associated in Israel.
    The official address of the Company is 3 Azrieli Center, Triangle Tower, 44'th floor, Tel Aviv.
    The controlling interest of the Company consists of Ganden Holdings Ltd., Manor Holdings
    B.I. Ltd., and Avraham Livnat Ltd.; these companies have entered into a voting agreement. The
    parent company of the Company is IDB Holdings Ltd.; the final parent company of IDB
    Holdings is Ganden Holdings Ltd. Mr. Nochi Dankner is the final controlling shareholder. The
    Company is one of the largest holding companies in Israel, investing on its own behalf and
    through investee companies in companies mainly operating in various sectors of the Israeli
    economy. Recently, some of the investee companies' operations have focused on global
    diversification of their investments. The Company's bonds are listed on the Tel Aviv Stock
    Exchange.
    The consolidated financial statements have been prepared in accordance with the International
    Financial Reporting Standards ("IFRS"), and are the IFRS first annual financial statements,
    including implementation of IFRS 1 "First-time Adoption of International Financial Reporting
    Standards".
    The financial statements have also been prepared in accordance with the Securities Regulations
    (Preparation of Annual Financial Statements), 1993 ,insofar as these regulations apply to the
    insurance subsidiaries .With regard to insurance activity, the consolidated financial statements
    partially include the disclosure requirements established by the Supervisor of Insurance,
    pursuant to the Supervision of Financial Services Law (Insurance), 1981.
    For details regarding the effect of transition to the IFRSs on the financial statements of the
    Company and the results of its activity and its cash flows, see Note 47.
    The Board of Directors of the Company approved the publication of the financial statements on
    March 31, 2009.
B. Definitions
(1) International Financial Reporting Standards (hereunder – "IFRS") – Standards and
    interpretations that were adopted by the International Accounting Standards Board ("IASB")
    and which include international financial reporting standards and international accounting
    standards ("IAS") along with the interpretations to these standards of the International Financial
    Reporting Interpretations Committee ("IFRIC") or interpretations of the Standing
    Interpretations Committee ("SIC"), respectively.
(2) Subsidiaries – companies in which the Company holds, directly or indirectly, 50% or more of
    the voting rights or the rights to appoint the members of the Board of Directors, and the
    financial statements of which are consolidated with those of the Company.
(3) Proportionately consolidated companies – companies (including partnerships and participation
    units in venture capital funds) jointly controlled with others, directly or indirectly, whose
    financial statements are consolidated with those of the Company based on the proportionate
    consolidation method.
(4) Affiliated companies – companies (including partnerships and participation units in venture
    capital funds) in which the Company or its subsidiaries have a direct or indirect holding and
    where significant influence exists over their financial and operating policies and which are not
    subsidiaries or proportionately consolidated companies. The investments in these companies
    are presented on the equity basis.
(5) Investee companies – subsidiaries, proportionately consolidated companies and affiliated
    companies.
(6) Significant influence – 20% or more of the voting rights or the right to appoint 20% or more of
    the Board of Directors, unless it is apparent that significant influence does not actually exist. A
    holding of less than 20% of such rights may also be considered as granting significant influence
    in cases where such influence is clearly apparent.
(7) Reporting Details Regulations – Insurance Business Supervision Regulations (Reporting
    Details) -1998, including their amendments.




                                                                                          IDBD Notes 10
                                                                    IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 1- General (cont'd)

B.   Definitions (cont'd)

(8) Related parties – as defined in IAS 24 regarding related parties.
(9) Interested parties – as defined in paragraph (1) of the definition of "Interested Parties" in
     Section 1 of the Securities Law - 1968.
(10) Insurance contracts – a contract under which one party (the insurer) accepts significant
     insurance risk from another party (the policyholder) by agreeing to compensate the
     policyholder if a specified uncertain future event (the insured event) adversely affects the
     policyholder.
(11) Investment contracts – Policies that have a saving component of 100% the policies’ savings are
     withdrawn as a lump sum and they do not include riders that constitute insurance contracts, as
     well as the members rights in the consolidated provident fund program.
(12) Yield dependent contracts - insurance contracts and investment contracts in life assurance and
     long term care, in which the liabilities are linked to the profits of the investment portfolio
     (policies participating in investment income).
(13) Liabilities for insurance contracts - Insurance reserves and outstanding claims in life assurance,
     general insurance and health insurance segments of activity.
(14) Total assets for yield dependent contracts - The total assets held against liabilities in respect of
     yield dependent contracts
(15) Reinsurance assets -Reinsurers' share in insurance reserves and outstanding claims.
(16) Premiums - Premiums including fees.
(17) Premiums earned - Premiums relating to the reported period.
(18) Functional currency and presentation currency.
     These financial statements are presented in NIS, which is the Company’s functional currency,
     and have been rounded to the nearest million. The NIS is the currency that represents the
     principal economic environment in which the Company operates.
(19) CPI – the Consumer Price Index published by the Central Bureau of Statistics.
(20) Dollar – the U.S. Dollar.
(21) In these financial statements –
     The Company                         – IDB Development Corporation Ltd.
     The Group                           – The Company and its investee companies.
     IDB Holding                         – IDB Holding Corporation Ltd. – the parent company
     DIC                                 – Discount Investment Corporation Ltd.
     Clal Industries                     – Clal Industries and Investments Ltd.
     Clal Insurance Enterprises      – Clal Insurance Enterprises Holdings Ltd.
     Hadera Paper                    – Hadera Paper Ltd.
     Clal Tourism                    – Clal Tourism Ltd.
     Clal Finance                    – Clal Finance Management Ltd.
     GVT                                 – GVT (Holding) N.V.
     Elron                               – Elron Electronic Industries Ltd.
     Cellcom                             – Cellcom Israel Ltd.
     Given                               – Given Imaging Ltd.
     Shufersal                           – Shufersal Ltd.
     Property and Building               – Property and Building Corporation Ltd.
     Koor                                – Koor Industries Ltd.




                                                                                            IDBD Notes 11
                                                                   IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 1- General (cont'd)

C. Basis of Preparation

(1) Basis of measurement
    These financial statements are prepared on the cost basis except the following assets and
    liabilities that are stated at fair value: derivative financial instruments, financial instruments at
    fair value through profit and loss, financial instruments classified as available-for-sale and
    investment property. Biological assets are measured at fair value less estimated point-of-sale
    costs. Non-current assets and disposal groups held for sale are stated at the lower of carrying
    amount and fair value less expected costs to sell. For liabilities details in respect of insurance
    and employee benefits and insurance, see paragraphs B and K.
    The value of non-monetary assets and equity items that were measured on the historical cost
    basis was adjusted to changes in the Consumer Price Index (CPI) until December 31, 2003,
    since until that date the economy of Israel was considered a hyperinflationary economy.
    Presented hereunder are details of the rate of change in the CPI and the dollar and Swiss franc
    exchange rate:
                                                                  CPI                Exchange rate
                                                          Known         Month   US Dollar   Swiss frank
                                                                                %
      Change in the period:
      For the year ended
      December 31, 2008                                     4.5          3.8       (1.14)         4.23
      December 31, 2007                                     2.8          3.4       (8.97)        (1.31)

(2) Use of estimates and judgments
    The preparation of financial statements in conformity with IFRS, requires managements of the
    Company and investee companies to make judgments, estimates and assumptions, including
    actuarial estimates and assumptions that affect the application of accounting policies and the
    reported amounts of assets, liabilities, income, expenses and capital. Actual results may differ
    from these estimates.
    The preparation of accounting estimates used in the preparation of the Company’s financial
    statements requires managements of the Company and investee companies to make
    assumptions regarding circumstances and events that involve considerable uncertainty. These
    managements prepare the estimates on the basis of past experience, various facts, external
    circumstances, and reasonable assumptions according to the pertinent circumstances of each
    estimate.
    Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
    accounting estimates are recognized in the period in which the estimates are revised and in any
    future periods affected.
    Presented below is a description of the critical accounting estimates that were used in preparing
    the financial statements of the Company, which required managements of the Company and
    investee companies to make assumptions regarding significantly uncertain circumstances and
    events.
    The principal estimates in respect of the insurance business included in the financial statements
    are based mainly on actuarial assessments, whereas other estimates are based on external
    valuations and assessments of other experts.
    a. Investment property
         The Group presents its investment property according to the fair value model.
         Changes in fair value after January 1, 2007 are recorded as profit or loss. The fair value is
         determined by independent appraisers having relevant professional skills and is examined
         at least once a year and any time there are indications of a material change in value.
    b. Contingent liabilities
         When assessing the chances of legal claims that were filed against the Companies of the
         group and its investee companies, the companies relied on the opinion of their legal
         counsel.



                                                                                            IDBD Notes 12
                                                                    IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 1- General (cont'd)

C. Basis of Preparation (cont'd)

(2) Use of estimates and judgments (cont'd)
     b. Contingent liabilities (cont'd)
         The opinion of their legal counsel is based on the best of their professional judgment, and
         takes into consideration the current stage of the proceedings and the legal experience
         accumulated with respect to the various matters. As the results of the claims will
         ultimately be determined by the courts, they may be different from such estimates.
     c. Impairment in value of assets
         The Group examines on every balance sheet date whether events occurred or there have
         been any changes in circumstances which would indicate impairment in the value of one or
         more of the non-monetary assets. When there are signs of impairment in value, the
         Company examines whether the amount, by which the investment in the asset is presented,
         can be recovered from the discounted cash flows anticipated to be derived from the asset
         or the fair value less costs to sell ("net selling price") from it, and if necessary, a provision
         for impairment is recorded up to the amount of the recoverable value. The estimated future
         cash flows are discounted to their present value, in some cases with assistance of external
         assessors, using a pre-tax discount rate that reflects current market assessments of the time
         value of money and the risks specific to the asset. The estimates regarding cash flows are
         based on past experience with respect to this asset or similar assets, and on the best
         possible evaluations of the Group regarding the economic conditions that will exist during
         the remaining useful life of the asset.
         The Company uses the estimates of an appraiser when determining the net selling price of
         part of the assets. With respect to real estate, the estimates also take into consideration the
         situation of the market where the asset is located.
         The deepening of the competition in the market may significantly affect forecasts
         regarding cash flows, the remaining useful life and the net selling price of the assets.
     d. Allocation of shares acquisition cost and evaluation of intangible assets and goodwill
         The group is required to allocate the cost of the acquisition of investments in investee
         companies (excluding acquisitions of minority rights) to the assets and liabilities of those
         companies, based on their estimated fair values. In material acquisitions, the group
         contracts with independent assessors who assist it in determining the fair value of these
         assets and liabilities. These assessments necessitate the use of significant estimates and
         assumptions by management. The material intangible assets recognized with the assistance
         of the assessors include customer relationships, commercial names, and brands. Critical
         estimates used in evaluating the useful life of these intangible assets include, among
         others, estimates of the duration of customer relationships and other intangible assets, and
         expected developments in the market. Critical estimates used to evaluate certain assets
         include, among others, expected cash flows from customer relationships and replacement
         costs of brands and fixed assets. Management's estimates of fair value and useful life are
         based on assumptions found to be reasonable by management, however, these assumptions
         involve inherent uncertainty, and actual results may therefore differ.




                                                                                             IDBD Notes 13
                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 1- General (cont'd)

C. Basis of Preparation (cont'd)

(2) Use of estimates and judgments (cont'd)
     d. Allocation of shares acquisition cost and evaluation of intangible assets and goodwill
         (cont'd)
         Goodwill is allocated at the acquisition date to each of the cash-generating units or groups
         of cash-generating units of the acquired company which are expected to benefit from the
         synergies of the acquisition. Goodwill is subsequently examined for the purpose of decline
         in value at the level of those cash-generating units or groups of cash-generating units of
         the acquired company to which it was attributed. In attributing goodwill to the cash-
         generating units or groups of cash-
         generating units of the acquired company, the Company prepared estimates regarding the
         expected synergies between the existing and acquired activities. Each unit or group of
         units to which goodwill was allocated, as noted, represents the lowest level of the company
         at which goodwill is monitored for internal administration purposes, and is not larger than
         a reportable segment.
     e. Employee benefits
         The liability in respect of defined benefit plans after the completion of employment is
         determined using actuarial valuations. The calculation of the liability involves making
         assumptions, among others, regarding discount rates, expected rates of return on assets,
         future salary increases and employees’ replacement rates. Due to the long-term nature of
         these plans, such estimates are subject to significant uncertainty.
     f. Trade receivable
         These financial statements include a provision for doubtful accounts in respect of trade
         receivables, which the Group estimates adequately reflects the potential loss from
         uncollected amounts. The provision was calculated based on past debt collection
         experience as well as on information regarding specific debtors.
     g. Deferred tax assets
         Deferred tax assets are recognized for unutilized carry forward tax losses and temporary
         differences to the extent that it is probable that taxable profit will be available against
         which the losses can be utilized. The management’s judgment is required in order to
         determine whether it is possible to recognize deferred tax assets and the amount of
         deferred tax assets that can be recognized, based on the existence, timing and amount of
         future taxable profits together with future tax planning strategies.
     h. Determination of the recoverability of deferred acquisition expenses of life assurance
         policies
         Acquisition expenses of life assurance policies are deferred and written-off over the
         policy’s term. The recoverability of deferred acquisition costs is examined once a year
         while using the assumptions regarding the cancellation rates, mortality and morbidity rates
         and other variables. If these assumptions are not materialized it might be necessary to
         accelerate the write-offs or even to cancel the deferred acquisition costs.
     i. Liabilities in respect of insurance contracts
         Liabilities in respect of insurance contracts are based on the actuarial valuation method
         and on the assumptions detailed in Note 20.
         The actuarial valuations and the various assumptions are based on past experience and are
         mainly based on the fact that past behavioral patterns and claims represent future behavior.
         Change in the risk factors, frequency of events or their severity, as well as a change in the
         legal situation, might have a significant influence on the volume of liabilities for insurance
         contracts.




                                                                                          IDBD Notes 14
                                                                   IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles

These financial statements have been prepared on the basis of IFRSs in issue that are effective or
available for early adoption at the Group’s first IFRS annual reporting date, December 31, 2008, and
were the basis for the Group’s accounting policy.
A. The operating cycle
     Being a holding company that engages in a variety of operations, some of the Group’s normal
     operating cycle is longer than one year, particularly with respect to contracting work in respect
     of which the operating cycle can even be two to three years and with respect to life assurance
     and long-term savings and general insurance business with a long "tail". As a result, current
     assets and current liabilities include items the realization of which is intended and anticipated to
     take place over the normal operating cycle of the Group. Liabilities in respect of insurance
     contracts and investment contracts and the assets backing them – financial investments for
     insurance contracts – are presented at their full amount under non-current liabilities and assets,
     without separation into current maturity, in accordance with their order of liquidity.
B. Consolidated financial statements
     The consolidated financial statements include the financial statements of companies that are
     controlled by the Company (subsidiaries). Control exists when the Company has the power to
     govern, directly or indirectly, the financial and operating policies of the controlled company.
     The financial statements of subsidiaries are included in the consolidated financial statements
     from the date that control commences until the date that control ceases. The Company does not
     consolidate companies that it does not legally control, meaning companies over which the
     Company has effective control were not consolidated. In assessing control, potential voting
     rights that currently are exercisable are taken into account.
     Material intra-group balances and transactions, as well as any income and expenses arising
     from intra-group transactions, are eliminated in preparing the consolidated financial statements.
     Material balances and transactions between the Group and the affiliated and jointly controlled
     companies as well as any income and expenses arising from such transactions are eliminated
     according to the rate of holding in such companies.
     Basis of consolidation
     1. Subsidiaries
          Subsidiaries are entities in which the Company holds more than 50% of their voting rights,
          including potential voting rights that are immediately exercisable, so that the Company has
          the power to govern the financial and operating policies of an entity so as to obtain
          benefits from its activities. In assessing control, potential voting rights that currently are
          exercisable are taken into account. In examining control, the risks of each party involved
          in transactions with the entity were also taken into consideration, such as when the Group
          provides a guarantee to protect returns of rights of members of compensation plans. The
          financial statements of subsidiaries are included in the consolidated financial statements
          from the date that control commences until the date that control ceases. The accounting
          policies of subsidiaries have been changed when necessary to align them with the policies
          adopted by the Company.
          The financial statements of the pension funds, provident funds (with the exception of a
          provident fund where Clal Insurance provides a guarantee of minimum return to the fund's
          members), and mutual funds were not consolidated, as the Company is not exposed to
          residual risks and yields in respect of their activities.
     2. Special purpose entities (SPE)
          An SPE is consolidated if, based on an evaluation of the substance of its relationship with
          the Group and the SPEs’ risks and rewards, the Group concludes that it controls the SPE.
          SPEs controlled by the Group were established under terms that impose strict limitations
          on the decision-making powers of the SPEs’ management and that result in the Group
          receiving all the benefits related to the SPEs’ operations and net assets. The group is




                                                                                            IDBD Notes 15
                                                                    IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

B.   Consolidated financial statements

     Basis of consolidation (cont'd)
     2. Special purpose entities (SPE) (cont'd)
         exposed to risks as a result of the SPE activity and it has the majority of the residual
         interest and the ownership risks related to the SPE assets.
     3. Affiliates accounted for using the equity method
         Affiliates are those entities in which the Group has significant influence, but not control,
         over the financial and operating policies and consolidate terms as aforesaid, do not exist..
         Affiliates are accounted for using the equity method and initially recognized according to
         their cost. The consolidated financial statements of the Company include the Group’s
         share of the income and expenses of equity accounted investees, after adjustments to align
         the accounting policies with those of the Group, from the date that significant influence
         commences until the date that significant influence ceases. When the Group’s share of
         losses exceeds its interest in an equity accounted investee, the carrying amount of that
         interest (including any long-term investments) is reduced to nil and the Group does not
         recognized other losses except to the extent that the Group has an obligation to support the
         entity or has made payments on behalf of the entity, or has granted loans to it.
         Excess cost of affiliates is presented as part of the investment. The excess cost of an
         investment in an affiliate over the Company’s interest in the fair value of the affiliate’s
         identifiable assets (including intangible assets) net of the fair value of its identifiable
         liabilities (after the allocation of taxes) on the date of acquisition is goodwill. The excess
         of the Group’s interest in the fair value of the affiliate’s identifiable assets (including
         intangible assets) net of the fair value of its identifiable liabilities (after the allocation of
         taxes) over the cost of the investment in the affiliate is negative goodwill that is recognized
         immediately in profit or loss. See also Paragraph H1 hereunder.
         Excess cost allocated in an affiliate to identifiable assets and identifiable liabilities having
         a finite useful life is amortized according to the said useful life. Goodwill and intangible
         assets having an indefinite useful life are not systematically amortized. A subsidiary of the
         Company invests in shares of equity-basis investees of the Company, through companies
         under its control within the assets held against profit-participatory policies and index
         certificates companies and its nostro portfolio. These investments are stated in the
         Company's reports according to their fair value. See Paragraph Q2 hereunder regarding
         impairment testing of goodwill and intangible assets.
         See Paragraph AA hereunder regarding the allocation of deferred taxes in respect of
         investments in affiliates.
         See Paragraph C2 hereunder regarding adjustments from the translation of financial
         statements of affiliates.
     4. Jointly controlled entities accounted for using the proportionate consolidation
         method
         Jointly controlled entities are those entities over whose activities the Group has joint
         control, established by contractual agreement and requiring unanimous consent for
         strategic financial and operating decisions in those entities. Jointly controlled entities are
         accounted for using the proportionate consolidation method from the date that joint control
         commences until the date that joint control ceases. These financial statements include the
         Group’s proportionate share of the assets, liabilities, revenue and expenses of
         proportionately consolidated entities according to the rates of holding therein, after
         adjustments necessary to align their accounting policies with those of the Group.




                                                                                             IDBD Notes 16
                                                                   IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

B.   Consolidated financial statements

     Basis of consolidation (cont'd)
     5. Joint ventures
         Joint ventures are ventures carried on by each venture using its own assets in pursuit of the
         joint operations. These financial statements include the assets that the Group controls and
         the liabilities that it incurs in the course of pursuing the joint operation, and the expenses
         that it incurs and its share of the income that it earns from the joint operation.
     6. Rise to control in existing holding and the creation of a capital reserve
         On the date of gaining control in a business combination executed in steps, all the
         identified assets, liabilities and contingent liabilities of the acquired entity are remeasured
         at fair value. The difference arising from remeasurement of the acquisitions preceding the
         gain of control is included in a capital reserve. The portion of the said capital reserve that
         is created in respect of fixed assets and intangible assets is transferred to retained earnings
         corresponding to the depreciation or amortization of the item for which it was created, or
         when the item or investment is realized all or part. The portion of the said capital reserve
         that is created in respect of inventory and financial instruments is recognized in profit or
         loss in the same manner. For this purpose, the fair value of a marketable asset is its market
         value, except when circumstances clearly indicate that the fair value of the said asset is
         different from its market value.
     7. Acquisition of additional rights from the minority after a business combination
         Excess cost created upon the acquisition of shares of the minority in subsidiaries is
         recognized as goodwill or negative goodwill that is recognized immediately in profit or
         loss . See also Paragraph H1 hereunder.
     8. Sale of shares to the minority while retaining control
         Consistently with the accounting treatment of the acquisition of additional rights from the
         minority after a business combination as specified in 7 above, the Company recognizes a
         gain from the sale of shares to the minority while retaining control, in the amount of the
         difference between the consideration received and the carrying value of the realized
         portion.
     9. Put option to the minority shareholders of subsidiaries
         A put option that is granted by the Group to the minority shareholders in a subsidiary is
         recognized as a liability in accordance with the present value of the payment, and is
         accounted for as a contingent purchase cost of the minority interest. Revaluation of the
         liability in respect of the time component is reflected in financing expenses, and the Group
         includes in its income its share in the subsidiary’s income, taking into account exercise of
         the put option, whereas valuation of the liability in respect of other changes is recorded
         against goodwill.
     10. Investments in shares and bonds of subsidiaries
         Clal Insurance Enterprises Holdings, on its own behalf and through companies under its
         control, within the assets held against profit-participatory policies, as well as through
         index certificates companies and its nostro portfolio, invests in shares and bonds of
         subsidiaries of the Company. In the reports of Clal Insurance Enterprises Holdings, these
         investments are stated at fair value through profit and loss, or as investments available for
         sale stated at fair value. The insurance liabilities within the profit-participatory policies
         and the liabilities to owners of units of the index certificates are stated according to the
         value of assets held against the policies and the index certificates, through profit and loss.
         Pursuant to international accounting rules, the said investments in shares should be stated
         in the Company's consolidated report as a reduction of minority rights, with cancellation of
         the revaluation to fair value performed in the reports of Clal Insurance and recognition of
         goodwill or negative goodwill.




                                                                                           IDBD Notes 17
                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

B.   Consolidated financial statements

   Basis of consolidation (cont'd)
   10. Investments in shares and bonds of subsidiaries (cont'd)
         In addition, investments by Clal Insurance in the said bonds should be treated as early
         redemption of bonds, with recognition of profit or loss from early redemption, while
         cancelling revaluations to fair value and effective interest accrual, as performed in the
         reports of Clal Insurance. However, the sale of the said bonds by Clal Insurance will be
         treated in the Company's consolidated report as a new offering of bonds, with new
         effective interest calculated. In all of the adjustments noted above, the Company also takes
         the relevant tax effects into account.
         With regard to investments in shares of equity-basis investee companies within the
         portfolio of assets held against profit-participatory policies and by index certificates
         companies, see Section 3 above.
C. Foreign currency
   The functional currency is determined separately for each investee company, including an
   affiliated company that is presented by the equity method, and this currency is the basis for
   measuring its financial position and results of operations. When the functional currency of an
   investee company is different from that of the Company, the investee company constitutes a
   foreign operation and its financial statements are translated for purposes of their inclusion in
   the financial statements of the Company.
   1. Foreign currency transactions
         Transactions in foreign currencies are translated to the functional currency of the Company
         at exchange rates at the dates of the transactions. Monetary assets and liabilities
         denominated in foreign currencies at the balance sheet date are translated to the functional
         currency at the exchange rate at that date. Non-monetary assets and liabilities that are
         measured in terms of historical cost in a foreign currency are translated using the exchange
         rate at the date of the transaction. Non-monetary assets and liabilities denominated in
         foreign currencies that are measured at fair value are translated to the functional currency
         at the exchange rate at the date that the fair value was determined. Foreign currency
         differences arising on retranslation are recognized in profit or loss, except for differences
         arising on the retranslation of available-for-sale non-monetary equity instruments, or
         qualifying cash flow hedges, which are recognized directly in equity.
   2. Foreign operations
         The assets and liabilities of foreign operations, including goodwill and fair value
         adjustments arising on acquisition, are translated to NIS at exchange rates at the reporting
         date. The income and expenses of foreign operations are translated to NIS at exchange
         rates at the dates of the transactions.
         Foreign currency differences are recognized directly in equity since January 1, 2007, the
         date of transition to IFRS. In accordance with IFRS 1, the Company has chosen to include
         in retained earnings all the translation differences accumulated until that date in respect of
         all foreign operations on the date of transition to IFRS. When a foreign operation is
         disposed of, in part or in full, the relevant amount in the foreign currency translation
         reserve is transferred to profit or loss.
   Foreign exchange gains and losses arising from loans that were received from foreign
   operations or provided to foreign operations, the settlement of which is neither planned nor
   likely in the foreseeable future, are considered to form part of a net investment in a foreign
   operation and are recognized directly in equity in the foreign operation translation reserve.




                                                                                          IDBD Notes 18
                                                                    IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

D. Insurance contracts and asset management contracts
   IFRS 4 which deals with insurance contracts allows the insurer to continue with the accounting
   policies regarding insurance contracts that were issued (including related acquisition costs and
   related intangible assets) as well as reinsurance contracts acquired. .As a result the significant
   accounting policies and methods of calculation of insurance operations in life assurance,
   general insurance and health insurance which were applied in these financial statements, that
   are prepared on the basis of the IFRS, are essentially identical to those which were applied in
   the last annual financial statements, which were prepared on the basis of generally accepted
   accounting principles in Israel (Israeli GAAP), except for a number of changes required from
   the transition to IFRS as detailed in Note 47. The accounting principles regarding insurance
   contracts are detailed below:
   1. Life assurance, Long Term Care (LTC) and long-term savings
        a. Recognition of income – see paragraph V3 below
        b. Liabilities in respect of life assurance and LTC contracts
             Liabilities in respect of life assurance and LTC contracts are computed according to
             the Regulator’s directives (regulations and circulars), accounting principles and
             generally accepted actuarial methods. The liabilities are included on the basis of an
             actuarial valuation and calculated according to the relevant coverage data, such as: the
             age of the policyholder, number of years of coverage, type of insurance, amount of
             insurance, etc. The reinsurers’ share in liabilities in respect of life assurance contracts is
             determined according to the conditions of the relevant contracts.
             Liabilities in respect of life assurance and LTC contracts and the reinsurers' share
             therein which are determined by the appointed actuaries of the insurance subsidiaries,
             Mr. Ofer Brant, F.IL.AA, F.I.A., MBA., and Ms. Nadine Bloomberg, F.IL.AA, (who
             replaced Ms. Michal Tamir Hait, F.IL.AA from the financial statements as at June 30,
             2008) who are officeholders in the subsidiaries.
        c. Liabilities in respect of life assurance contracts linked to the index and the
             investments linked to the index that are utilized to cover these liabilities are included
             in the financial statements according to the latest published index prior to the balance
             sheet date, including liabilities in respect of life assurance contracts regarding policies
             that, according to their terms, are semi-annually linked.
        d. The Regulator’s directives regarding reserves for payment of annuities
             In a circular published by the Regulator in February 2007, regarding the calculation of
             liabilities for payment of annuities in life assurance policies, he determined updated
             directives for the calculation of the provisions as a result of the rate of increase in life
             expectancy. The instructions require monitoring the sufficiency of the liabilities with
             respect to insurance policies which allow receipt of an annuity and their appropriate
             supplementation.
             Accordingly, the Company makes an immediate supplementation of the reserve, when
             necessary, with respect to policies in which an annuity is being paid, when the
             policyholder has reached retirement age or when a group of policies is not profitable.
             With respect to other policies, which are expected to be profitable, there is a
             supplementation of the liabilities over the policy’s term, parallel to the anticipated
             income.




                                                                                             IDBD Notes 19
                                                                IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

D. Insurance contracts and asset management contracts (cont'd)
   1. Life assurance, Long Term Care (LTC) and long-term savings (cont'd)
       e. Deferred acquisition costs
           (1) Deferred acquisition costs of life assurance policies and LTC (hereunder – the
                DAC) that are sold from January 1, 1999 include commissions for agents and
                acquisition supervisors as well as other expenses relating to the acquisition of
                new policies, including part of the administrative and general expenses. The
                DAC is amortized in equal annual rates over the policy’s term, but not over more
                than 15 years. The DAC in respect of cancelled policies are written-off at the
                time of cancellation.
                Deferred acquisition costs in respect of policies that were issued up to December
                31, 1998 are computed according to the Zillmer deduction method by the
                Company’s actuary, based on a percentage of the premium or of the amount at
                risk according to the various insurance programs. The Zillmer deduction of
                “Adif” policies is 10% per annum and for “Traditional” policies, over the
                policy’s term.
           (2) Commissions to agents and acquisition supervisors that are paid for the
                acquisition of asset management contracts (investment contracts, pension funds
                and provident funds) are reported as deferred acquisition costs (DAC) if they can
                be identified separately and can be measured reliably and if they are expected to
                be returned through the payment of management fees. The DAC is amortized
                over the period of 12 years which constitutes the estimated period for receiving
                income from management fees, and taking the cancellations into account.
           (3) An examination of the DAC’s recoverability - in accordance with the directives
                of the Regulator of Insurance, the actuaries in consolidated insurance companies
                in Israel, examine each year the recoverability of the DAC. This calculation
                examines whether the liabilities for insurance contracts, net of the DAC for
                policies sold since the year 1999, is sufficient and if the policies are expected to
                create the future income which covers the DAC deduction and the insurance
                liabilities, the operating expenses and the commissions for those policies. The
                examination is prepared for all the underwriting years together.
                The assumptions that are utilized for this examination which include
                assumptions regarding cancellations, operating expenses, rate of return on assets,
                mortality and morbidity rates, are determined by the actuary every year based on
                a review of past experience and relevant up-to-date research studies that are
                known to the Company on the date of calculation.
       f. Liability Adequacy
           The appointed actuaries examine each year, that the total reserve, net of deferred
           acquisition costs, is sufficient to cover the future anticipated cash flows: claims,
           commissions and expenses, net of premiums and investment income. The cash flows
           are examined after deduction of anticipated cancellations and capitalization of non-
           risk real interest in respect of existing policies, under reasonable assumptions. This
           examination is done on a number of levels, as follows:
           (1) The consolidated insurance companies examine the sufficiency of the liabilities
                in respect of life assurance and LTC contracts. If it turns out from the
                examination that the premiums received are not sufficient to cover the expected
                claims, a special provision for the deficiency is recorded. The examination is
                made separately for the individual policies and for collective policies. In the
                case of individual policies, the examination is made at the product level, whereas




                                                                                       IDBD Notes 20
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

D. Insurance contracts and asset management contracts (cont'd)
       f. Liability Adequacy (cont'd)
           (1) Cont'd
                 in the case of collective policies, the examination is performed on the level of the
                 individual collective.
                 The assumptions used in the abovementioned examinations include assumptions
                 regarding cancellations, operating expenses, rate of return on assets, mortality
                 and morbidity rates, and they are determined by the actuary every year based on
                 examinations, past experience and other relevant research studies. Regarding
                 collective policies, the examination is made based on the claims’ history of the
                 individual collective and subject to the statistical reliability of this experience.
           (2) Examination of DAC recoverability – see paragraph e3 above.
       g. Outstanding claims
           Outstanding claims, net of the reinsurers’ share therein, are computed on an
           individual case basis, according to the estimation of the Group’s experts, on the basis
           of notifications regarding insurance events and sums insured.
           The provisions for annuity payments and the provisions for ongoing claims in
           payment for disability insurance and LTC, the direct and indirect expenses deriving
           from them, as well as the provisions for incurred but not yet reported claims (IBNR)
           were included under liabilities for insurance and investment contracts.
       h. Investment contracts
           Receipts in respect of investment contracts are not included in the item of earned
           premiums, but are directly allocated to liabilities for insurance and investment
           contracts. Surrenders and maturities of these contracts are not allocated to the
           statement of profit and loss, but are deducted directly from the liabilities for insurance
           and investment contracts.
           In respect of these contracts the statement of profit and loss includes investment
           income, management fees collected from policyholders, change in liabilities in
           respect of insurance and investment contracts at the rate of the policyholders’ share in
           the investment income, commissions to agents, and general and administrative
           expenses.
       i. Provision in respect of profit participating collective insurance policyholders
           The provision is included in the creditors and payables item in the balance sheet, and
           the change in provision is offset from the income from premium.
   2. General and health insurance with the exception of long-term care
       a. Recognition of income -see Paragraph V.3 below.
       b. The items of change in liabilities and payments for insurance contracts, gross and on
           retention, include, among others, settlement and direct handling costs of claims paid,
           indirect expenses for settlement of claims, as well as an adjustment of the provision
           for outstanding claims and their direct handling costs, as well as indirect expenses for
           settlement of claims, recorded in previous years.
       c. Liabilities in respect of insurance contracts and deferred acquisition costs
           The insurance reserves and the outstanding claims included in the liabilities in respect
           of insurance contracts, the reinsurers’ share in the reserve and in outstanding claims,
           included in the item reinsurance assets, and deferred acquisition costs in general
           insurance, were computed in accordance with the Supervision of Insurance Business
           Regulations (Methods of Calculating Provisions for Future Claims in General
           Insurance),1984, amended, the Regulator’s directives and generally accepted actuarial
           methods for computing outstanding claims, are applied at the actuaries’ discretion.
           The liabilities in respect of insurance contracts were computed by the appointed
           actuaries.




                                                                                        IDBD Notes 21
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

D. Insurance contracts and asset management contracts (cont'd)
   2. General and health insurance with the exception of long-term care (cont'd)
       d. The item liabilities in respect of insurance contracts, includes insurance reserves and
           outstanding claims, as follows
           (1) Provision for unearned premium reserve, reflects the insurance fees relating to
                the insurance period after the balance sheet date and is calculated on a daily basis.
           (2) Provision for premium deficiency. This provision is recorded in the event that
                the unearned premium (net of deferred acquisition costs) does not cover the
                anticipated cost in respect of insurance contracts. In the motor casco and
                comprehensive residential branches the provision is based on, among others, a
                model determined in the Regulations for Supervision of Insurance Business
                (Mode of Calculating Provisions for Future Claims in General Insurance), 1984
                (hereunder – regulations for calculating reserves).
           (3) Insurance reserves in health insurance calculated according to actuarial
                estimates, and including, when required, a provision in respect of an anticipated
                loss on retention (premium deficiency) calculated on the basis of the cash flows
                estimate in respect of the contracts.
           (4) Outstanding claims that are computed according to the methods detailed below:
                a. Outstanding claims and the reinsurers’ share therein are included based on
                     an actuarial valuation, except for the branches detailed in paragraph B
                     below.
                     Provision for indirect expenses for the settlement of claims are included
                     according to an actuarial valuation.
                     The actuarial calculation was made by the appointed actuary in general
                     insurance, Mrs. Naama Hashmonai, F.IL.A.A., and Ms. Nadine Bloomberg
                     F.IL.A.A., who replaced Ms. Michal Tamir Hait, F.IL.A.A..The actuarial
                     calculation of outstanding claims in respect of general insurance business
                     obtained by a syndicate of Lloyds owned by a subsidiary operating in the
                     UK was made by the actuary of the Chaucer Syndicate Group, the company
                     managing the syndicate.
                     The actuarial calculation of outstanding claims in respect of general
                     insurance business obtained by insurance subsidiaries in the USA (workers
                     compensation branch), was made by an external firm of consultant
                     actuaries.
                     Claims recoveries and salvage are taken into consideration in the database
                     by which the actuarial valuations of the outstanding claims are calculated. In
                     non-statistical branches, the claims recoveries are taken into account on a
                     specific basis at the time of assessing the risk included in the claims
                     portfolios.
                b. In the insurance of freight, marine hull and aircraft, sales law guarantee and
                     financial guarantees, wherein the actuary determined that an actuarial model
                     cannot be applied due to lack of statistical significance, the outstanding
                     claims were included on the basis of the valuations of external experts and
                     employees of Clal Insurance Enterprises Holdings who handle claims, the
                     reports of ceding companies for incoming business and with the addition of
                     IBNR if necessary.




                                                                                        IDBD Notes 22
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

D. Insurance contracts and asset management contracts (cont'd)
   2. General and health insurance with the exception of long-term care (cont'd)
       d. (4) cont'd
                 c. Excess of income over expenses
                      Regarding all businesses with long tail claims (branches in which the time
                      required for issuing a notice of damage and/or determining damage and its
                      compensation, is long and can be a number of years), such as the liability and
                      motor act branches, the excess of income
                      over expenses is calculated on a tri-annual cumulative basis, in the Sales Law
                      Guarantees branch, on a five-year cumulative basis and in the financial
                      guaranties branch, at the end of the policy’s term ("the excess").
                      The excess is calculated, according to the regulations for calculating reserves
                      and the Regulator’s directives, on the basis of income from premiums, net of
                      the acquisition and claims expenses, with the addition of a 3% yeild per
                      annum, in real terms (regardless of the actual yield from the investments) net
                      of the reinsurers’ share, for each insurance branch and the respective
                      underwriting year. The excess accumulated until its release, from the
                      beginning of the insurance, net of the provision for unearned premium less
                      deferred acquisition costs and net of outstanding claims calculated as
                      aforementioned (hereunder- the fund), is included under liabilities for
                      insurance contracts and the deficiency is imputed as an expense.
                      Up to December 31, 2006, the fund in the liability branches, was credited by
                      the actual investment income but not less than an accumulated yield of 3%
                      per annum, in real terms.
                      The outstanding claims in respect of general insurance business received by
                      a syndicate of Lloyds owned by a subsidiary operating in the UK, include
                      excess income over expenses calculated consistently with prior year on a
                      two-year cumulative basis for each underwriting year for all the general
                      insurance branches (mainly property and accident insurance).
                 d. In the opinion of Clal Insurance Enterprises Holdings' the outstanding
                      claims are sufficient, considering the fact that the outstanding claims are
                      mainly calculated on an actuarial basis and their balance includes sufficient
                      provisions for the IBNR, if necessary.
       e. Deferred acquisition costs:
            (1) Deferred acquisition costs in general insurance include agents’ commissions and
                 part of the general and administrative expenses related to the issuance of polices,
                 in respect of the unearned insurance premiums on retention. The acquisition
                 costs are calculated for each branch separately, on the basis of the actual rates of
                 expenses or according to standard rates, as determined in the Supervision
                 Regulations, as a percentage of the unearned premium, at the lower of the two.
            (2) Deferred acquisition costs in health insurance include commission to agents and
                 acquisition supervisors and other expenses related to the acquisition of other
                 policies.
                 The deferred acquisition costs are amortized at equal rates over the policy’s term,
                 but no longer than six years. Deferred acquisition costs relating to cancelled
                 policies are written off on the cancellation date.




                                                                                        IDBD Notes 23
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

D. Insurance contracts and asset management contracts (cont'd)
   2. General and health insurance with the exception of long-term care (cont'd)
       e. Deferred acquisition costs (cont'd):
             (3) In accordance with the Regulator’s directives, the subsidiary’s actuary examines
                  each year the recoverability of the deferred acquisition costs in health insurance
                  (hereunder – the DAC). For this calculation the examination is prepared so that
                  the reserve net of the DAC in respect of policies sold since 2005, which the DAC
                  calculation is sufficient, and the policies are expected to produce future income to
                  cover the DAC deduction and the insurance liabilities, operating expenses and
                  commissions in respect of these policies. The examination is prepared for all the
                  underwriting years together.
                  The assumptions used in the abovementioned examinations include assumptions
                  regarding cancellations, operating expenses, rate of return on assets, mortality
                  and morbidity rates, and they are determined by the actuary every year based on
                  examinations of past experience and other relevant up-to-date research studies.
       f. Business received from the Israeli pool for motor vehicle property insurance of the
             Association of Insurance Companies in Israel (the Pool), from other insurance
             companies (including co-insurance) and from underwriting agencies, is reported
             according to the accounts received up to the balance sheet date with the addition of the
             relevant provisions, based on the Company’s rate of participation in them.
E. Provision for doubtful debts
   1. In respect of outstanding premiums, unquoted debt assets and other debts – the provision is
       determined in a specific manner in respect of the debts which in the opinion of management
       their collection is doubtful.
   2. The liabilities of secondary insurers towards the consolidated insurance companies do not
       release the consolidated insurance companies from their liabilities towards those insured
       under the insurance policies. Secondary insurers who fail to meet their liabilities under
       secondary insurance contracts may cause losses for the consolidated insurance companies.
       The subsidiaries set up provisions for doubtful debts in respect of reinsurers’ debts whose
       collection is doubtful on the basis of individual risk estimates.
       In addition, for determining the reinsurers' share in outstanding claims and insurance
       reserves, the subsidiaries take into account, among other things, an assessment of the
       likelihood of collection from the reinsurers, while the reinsurers’ share, as mentioned, is
       computed on an actuarial basis, the share of those reinsurers who are having financial
       difficulties is computed by the actuary, which takes all the risk factors into account.
       When reinsurers are facing difficulties, they may raise various arguments related to
       recognition of the debt. In such cases, the subsidiaries take into account, when preparing the
       provisions, the reinsurers’ willingness to make cut off agreements.
F. Financial instruments
   1. Non-derivative financial instruments
       Non-derivative financial instruments comprise investments in equity and debt securities,
       trade and receivables, cash and cash equivalents, loans and borrowings, and trade and
       other payables.
       Non-derivative financial instruments are recognized initially at fair value plus, for
       instruments not at fair value through profit or loss, any directly attributable transaction
       costs. Subsequent to initial recognition non-derivative financial instruments are measured
       as described below.
       A financial instrument is recognized when the Group assumes upon itself the contractual
       conditions of the instrument. Financial instrument is decreased when the contractual rights
       of the Group to the cash flows deriving from the financial assets expire, or when the Group




                                                                                         IDBD Notes 24
                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

F. Financial instruments (cont'd)
   1. Non-derivative financial instruments (cont'd)
       transfers to others the financial asset without retaining control over the asset or actually
       transfers all the risks and benefits deriving from the asset. Ordinary purchases and sales of
       financial asset are recognized on the trade date, meaning on the date the Company
       undertook to purchase or sell the financial asset. Financial liabilities are decreased when
       the obligation of the Group, as specified in the agreement, expires or when it is settled or
       cancelled.
       The fair value of non-derivative financial liabilities, which was determined for disclosure
       purposes, is calculated on the basis of the present value of the expected principal and
       interest payments discounted at the market interest rate at the reporting date.
       Cash and cash equivalents
       Cash comprises cash balances available for immediate use and call deposits. Cash
       equivalents comprise short-term highly liquid investments that are readily convertible into
       known amounts of cash and are exposed to insignificant risks of change in value and are
       not restricted by a lien.
       Held-to-maturity investments
       If the Group has the positive intent and ability to hold debt securities to maturity, then they
       are classified as held-to-maturity. Held-to-maturity investments are measured at amortized
       cost using the effective interest method, less any impairment losses.
       Available-for-sale financial assets
       The Group’s investments in certain shares and certain debt instruments are classified as
       available-for-sale financial assets. Subsequent to initial recognition, these investments are
       measured at fair value and changes therein, other than continuous or material impairment
       losses, foreign exchange gains and losses in respect of debt instruments and the accrual of
       effective interest on available-for-sale monetary items (such as: debt instruments), are
       recognized directly in equity. A dividend received in respect of available-for-sale financial
       assets is recognized in profit or loss on the date the entity’s right to receive the payment is
       established. When an investment is decreased, the cumulative gain or loss in equity is
       transferred to profit or loss. The amounts recognized in profit or loss in respect of
       available-for-sale financial assets that are part of the Group’s liquid resources, are included
       in financing income or financing expenses, as relevant. The amounts recognized in profit
       or loss in respect of other available-for-sale financial assets are included in the gain on sale
       of investments and assets or in the loss from sale and write-off of investments and assets,
       as relevant.
       Investments at fair value through profit or loss
       A financial instrument is classified at fair value through profit or loss if it is held for
       trading or is designated as such upon initial recognition. Financial instruments are
       designated at fair value through profit or loss if the Company manages such investments
       and makes purchase and sale decisions based on their fair value in accordance with the
       Group’s documented risk management or investment strategy, or if their measurement at
       fair value reverses or reduces an accounting distortion. Upon initial recognition,
       attributable transaction costs are recognized in profit or loss when occurred. These
       financial instruments are measured at fair value, and changes therein are recognized in
       profit or loss.
       In accordance with the amendment to IAS 39, “Financial Instruments: Recognition and
       Measurement” and IFRS 7, “Financial Instruments: Disclosures”, it is permitted to
       reclassify (after initial recognition), certain financial instruments held-for-trading to
       various categories such as: shares or debentures quoted on an active market, from the fair-
       value-through-profit-or-loss-category to the available-for-sale category or to the held-to-
       maturity category. This reclassification is permitted with respect to certain financial




                                                                                          IDBD Notes 25
                                                                   IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

F. Financial instruments (cont'd)
    1. Non-derivative financial instruments (cont'd)
        Investments at fair value through profit or loss (cont'd)
        instruments held for trading, if these instruments are no longer held for the purpose of
        being sold or bought back in the near future.
        In addition, it is permitted, under conditions, to reclassify certain financial instruments
        from the available-for-sale category to the loans and receivables category.
        Loans and receivables
        Loans and receivable are non-derivative financial assets with fixed or determinable
        payments that are not traded on an active market. After initial recognition, the loans and
        receivables are measured at amortized cost using the effective interest method after
        transaction costs allocation and deduction of any impairment losses.
        Determination of fair value of investments in shares and debt instruments
        The fair value of financial assets at fair value through profit or loss, of held-to-maturity
        investments and of available-for-sale financial assets is determined with reference to their
        quoted closing bid price at the reporting date, and in the absence of such a quoted price, by
        other accepted valuation methods. In periods subsequent to initial recognition, the fair
        value of held-to-maturity investments is calculated only for the purpose of disclosure.
    2. Derivative financial instruments
        The Group holds derivative financial instruments to hedge its foreign currency, interest
        rate and inflation risk exposures. Embedded derivatives are separated from the host
        contract and accounted for separately if the economic characteristics and risks of the host
        contract and the embedded derivative are not closely related, a separate instrument with
        the same terms as the embedded derivative would meet the definition of a derivative, and
        the combined instrument is not measured at fair value through profit or loss.
        Derivatives are recognized initially at fair value; attributable transaction costs are
        recognized in profit or loss when incurred. Subsequent to initial recognition, derivatives
        are measured at fair value, and changes therein are accounted for as described below.
        Under IFRS, embedded derivatives in insurance, wherein the embedded derivative itself is
        an insurance contract, are not separated.
        Fair value hedges
        Changes in the fair value of a derivative hedging instrument designated as a fair value
        hedge are recognized in profit or loss. The hedged item also is stated at fair value in
        respect of the risk being hedged; and changes in fair value are recognized in profit or loss.
        Cash flow hedges
        Changes in the fair value of the derivative hedging instrument designated as a cash flow
        hedge are recognized directly in equity to the extent that the hedge is effective. To the
        extent that the hedge is ineffective, changes in fair value are recognized in profit or loss. If
        the hedging instrument no longer meets the criteria for hedge accounting, expires or is
        sold, terminated or exercised, then hedge accounting is discontinued. The cumulative gain
        or loss previously recognized in equity remains there until the forecast transaction occurs
        or is no longer expected to occur.. When the hedged item is a non-financial asset, the
        amount recognized in equity is transferred to the carrying amount of the asset when it is
        recognized. In other cases the amount recognized in equity is transferred to profit or loss in
        the same period that the hedged item affects profit or loss.




                                                                                           IDBD Notes 26
                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

F. Financial instruments (cont'd)
    2. Derivative financial instruments (cont'd)
        Economic hedges
        Hedge accounting is not applied to derivative instruments that economically hedge
        monetary assets and liabilities denominated in foreign currencies or linked to the CPI.
        Changes in the fair value of such derivatives are recognized in profit or loss as part of
        financing income or financing expenses.
        Derivatives that do not serve as a hedge and a hedge that does not meet the hedge
        accounting criteria
        The changes in fair value of these derivatives are recognized immediately in profit or loss.
        Inter alia, the Group implements the said accounting treatment to changes in the fair value
        of options that do not have a fixed exercise price. A liability in respect of options that were
        issued by the Group was classified as long-term in accordance with IAS 1, since if the
        options are exercised they will be exercised by means of an issuance of equity and not in
        cash.
        Separable embedded derivatives
        Changes in the fair value of separable embedded derivatives are recognized immediately in
        profit or loss. Inter alia, the Group implements the said accounting treatment to changes in
        the market value of the conversion option of CPI-linked convertible debentures.
        Determination of fair value of derivatives
        The fair value of foreign currency forward contracts is estimated on the basis of quotes of
        banks/brokers or on the basis of the discounted difference between the forward price
        specified in the contract and the present forward price in respect of the remaining period to
        maturity of the contract, while using a risk-free interest rate based on government
        debentures. The fair value of CPI forward contracts and interest rate swaps is based on
        quotes of banks/brokers. Reasonableness of the quotes is examined by discounting the
        future estimated cash flows according to the terms and duration to maturity of each
        contract and using market interest rates of a similar instrument at the date of measurement.
    3. Compound financial instruments
        Compound financial instruments issued by the companies comprise convertible notes that
        can be converted to share capital at the option of the holder for an issuance of shares in a
        number that does not vary with changes in their fair value, and that have a fixed exercise
        price.
        The liability component of a compound financial instrument is recognized initially at the
        fair value of a similar liability that does not have an equity conversion option. The equity
        component is recognized initially at the difference between the fair value of the compound
        financial instrument as a whole and the fair value of the liability component. Any directly
        attributable transaction costs are allocated to the liability and equity components in
        proportion to their initial carrying amounts.
        Subsequent to initial recognition, the liability component of a compound financial
        instrument is measured at amortized cost using the effective interest method. The equity
        component of a compound financial instrument is not remeasured subsequent to initial
        recognition.
        Interest, dividends, losses and gains relating to the financial liability are recognized in
        profit or loss.
        Distributions to the equity holders are recognized against equity, net of any tax benefit.
        In accordance with IFRS 1, the Group has chosen to not separate compound financial
        instruments into an equity component and a liability component, when at the date of
        transition to reporting according to IFRS (January 1, 2007) the liability component no
        longer exists.




                                                                                          IDBD Notes 27
                                                                   IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

F. Financial instruments (cont'd)
    4. CPI-linked assets and liabilities that are not measured at fair value
        The value of CPI-linked financial assets and liabilities, which are not measured at fair
        value, is remeasured every period in accordance with the actual increase in the CPI.
    5. Financial liabilities at fair value through profit or loss
        Financial liabilities at fair value through profit or loss include financial liabilities that are
        designated on initial recognition to be measured at fair value with changes being
        recognized in profit or loss.
        Derivatives, including embedded derivatives that were separated, are classified as held for
        trading unless they are designated for use as instruments for effective hedging. If a
        contract has one or more embedded derivative, the entire hybrid contract can be designated
        as a financial liability at fair value through profit or loss, with the exception of an
        embedded derivative that does not cause a material change in cash flows or when it is clear
        that separation of the embedded derivative is not permitted.
    6. Issuance of block of securities
        a. The consideration received from the issuance of a block of securities is attributed at
             first to financial liabilities that are measured each period at fair value through profit or
             loss, and then to financial liabilities that are measured only upon initial recognition at
             fair value. The remaining amount is the value of the equity component.
        b. Direct issuance costs are attributed to the specific securities in respect of which they
             were incurred, whereas joint issuance costs are attributed to the securities on a
             proportionate basis according to the allocation of the consideration from the issuance
             of the block, as indicated in (a) above.
    7. Exchange of Financial Liabilities
        The exchange of financial liabilities with materially different terms between an existing
        borrower and lender is treated as the disposal of the original financial liability and
        recognition of a new financial liability. In addition, significant change in the terms of an
        existing financial liability or part thereof is treated as the extinguishment of the original
        financial liability and recognition of a new financial liability. Change is material in the
        event that the present value of cash flows under the new terms, including any fees paid, net
        of any fees received, discounted at the original effective interest rate, differs by at least ten
        percent from the present discounted value of the remaining cash flows of the original
        financial liabilities.
    8. The insurance companies and the companies operating in the finance branch decided
        to designate assets as follows:
        a. Assets in investment portfolios of policies participating in investment profits
             These assets, which include marketable and non-marketable financial instruments, are
             designated at fair value through profit or loss, for the following reasons: These are
             portfolios under management, separate and identified, whose statement at fair value
             significantly reduces an accounting distortion of financial asset and financial liability
             mismatch. Furthermore, the management is based on fair value and the portfolio's
             performance is measured at fair value, in accordance with a documented risk
             management strategy. The information about the financial instruments is reported to
             the management (the relevant investments committee) internally at fair value.




                                                                                            IDBD Notes 28
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

F. Financial instruments (cont'd)
    8. The insurance companies and the companies operating in the finance branch decided
        to designate assets as follows (cont'd):
        b. Non-marketable assets which are not included in investment portfolios against profit-
             sharing policies (nostro)
             These assets, which apply for loans group and debit balances receivable criterions,
             which include designated debentures (Hetz agreements), other non-negotiable
             debentures, commercial certifications, deposit with banks and loans and debit
             balances receivable, are classified to this group and stated in the balance sheet as non-
             marketable debt assets.
             Non-marketable shares are classified as available-for-sale financial assets.
        c. Marketable assets which are not included in investment portfolios against profit-
             sharing policies (nostro) that do not include embedded derivatives or do not constitute
             derivatives (including investment funds)
             These assets were classified into groups of financial assets available for sale (mainly
             at the consolidated insurance companies), or designated to fair-value groups through
             profit and loss (mainly nostro portfolios at the Clal Finance group).
        d. Derivatives and financial instruments that include embedded derivatives requiring
             separation
             These assets, marketable and non-marketable, are designated at fair value through
             profit or loss commencing on the transition date (excluding derivatives designated as
             effective hedging instruments).
        e. Marketable assets and liabilities of special purpose entities (index, reverse tracker,
             complex certificates and certain liability certificates) ("the certificates")
             According to IAS 39, “Financial Instruments: Recognition and Measurement”, the
             Group chose to designate the marketable securities used as back-up assets to fair
             value through profit or loss. Liabilities in respect of the certificates are a hybrid
             financial instrument comprising a host contract and an embedded derivative. Under
             IAS 39, the accounting treatment of the host contract (certificates which are a zero
             coupon loan) is separated from that of the embedded derivative (a forward transaction
             on the index to which the certificates are linked to), and each of them is measured
             separately. The host contract within the certificate is measured at amortized cost on
             each reporting date, net of the balance of the issuance expenses not yet amortized.
             IAS 39 does not require separate presentation of each of the components of the hybrid
             instrument. In the opinion of the Group, presentation of the components of the
             certificate together more properly reflects the economic nature of the liability in
             respect of the certificates.
             Under IAS 39, when a hybrid financial instrument includes an embedded derivative,
             the embedded derivative is stated at fair value. Changes in fair value through the life
             of the certificates are charged to profit or loss. The fair value of the embedded
             derivative at the issuance date of the certificates is almost zero. Accordingly, the
             issuance costs of the certificates are attributed proportionately between the embedded
             derivative and the host contract. Since the value of the embedded derivative is
             negligible, most of the issuance expenses are attributed to the host contract (zero
             coupon loan).
        f. Financial assets and liabilities of certain liability certificates
             Marketable and non-marketable financial assets and liabilities of liability certificates
             included in a portfolio measured as a whole by the company at fair value are stated at
             fair value.




                                                                                         IDBD Notes 29
                                                                   IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

F. Financial instruments (cont'd)
    8. The insurance companies and the companies operating in the finance branch decided
        to designate assets as follows:
        g. Reclassification of financial assets
             An amendment of International Accounting Standard 39 and of International
             Financial Reporting Standard 7 was issued on October 13, 2008 (the "Amendment").
             In certain cases, the Amendment allows financial assets held for trading (except
             derivatives) to be removed from the category of fair value through profit and loss, and
             allows financial assets to be moved from the available-for-sale category to the loans
             and receivables category, provided that they comply with the definition of loans and
             receivables (if they were not originally actively designated for the available-for-sale
             category); and as of now, the entity has the intention and ability to hold them in the
             foreseeable future or to maturity.
             After reclassification from the fair value through profit and loss or available-for-sale
             groups, if there is an estimate that the expected cash flow from the asset will increase,
             profit should not be recognized immediately but should be spread from that time,
             according to the effective interest method. If an entity chooses to reclassify from one
             category to another, extensive disclosure requirements will apply.
             An entity that decides to reclassify starting November 1, 2008 shall apply the
             directives of the Amendment as of the date of the decision.
             Due to the severe crisis underway in Israeli and global capital markets, which has
             included steep declines in prices of corporate and government bonds since September
             2008, a consolidated company has reexamined the management policy of a tradable-
             securities portfolio under its ownership. In early October 2008, the consolidated
             company decided to change the management policy of the portfolio so that the
             portfolio would no longer be held for current trading but would be held until an
             increase in value, or until the funds were necessary in order to finance investments.
             Following the change in the management policy of the portfolio, the consolidated
             company decided to change the accounting classification of the portfolio to a portfolio
             available for sale, as of the start of the fourth quarter of 2008 (based on the
             Amendment).
    9. Determination of fair value
        The fair value of the investments traded actively in organized financial markets is
        determined by the market prices on the date of the balance sheet. For investments that do
        not have an active market, the fair value is determined by using valuation methods. These
        methods are based on transactions recently made at market terms, reference to the present
        market value of another similar instrument, discounted cash flows or other valuation
        methods. The fair value of non-marketable debentures, loans and deposits included in
        financial investments of performance-based contracts is calculated using the discounted
        cash flow model. The interest rates for discounting are determined by a company that
        issues interest quotes for the different risk ratings.
G. Fixed assets
    1. Recognition and measurement
        Fixed asset items are measured at cost less accumulated depreciation and any accumulated
        impairment losses.
        Cost includes expenditure that is directly attributable to the acquisition of the asset. The
        cost of self-constructed assets includes the cost of materials and direct labor, and any other
        costs directly attributable to bringing the asset to the location and condition necessary for it
        to begin operating in the manner intended by management, as well as the costs of
        dismantling and removing the items and restoring the site on which they are located.




                                                                                           IDBD Notes 30
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

G. Fixed assets (cont'd)
   1. Recognition and measurement (cont'd)
       Purchased software that is integral to the functionality of the related equipment is
       recognized as part of that equipment.
       A fixed asset that was purchased in consideration for another non-monetary item in a
       transaction having a commercial substance is recognized at fair value.
       When major parts of a fixed asset item (including the costs of significant periodic
       examinations) have different useful lives, they are accounted for as separate items (major
       components) of fixed assets.
       Changes in the obligation to dismantle and remove the items and to restore the site on
       which they are located, other than changes deriving from the passing of time, are added or
       deducted from the cost of the asset in the period in which they occur. The amount
       deducted from the cost of the asset shall not exceed the balance of the carrying amount on
       the date of change, and any balance is attributed immediately in profit or loss.
       Gains and losses on disposal of a fixed asset item are recognized in the statement of
       income under the gain from realization of investments and assets or the loss from
       realization and reduction of investments and assets, as relevant.
   2. Reclassification to investment property
       See Paragraph J hereunder regarding reclassification of fixed assets to investment property
       and reclassification of investment property to fixed assets.
   3. Subsequent costs
       The cost of replacing part of a fixed asset item is recognized in the carrying amount of the
       item if it is probable that the future economic benefits embodied within the part will flow
       to the Group and its cost can be measured reliably. The carrying amount of the replaced
       part is derecognized. The costs of the day-to-day servicing of fixed assets are recognized
       in profit or loss as incurred.
   4. Depreciation
       Depreciation is recognized in profit or loss on a straight-line basis over the estimated
       useful lives of each part of a fixed asset item. Leased assets are depreciated over the
       shorter of the lease term and their useful lives. Land is not depreciated.
       The estimated useful lives for the current and comparative periods are as follows:
                                                             years
       Building                                              25-50
       Machinery, installations and equipment             3-33 (in 2007-mainly 3-17 years)
       Computers, office furniture and equipment          3-17 (mainly 3-6 years)
       Motor vehicles                                        5-7 (in 2007 5-10 years)
       Fixtures in leased buildings                       10 (in 2007 10-24 years)
       Communications network                                5-20
       Network control and examination equipment 4-6
       Orchards and irrigation facilities                    5-7
       Airplane                                              6

       Leasehold improvements are amortized on a straight line basis over the shorter of the lease
       term (including the option period for extension that the Group intends to exercise) or the
       estimated useful life of the assets.
       Depreciation methods, useful lives and residual values are reviewed at least each reporting
       date.
H. Intangible assets
   1. Goodwill
       Goodwill or negative goodwill arises on the acquisition of subsidiaries, including
       acquisitions of minority interests, affiliates (including acquisitions of additional rights in
       affiliates) and joint ventures, and in acquired business operations. Negative goodwill is
       recognized immediately in profit or loss.



                                                                                        IDBD Notes 31
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

H. Intangible assets (cont'd)
   1. Goodwill (cont'd)
       Acquisitions prior to January 1, 2007
       As part of its transition to IFRS, the Group chose to restate only those business
       combinations, acquisitions of affiliates, acquisitions of jointly controlled entities and
       acquisition of minority interests that occurred on or after January 1, 2007. In respect of
       acquisitions prior to January 1, 2007, goodwill represents the amount recognized by the
       Group under Israeli GAAP. In respect of these acquisitions, the accounting classification
       and treatment were not adjusted to IFRS for purposes of preparing the Group’s opening
       balance.
       For acquisitions after January 1, 2007, goodwill represents the excess of the cost of the
       acquisition over the Company’s interest in the net fair value of the identifiable assets,
       liabilities and contingent liabilities of the acquire. When the excess is negative (negative
       goodwill), it is recognized immediately in profit or loss.
       Acquisition of minority interests
       The amount paid in excess of the book value of the minority rights acquired is recognized
       as goodwill. In cases in which the book value exceeds the amount paid, the difference is
       allocated to the statement of profit and loss.
       Subsequent measurement
       Goodwill is measured at cost less accumulated impairment losses. Goodwill, in respect of
       investees which are handled according to the equity basis method, is included in the
       investment's book value.
   2. Research and development
       Expenditure on research activities, undertaken with the prospect of gaining new scientific
       or technical knowledge and understanding, is recognized in profit or loss when incurred.
       Development activities are activities that are connected to a plan or design for the
       production of new or substantially improved products and processes. Development
       expenditure is recognized as an intangible asset only if development costs can be measured
       reliably, the product or process is technically and commercially feasible, future economic
       benefits are probable, and the Group intends to and has sufficient resources to complete
       development and to use or sell the asset. The expenditure recognized as an intangible asset
       includes the cost of materials, direct labor and overhead costs that are directly attributable
       to preparing the asset for its intended use. Other development expenditure is recognized in
       profit or loss as incurred.
       Development expenditure recognized as an intangible asset is measured at cost less
       accumulated amortization and accumulated impairment losses.
   3. Other intangible assets
       a. Intangible assets are stated at cost and include direct costs required in order to bring
             the assets to operation. Intangible assets are measured on a cost basis net of
             accumulated amortization (other than intangible assets having an indefinite useful
             life) and impairment losses.
       b. Direct and certain indirect development costs deriving from the development of assets
             for self use, and salaries of employees working on the development of software
             during the development period, are recognized as an intangible asset. These assets are
             amortized on a straight-line basis from the date the asset is ready for use. Costs
             incurred in the research stage and after the asset is ready for use are expensed
             immediately.
       c. Subsequent expenditure is recognized as intangible asset only when it increases the
             future economic benefits embodied in the specific asset to which it relates. All other
             expenditure, including expenditure on internally generated goodwill and brands, is
             recognized in profit or loss as incurred.




                                                                                        IDBD Notes 32
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

H. Intangible assets (cont'd)
   3. Other intangible assets (cont'd)
       d. Commissions arising from cellular subscriber acquisition are recognized as intangible
            assets if the costs can be reliably measured, are an inseparable part of the contract and
            can be attributed to a specific subscriber acquisition. If the costs do not meet such
            criteria, they are expensed immediately.
       e. Customer relations – The excess cost that was attributed to customer relations is
            amortized in accordance with the expected economic benefit from the customers in
            each period.
       f. Brand – The excess cost that was attributed to a brand having an indefinite useful life
            is not amortized.
       g. Amortization is calculated in accordance with the expected economic benefit from the
            assets in each period, on the basis of the estimated useful life of each group of assets,
            other than goodwill and a brand having an indefinite useful life, from the date that
            they are available for use.
            The estimated useful lives are as follows:
                                                      years
            Customer relations                        4-15      (mainly 5-8 years)
            Licenses                                  16-20     (mainly 16 years)
            Information systems                    4
            Software                                  4         (in 2007- 3-10 years)
            Concession (in 2007)                   8-10
            Know-how use right                     5-10
            Brand with defined life                5-8
            Orders backlog                            1-3
            Patents and technology                 5
            Development costs recognized as
               intangible asset                   3

               Deferred costs from subscriber acquisition of communication services are amortized
               over the anticipated period of the engagement with the cellular subscriber (mainly 18
               months).
               The estimates regarding the amortization method and useful life are reassessed at each
               reporting date.
               The Group examines the useful life of an intangible asset that is not periodically
               amortized in order to determine whether the events and circumstances continue to
               support the decision that the intangible asset has an indefinite useful life.
I.   Biological assets
     Biological assets (owned by an affiliate) are measured at fair value less estimated sale costs,
     with any change therein recognized in profit or loss. Sale costs include all costs that would be
     necessary to sell the assets. Standing timber is transferred to inventory at its fair value less
     estimated sale costs at the date of harvest.
J.   Investment property
     Investment property is property (land or building – or part of a building – or both) held by the
     Group (as the owner or under a financing lease) either to earn rental income or for capital
     appreciation or for both, but not for:
     1. Use in the production or supply of goods or services or for administrative purposes; or
     2. Sale in the ordinary course of business.
          Furthermore, leased buildings that are leased out by the Group under an operating lease are
          classified and treated as investment property.
          Investment property is initially measured at cost with the addition of transaction costs. In
          subsequent periods the investment property is measured at fair value with any changes
          therein recognized in profit or loss.



                                                                                         IDBD Notes 33
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

J.   Investment property (cont'd)
     2. Sale in the ordinary course of business (cont'd)
         Property in the process of being constructed for future use as investment property, and
         which will be measured at fair value, are measured in the construction period on the basis
         of the fair value of the land with the addition of construction costs. When the construction
         is concluded it is remeasured according to fair value and classified as investment property.
         Any gain or loss from the remeasurement is recorded in profit or loss.
         The land on which the building is being constructed is classified as investment property
         from the date of its acquisition, and is presented at fair value as from that date.
         When property is transferred from owner-occupied property to investment property,
         measured at fair value, the asset is remeasured according to fair value and is classified as
         investment property. Any gain from the remeasurement is included directly in equity. Any
         loss is included directly as an expense. When the investment property measured according
         to fair value becomes a fixed asset (owner-occupied property) or inventory, the fair value
         becomes the cost of the fixed asset or inventory, for purposes of consistent accounting
         treatment. When inventory becomes investment property measured at fair value, any
         difference between the fair value of the property on that date and its previous value on the
         books is included directly in profit or loss.
         The fair value of the investment property was determined on the basis of valuations
         prepared by independent appraisers having relevant professional skills.
         The valuations were mainly prepared by capitalizing the cash flows anticipated to derive
         from the assets. The appraisers used capitalization rates of 7%-12% p.a., which were
         determined according to the specific risks inherent in the net cash flows, taking into
         consideration the type of the property and its designation, its location, the amount of the
         lease payments compared to market prices and the quality of the lessees. Capitalization
         rates of 8%-9% were used in the valuations of office buildings and buildings used in the
         hi-tech industry and for commercial purposes (located mainly in the center of the country
         and in parks for know-how intensive industries, which have a high quality of lessees),
         whereas capitalization rates of 9%-11% were used in the valuations of workshops, storage
         and industrial buildings (located mainly in the periphery). Commercial centers and office
         buildings in the USA were valued according to a discount rate of 8%-10%.
         In certain cases where there is an active market, the fair value of the investment property
         was valued according to the estimated amount for which the investment property could
         have been exchanged on the date of the valuation between a willing buyer and a willing
         seller in an arm’s length transaction wherein the parties each acted knowledgeably.
         In light of the deterioration in the economic crisis in the fourth quarter of 2008 and the
         resulting rise in risk on the markets, the discount rates that were used by part of the Group
         companies in the valuations for December 31, 2008 increased by 0.1%-0.25%.
         None of the aforementioned valuations is material for the Company and therefore were not
         attached as required in Regulation 8B of the Securities Regulations (Periodic and
         Immediate Reports) – 1970. The Company tests the materiality of valuations, for the
         purpose of their disclosure or attachment, on the basis of materiality tests of 5% and 10%,
         respectively, while taking into consideration the ratio of the valued asset to total
         consolidated assets or the ratio of the asset impairment required in accordance with the
         valuation to the representative annual income (on the basis of the average of the last 12
         quarters).




                                                                                         IDBD Notes 34
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

K. Leased assets
   Leases in terms of which the Group assumes most of the risks and rewards of ownership are
   classified as finance leases. Upon initial recognition the leased asset aforesaid is measured at an
   amount equal to the lower of its fair value and the present value of the minimum lease
   payments. Subsequent to initial recognition, the asset is accounted for in accordance with the
   accounting policy applicable to that asset.
   The remaining leases are classified as operating leases, except for those classified as investment
   property, and the leased assets aforesaid are not recognized in the Group’s balance sheet.
   Property under an operating lease that were classified by the Group as investment property are
   recognized on the balance sheet of the Company at fair value, and the lease is accounted for as
   a finance lease.
   Leases of land from the Israel Lands Administration ("the Administration") that are not
   accounted for as investment property are operating leases. Prepaid lease fees to the
   Administration are presented on the balance sheet and recognized in profit or loss over the lease
   period. The lease period and amortization take into consideration an option to extend the lease
   period if at the beginning of the lease it was probable that the option will be exercised.
   Lease payments in respect of operating leases of land related to projects under construction,
   other than inventory, are recorded as a prepaid expense.
   The Group implements IFRIC 4, determining whether an arrangement contains a lease, which
   defines criterions for determining at the beginning of the arrangement whether a right to use an
   asset constitutes a lease arrangement. It also provides when the arrangement should be
   subsequently reexamined. The Group implemented the relief provided in IFRS 1, by which it
   determined whether an arrangement contains a lease on the basis of the facts and circumstances
   existing on January 1, 2007 (the date of transition to IFRS).
   In accordance with IFRIC 4, transactions for the acquisition of an irrevocable right to use the
   capacity of underwater communication lines are accounted for as arrangements for the receipt
   of service. The amount paid in respect of the rights to use communication lines is amortized on
   a straight line basis over the period specified in the agreement, including the period of the
   option, which constitute the estimated useful life of such capacities.
L. Inventory
   Inventory is measured at the lower of cost, less a provision for slow-moving or obsolete
   inventory, and net realizable value. The cost of inventory includes expenditure incurred in
   acquiring the inventory and bringing it to its existing location and condition. In the case of
   inventories of work in progress and finished goods, cost includes an appropriate share of
   production overheads based on normal operating capacity. Net realizable value is the estimated
   selling price in the ordinary course of business, less the estimated costs of completion and
   selling expenses.
   Cost of inventory is determined as follows: inventory of goods in stores and warehouses – at
   the last purchase price (reflecting an approximately average moving price); inventory of raw
   and packing materials – on a moving average basis or a “first in-first out” basis according to the
   type of material; inventory of finished goods and work in progress – at a standard cost that
   reflects the average manufacturing cost for the period, or on the basis of production expenses,
   with the component of raw and auxiliary materials being determined on a “first in – first out”
   basis and the labor component and indirect expenses being determined on a weighted average
   basis, all in accordance with the nature of the finished product; purchased goods and spare parts
   – on a “first in – first out” basis.
M. Inventory of cellular telephones
   Inventory of cellular telephones, related accessories and spare parts are presented at the lower
   of cost or net realizable value calculated on a moving average basis.




                                                                                         IDBD Notes 35
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

N. Inventory of real estate and residential apartments
   Inventory of real estate and residential apartments is measured at the lower of cost and net
   realizable value. Cost of inventory includes the costs incurred in acquiring the inventory
   (including prepaid operating lease fees) and bringing it to its existing location and condition. In
   the case of inventories of work in progress and finished goods, cost includes an appropriate
   share of production overheads based on normal operating capacity. Net realizable value is the
   estimated selling price in the ordinary course of business, less the estimated costs of completion
   and selling expenses.
   Inventory of real estate acquired in transactions in which the seller of the real estate receives
   building services is recognized at fair value on the date of handing over the real estate
   concurrently with the recognition of a liability for building services.
   Inventory of real estate acquired in transactions in which the Group undertakes to hand over
   cash in an amount that depends on the price the apartments built on the land are sold, is
   measured according to the fair value of the land and of the financial liability created in respect
   of the anticipated future payments. In subsequent periods, the financial liability is remeasured
   according to the anticipated cash flows discounted at the original effective interest rate of the
   liability every period, and the changes in the present value of the discounted cash flows are
   recognized in the financing item.
   The financing component of the change in present value is capitalized to the cost of the
   inventory of apartments under construction.
O. Construction work in progress
   Construction work in progress represents the gross unbilled amount expected to be collected
   from customers for contract work performed to date. It is measured at cost plus profit
   recognized to date less progress billings and recognized losses. Cost includes all expenditure
   related directly to specific projects and an allocation of fixed and variable overheads incurred in
   the group’s contract activities based on normal operating capacity.
P. Capitalization of credit costs
   Specific and non-specific credit costs were capitalized to qualifying assets as defined in IAS 23.
   Throughout the period required for completion and construction until they are ready for their
   intended use. Non-specific credit costs are capitalized in the same manner to the same
   investment in qualifying assets, or portion thereof, which was not financed with specific credit
   by means of a rate which is the weighted-average cost of the credit sources which were not
   specifically capitalized. Other credit costs are expensed as incurred. In the event of suspension
   of active development of a qualifying asset, the discounting of credit costs is suspended during
   that period.
Q. Impairment
   1. Financial assets
         A financial asset is tested for impairment when objective evidence indicates that one or
         more events have had a negative effect on the estimated future cash flows of that asset.
         An impairment loss in respect of a financial asset measured at amortized cost is calculated
         as the difference between its carrying amount, and the present value of the estimated future
         cash flows discounted at the original effective interest rate. An impairment loss in respect
         of an available-for-sale financial asset is calculated by reference to its fair value. When
         testing for impairment available for sale financial assets that are equity instruments, the
         Group also examines the difference between the fair value of the asset and its original cost
         while taking into consideration the standard deviation of the instrument’s price, the length
         of time the fair value of the asset is lower than its original cost and changes in the
         technological, economic or legal environment or in the market environment in which the
         issuer of the instrument operates.
         Individually significant financial assets are tested for impairment on an individual basis.
         The remaining financial assets, other than available-for-sale financial assets or assets




                                                                                         IDBD Notes 36
                                                                IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

Q. Impairment (cont'd)
   1. Financial assets (cont'd)
      measured at fair value through profit or loss, are assessed collectively in groups that share
      similar credit risk characteristics.
      All impairment losses are recognized in profit or loss. Any cumulative loss, continuing or
      material, in respect of an available-for-sale financial asset recognized previously in equity
      is transferred to profit or loss. Any additional impairment in respect of that asset is
      recognized in profit and loss.
      An impairment loss is reversed if the reversal can be related objectively to an event
      occurring after the impairment loss was recognized. For financial assets measured at
      amortized cost and available-for-sale financial assets that are debit securities, the reversal
      is recognized in profit or loss. For available-for-sale financial assets that are equity
      securities, the reversal is recognized directly in equity.
   2. Non-financial assets
      The carrying amounts of the Group’s non-financial assets, other than biological assets,
      investment property, inventory and deferred tax assets, are reviewed at each reporting date
      to determine whether there is any indication of impairment. Indications that are examined
      by the Group with respect to the value of its investments include a decline in prices on the
      stock exchange, continuing losses on its investments, the industry in which its investees
      operate, excess cost included in the investments and other parameters. If any such
      indication exists, then the asset’s recoverable amount is estimated. On January 1, 2007, the
      date of transition to IFRS, the Group tested for impairment goodwill, indefinite-lived
      intangible assets and investments in affiliates for which goodwill was recognized in the
      investment. In subsequent periods the Group estimates, once a year, the recoverable
      amount of the goodwill and intangible assets that have indefinite useful lives or are
      unavailable for use, or more frequently – if there are indications of impairment.
      The recoverable amount of an asset or cash-generating unit is the greater of its value in use
      and its net selling price (fair value less selling costs). In assessing value in use, the
      estimated future cash flows are discounted to their present value using a pre-tax discount
      rate that reflects current market assessments of the time value of money and the risks
      specific to the asset. For the purpose of impairment testing of identified assets, they are
      grouped together into the smallest group of assets that generates cash inflows from
      continuing use that are largely independent of the cash inflows of other assets or groups of
      assets (the “cash-generating unit”). The goodwill acquired in a business combination, for
      the purpose of impairment testing, is allocated to cash-generating units that are expected to
      benefit from the synergies of the combination. Each unit or group of units to which
      goodwill was allocated as aforementioned represents the lowest level in the Group for
      which goodwill is monitored for internal management purposes and is not larger than an
      operating segment.
      An impairment loss is recognized if the carrying amount of an asset or its cash-generating
      unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit
      or loss. Impairment losses recognized in respect of cash-generating units are allocated first
      to reduce the carrying amount of any goodwill allocated to the units and then to reduce the
      carrying amount of the other assets in the cash-generating unit on a pro rata basis.
      An impairment loss in respect of goodwill is not reversed. In respect of other assets,
      impairment losses recognized in prior periods are assessed at each reporting date for any
      indications that the loss has decreased or no longer exists. An impairment loss is reversed
      if there has been a change in the estimates used to determine the recoverable amount. An
      impairment loss is reversed only to the extent that the asset’s carrying amount does not
      exceed the carrying amount that would have been determined, net of depreciation or
      amortization, if no impairment loss had been recognized.




                                                                                       IDBD Notes 37
                                                                   IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

Q. Impairment (cont'd)
   2. Non-financial assets (cont'd)
         The Group has elected to adopt early the amendment to IAS 28, Investments in Associates,
         by which an investment in an affiliate shall be tested for impairment with respect to the
         overall investment. Accordingly, an impairment loss recognized on the investment shall
         not be specifically allocated to the goodwill included in the investment but to the overall
         investment, and therefore it will be possible to reverse the full amount of an impairment
         loss that was recognized in the past when the conditions for reversal are met.
R. Non-current assets held for sale
   Non-current assets and disposal groups comprising assets and liabilities that are expected to be
   recovered primarily through sale rather than through continuing use are classified as held for
   sale. Immediately before classification as held for sale, the assets and components of a disposal
   group are remeasured in accordance with the Group’s accounting policies. Subsequently, assets
   and disposal group are measured at the lower of their carrying amount and fair value less
   selling costs. In subsequent periods, after their classification as held for sale, the assets are not
   periodically depreciated until their classification as held for sale are not periodically
   depreciated, and investments in affiliates classified as held for sale are not accounted for by the
   equity method. Any impairment loss of a disposal group is allocated first to goodwill, and then
   to remaining assets and liabilities on pro rata basis, except that no loss is allocated to
   inventories, financial assets, deferred tax assets, employee benefit assets, investment property
   and biological assets, which continue to be measured in accordance with the Group’s
   accounting policies. Impairment losses on initial classification as held for sale and subsequent
   gains or losses on remeasurement are recognized in profit or loss. Gains are not recognized in
   excess of any cumulative impairment loss.
S. Share capital
   Ordinary shares
   Costs directly attributable to the issue of ordinary shares and share options are recognized as a
   deduction from equity.
   Treasury shares
   The Company’s shares held by the Company and/or subsidiaries are stated at cost as a
   deduction from the Company’s equity. The profit or loss from acquisition, sale, issue or
   cancellation of treasury shares is recognized directly in equity.
T. Employee Benefits
   The Group has a number of post-employment benefit plans. The plans are usually financed by
   deposits with insurance companies or with funds managed by a trustee, and they are classified
   as defined contribution plans and as defined benefit plans.
   1. Defined contribution plans
         The Group’s obligations for contributions to defined contribution pension plans are
         recognized as an expense in profit or loss as incurred.
   2. Defined benefit plans
         The Group’s net obligation, in respect of defined benefit post-retirement plans, is
         calculated separately for each plan by estimating the amount of future benefit that
         employees have earned in return for their service in the current and prior periods. That
         benefit is discounted to determine its present value, and the fair value of any plan assets is
         deducted. The discount rate is the yield at the reporting date on Government debentures
         denominated in the same currency that have maturity dates approximating the terms of the
         Group’s obligations. The calculation is performed by a qualified actuary using the
         projected unit credit method.
         When the calculation results in an asset, an asset is recognized up to the net present value
         of economic benefits available in the form of a refund from the plan or a reduction in
         future contributions to the plan. An economic benefit in the form of refunds or reductions




                                                                                           IDBD Notes 38
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

T.   Employee Benefits (cont'd)
     2. Defined benefit plans (cont'd)
        in future contributions is considered available when it can be realized over the life of the
        plan or after settlement of the obligation.
        When in the framework of a minimum contribution requirement, there is an obligation to
        pay additional amounts for services that were provided in the past, the Group recognizes
        an additional obligation (increases the net liability or decreases the net asset), if such
        amounts are not available as an economic benefit in the form of a refund from the plan or
        the reduction of future contributions. When the benefits of a plan are improved, the portion
        of the increased benefit relating to past service by employees is recognized in profit or loss
        on a straight-line basis over the average period until the benefits become vested. To the
        extent that the benefits vest immediately, the expense is recognized immediately in profit
        or loss.
        The Group recognizes all actuarial gains and losses arising from defined benefit plans
        directly in profit or loss.
        Insurance policies in respect of employee severance benefits, which were issued by Clal
        Insurance, do not constitute plan assets for defined benefit and are presented as a
        deduction from the liabilities for the relevant insurance contracts.
     3. Other long-term employee benefits
        The Group’s net obligation in respect of long-term employee benefits other than post-
        employment plans is the amount of future benefit that employees have earned in return for
        their service in the current and prior periods; that benefit is discounted to determine its
        present value, and the fair value of any related assets is deducted. The discount rate is the
        yield at the reporting date on Government debentures denominated in the same currency
        that have maturity dates approximating the terms of the Group’s obligations. The
        calculation is performed using the projected unit credit method. Any actuarial gains or
        losses are recognized in profit or loss in the period in which they arise.
     4. Severance pay to employees before they reach the accepted age of retirement
        Severance pay to employees before they reach the accepted age of retirement are
        recognized as an expense when the Group is demonstrably committed, without realistic
        possibility of withdrawal, to a formal detailed plan regarding termination of employment
        before the normal retirement date. Termination benefits for voluntary redundancies are
        recognized as an expense if the Group has made an offer encouraging voluntary
        redundancy, it is probable that the offer will be accepted, and the number of acceptances
        can be estimated reliably.
     5. Short-term benefits
        Short-term employee benefit obligations are measured on an undiscounted basis and are
        expensed as the related service is provided.
        A liability is recognized for the amount expected to be paid under short-term cash bonus or
        profit-sharing plans if the Group has a present legal or constructive obligation to pay this
        amount as a result of past service provided by the employee and the obligation can be
        estimated reliably.
     6. Share-based payment transactions
        The grant date fair value of options granted to employees is recognized as an employee
        expense, with a corresponding increase in equity, over the period that the employees
        become entitled to the options. The amount recognized as an expense is adjusted to reflect
        the number of share options that are expected to be vested. Share-based payments that
        were granted before November 7, 2002 or that have vested before January 1, 2007 are not
        accounted for retroactively, in accordance with IFRS 2 and the relief that was adopted
        pursuant to IFRS 1.




                                                                                         IDBD Notes 39
                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

T. Employee Benefits (cont'd)
   7. Change in accounting principles
        Change in accounting principles relating to the accounting treatment in respect of actuarial
        profits and losses resulting from the defined benefit plan – during the reported period the
        Company changed its accounting principles relating to the manner of allocation of
        actuarial profits and losses resulting from the defined benefit plan, so that it will be
        allocated to profit and loss to the salary expenses item (and not directly to retained
        earnings), in order to supply more reliable and relevant information regarding the
        Company’s results of activities. This change in principles reduces the accounting
        mismatch in respect of the gap resulting from the allocation of the actuarial profits and
        losses in liabilities in respect of the defined benefit plan directly to retained earnings and
        between their allocation to insurance policies issued by Clal Insurance Enterprises
        Holdings to profit and loss.
        The change in policy was applied retroactively. The effect of this change on the
        consolidated financial statements is insignificant.
U. Provisions
   A provision is recognized if, as a result of a past event, the Group has a present legal or
   constructive obligation that can be estimated reliably, and it is probable that an outflow of
   economic benefits will be required to settle the obligation. Provisions are determined by
   discounting the expected future cash flows at a pre-tax rate that reflects current market
   assessments of the time value of money and the risks specific to the liability.
   1. Warranties
        A provision for warranties is recognized when the underlying products or services are sold.
        The provision is based on historical warranty data and a weighting of all possible
        outcomes against their associated probabilities.
   2. Onerous contracts
        A provision for onerous contracts is recognized when the expected benefits to be derived
        by the Group from a contract are lower than the unavoidable cost of meeting its
        obligations under the contract. The provision is measured at the present value of the lower
        of the expected cost of terminating the contract and the expected net cost of continuing
        with the contract. Before a provision is established, the Group recognizes any impairment
        loss on the assets associated with that contract.
   3. Contingent liabilities and legal claims
        In accordance with IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”,
        the Group recognizes a provision if, as a result of a past event, the Group has a present
        obligation (legal or constructive); it is more likely than not that an outflow of economic
        benefits will be required to settle the obligation; and the amount of the obligation can be
        estimated reliably. The Managements of the Group and its investees examine the need for
        recognizing provisions and their amount with the assistance of their legal advisors. When
        the influence of the value of time is material, the provision is measured at its present value.
        There are legal proceedings in the Group that have been recently initiated the outcome of
        which cannot be assessed at this stage.




                                                                                          IDBD Notes 40
                                                                IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

V. Revenue
   1. Goods sold
       Revenue from the sale of goods is measured at the fair value of the consideration received
       or receivable, net of returns, trade discounts and volume rebates. When the credit period is
       short and constitutes the accepted credit in the industry, the future consideration is not
       discounted. The Group recognizes revenue when the significant risks and rewards of
       ownership have been transferred to the buyer, recovery of the consideration is probable,
       the associated costs and possible return of goods can be estimated reliably, there is no
       continuing management involvement with the goods, and the amount of revenue can be
       measured reliably.
       Transfers of risks and rewards vary depending on the individual terms of the contract of
       sale. For sales of products, transfer usually occurs when the product is delivered to the
       customer or the goods reach the warehouse of the customer.
       As regards goods sold in the framework of software transaction, the transfer of risks and
       rewards usually occurs upon the delivery of the software, either physically, electronically,
       by providing use rights or license to duplicate existing copies.
   2. Sales of real estate and residential apartments
       Revenue from the sale of inventory of real estate and residential apartments is measured at
       the fair value of the consideration received or receivable. The Group recognizes revenue
       when the significant risks and rewards of ownership have been transferred to the buyer,
       recovery of the consideration is probable, the associated costs and possible return of the
       inventory can be estimated reliably, there is no continuing management involvement with
       the inventory, and the amount of revenue can be measured reliably.
       Transfers of risks and rewards vary depending on the individual terms of the contract of
       sale. For sales of residential apartments, including those built for the land owners in
       building services for land transactions, transfer usually occurs when the apartment is
       handed over to the buyer.
   3. Insurance business
       a. Premiums
           - Life assurance premiums, including savings and excluding receipts in respect of
              investment contracts are mainly accounted for as revenue when due.
              Cancellations are recorded when the notification is received from the policyholder
              or when initiated by Clal Insurance due to arrears in payments, subject to legal
              provisions.
              Participation in profits for policyholders is deducted from the premiums.
           - General insurance premiums are accounted for as revenue based on monthly
              production reports. Insurance premiums usually refer to an insurance period of one
              year. Gross revenue from premiums and changes in unearned premium are
              accounted for under earned premiums, gross, which included under insurance
              business and finance income.
              Some premiums in health insurance and foreign travel are accounted for on a
              monthly or daily basis.
              Since in the motor vehicle compulsory branch of insurance, the insurance comes
              into effect only after payment of the insurance premium, the premium is accounted
              for on the date of payment.
              Insurance premiums in respect of policies that come into effect after balance sheet
              date are recorded as deferred income.
              Revenue included in the financial statements is after cancellations requested by
              policyholders and after cancellations and provisions due to non-payment of the
              premiums, subject to the law, and subtraction of participation in profits based on the
              valid agreements.




                                                                                       IDBD Notes 41
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

V.   Revenue (cont'd)
     3. Insurance business (cont'd)
         b. Management fees, commissions and other financial services
             - Management fees for performance-based insurance contracts:
                The management fees are computed in accordance with the Supervisor's directives
                on the basis of the yield and the accumulated saving of the policyholders in the
                profit-participating portfolio.
                Management fees include the following components:
                For policies sold as of January 1, 2004 – fixed management fees only.
                For policies sold up to December 31, 2003 – fixed and variable management fees.
                The fixed management fees are computed at fixed percentages of the accumulated
                saving and are recorded on a cumulative basis.
                The variable management fees are computed as a percentage of the annual real
                profit (from January 1 to December 31) attributed to the policy, less the fixed
                management fees collected from that policy. Only positive variable management
                fees can be collected, and net of negative amounts accumulated in the preceding
                years.
                During the year, the variable management fees are recorded on a cumulative basis in
                accordance with the real monthly yield if it is positive. In months when the real
                yield is negative, the variable management fees are reduced to the amount of the
                cumulative variable management fees collected since the beginning of the year.
                Negative yield, for which a reduction of the management fees was not made during
                a current year, will be deducted for the purpose of computing the management fees
                from the positive yield in the subsequent year.
             - Revenue from general insurance commission in insurance agencies is recognized as
                incurred.
             - Revenue from life assurance commission is recognized when the commission is due
                for payment according to the agreements with the insurance companies, less
                provisions for commission refunds due to anticipated cancellations of insurance
                policies.
     4. Services rendered
         Revenue from services rendered is recognized in profit or loss pro rata to the stage of
         completion of the transaction at the balance sheet date. The stage of completion is assessed
         by reference to surveys of work performed.
     5. Revenues from communication services
         Revenue deriving from use of communication networks of the Group, including revenue
         from air-time, interconnection fees and roaming services, is recognized upon the
         performance of the service, and when all other criteria to income recognition were
         obtained.
         Proceeds from the sale of cellular call cards are recognized initially as deferred income and
         recognized as revenue according to use or when they expire.
         The Group offers enhanced services including voice mail, text and multimedia messaging,
         as well as downloadable applications, including ring tones, music, games, and other
         informational content. Generally, these enhanced features and data applications generate
         additional service revenues through monthly subscription fees or increased usage through
         utilization of the features and applications. Other optional services, such as equipment
         warranty plans are also provided for a monthly fee and are either sold separately or
         bundled and included in packaged rate plans. Revenues from enhanced features and
         optional services are recognized when earned.
         When the Group acts as an agent or an intermediary without bearing the risks and rewards
         resulting from the transaction, the revenue is presented on a net basis (as a profit or a
         commission).




                                                                                         IDBD Notes 42
                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

V.   Revenue (cont'd)
     5. Revenues from communication services (cont'd)
         However, when the Group acts as a principal supplier and bears the risks and rewards
         resulting from the transaction the revenue is presented on a gross basis, while
         distinguishing the revenue from the related expenses. This presentation of revenue on a
         gross or net basis was applied with retroactive effect for all of the reported periods.
     6. Revenues from software transactions
         Software transactions are multi-component sale transactions (such as: software,
         assimilation, installation, upgrades, support, training, consultation etc.). The Group
         examines the transaction's components, including those supplied on an "if and when
         available basis", in order to determine if the components can be separately identified.
         The Group recognizes revenues from the sale of software related goods only after the
         significant risks and rewards associated with ownership over the goods have been
         transferred to the buyer, when a necessary but insufficient condition involves the delivery
         of the software, whether physically, electronically, through the grant of a right to use the
         software or a license to duplicate existing copies. The Group recognizes revenues relating
         to the supply of software related services in respect of which the expense can be reliably
         measured, based on the stage of completion of the transaction at balance sheet date. If the
         services need to be completed in several steps, whose number cannot be determined and
         over a pre-defined period, the revenues are recognized over that period, unless there is
         evidence that a different method will best reflect the stage of completion.
     7. Construction contracts
         As soon as the outcome of a construction contract can be estimated reliably, contract
         revenue and expenses are recognized in profit or loss pro rata to the stage of completion of
         the contract. Contract revenue includes the initial amount agreed in the contract plus any
         variations in contract work, claims and incentive payments to the extent that it is probable
         that they will result in revenue and can be measured reliably.
         The stage of completion is assessed by reference to surveys of work performed. The Group
         identifies a completion percentage of 25% as the earliest stage for recognizing revenue
         from construction contracts of buildings. When the outcome of a construction contract
         cannot be estimated reliably, contract revenue is recognized only to the extent of contract
         costs incurred that are likely to be recoverable. An expected loss on a contract is
         recognized immediately in profit or loss.
     8. Financial services
         Revenue from the management of pension funds and provident funds is recognized on the
         basis of the managed asset balance and on a cumulative basis and on counterparts receipt
         basis.
         Revenue from stock exchange services, management fees from mutual funds, management
         commissions of client portfolios, consultation revenue, and distribution revenue are
         recorded on a cumulative basis, according to the date the service was rendered or the
         activity was performed.
         Revenue from underwriting and management commissions, which are subject to the actual
         performance of the issuance, are recognized in profit or loss only after the issuance of the
         securities and the issuer has received the issuance proceeds, and at the same time the
         expenses in their respect are recognized.
         Gains from financial transactions that derive from interest margins, net of expenses related
         to the execution of the transactions, are recognized in profit or loss over the transaction
         period.
         Revenue from distribution commissions received from special purpose companies is
         recognized in profit or loss according to the life of the index certificates and/or the
         liabilities in respect of which they were paid.




                                                                                        IDBD Notes 43
                                                                IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

V. Revenue (cont'd)
   9. Credit sales
       Revenue from credit sales that include a finance transaction is recognized at its present
       value and the difference between the fair value of the transaction and the stated value of
       the consideration is recognized in profit or loss as financing income using the effective
       interest method.
   10. Commissions
       When the Group acts in the capacity of an agent rather than as the principal in a
       transaction, the revenue recognized is the net amount of commission made by the Group.
       Revenues deriving from commissions and credit margins are recognized on the basis of the
       transactions executed with the credit cards of an investee company at the rate and on the
       date the businesses were credited. Revenues deriving from credit margins and membership
       fees of credit cards are recognized on the date the customer is charged. Revenues deriving
       from long-term credit arrangements (over one year) are recognized on the basis of the
       present value of the future cash flows, capitalized according to market interest rates as at
       the date of the transaction. The difference between the original amount of the credit and its
       present value, as aforementioned, is spread over the period of the credit and recognized as
       interest income.
   11. Rental income
       Rental income from investment property is recognized in profit or loss on a straight-line
       basis over the term of the lease. Lease incentives granted are recognized as an integral part
       of the total rental income, over the term of the lease.
   12. Government grants
       An unconditional government grant related to a biological asset is recognized in profit or
       loss when the grant becomes receivable.
       Other government grants are recognized initially when there is reasonable assurance that
       they will be received and that the Group will comply with the conditions associated with
       the grants.
       Grants that compensate the Group for expenses incurred are recognized in profit or loss on
       a systematic basis in the same periods in which the expenses are recognized. Grants that
       compensate the Group for the cost of an asset are presented as a deduction from the related
       asset and are recognized in profit or loss on a systematic basis over the useful life of the
       asset.
       Grants from the Chief Scientists are accounted for as forgivable loans according to the
       provisions of IAS 20. Accordingly, grants received from the Chief Scientist are recognized
       as a liability according to their fair value on the date of their receipt, measured according
       to the present value of the anticipated cash flows, unless on that date it is reasonably
       certain that the amount received will not be refunded. The amount of the liability is
       reexamined each period, and any changes in the present value of the cash flows discounted
       at the original interest of the grant are recognized in profit or loss.
W. Cost of sales
   1. The cost of sales includes also expenses regarding loss, storage and handling of inventory
       until the end selling point. Cost of sales in the Group also includes ongoing license fees,
       interconnection and roaming expenses, cell site leases, depreciation and amortization
       charges and technical repair and maintenance expenses directly related to services
       rendered.
   2. Supplier discounts – the Group recognizes discounts received from suppliers as a
       deduction from the purchase cost. Therefore, the part of the discounts that relates to the
       purchases added to the closing inventory is attributed to inventory, and the rest of the
       discounts reduce the cost of sales.
       Fixed discounts that do not depend on the volume of purchases (this discount is calculated
       as a fixed percentage of the purchases made from the supplier or as an annual fixed




                                                                                       IDBD Notes 44
                                                                   IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

W. Cost of sales (cont'd)
   2. cont'd.
        amount that does not depend on the volume of purchases) are included in the financial
        statements upon the execution of the proportionate purchases that entitle the Group to the
        said discounts.
   3. When an investee company of the Group issues a credit card to a customer, it grants the
        customer the right to a membership discount that can be used in the stores of the investee
        company. The right is contingent upon charging the credit card with a minimum annual
        amount during the 12 months following the issuance. In the opinion of management of the
        investee company, this right will for the most part be utilized. The expense in respect of
        the membership discount is recognized over a period of 12 months from the date of
        utilizing the right or on the date the minimum amount is charged, whichever earlier.
X. Insurance business costs and expenses
   Insurance business costs and administrative and general expenses are classified to indirect
   expenses for settlement of claims (that are included under payments and change in liability in
   respect of insurance and investment contracts), marketing expenses, other acquisition expenses,
   operating expenses and provision of financial services and other administrative and general
   expenses. The classification is according to the Group’s internal models and according to the
   identification of expenses and overhead expenses that were loaded according to the Regulator
   of Insurance’s directives in Israel.
Y. Lease payments
   Payments made under operating leases are recognized in profit or loss on a straight-line basis
   over the term of the lease, including the optional period when on the date of the transaction it
   was reasonably certain that the option will be exercised. Lease incentives received are
   recognized as an integral part of the total lease expense, over the term of the lease.
   Minimum lease payments made under finance leases are apportioned between the financing
   expense and the reduction of the outstanding liability. The financing expense is allocated to
   each period during the lease term so as to produce a constant periodic rate of interest on the
   remaining balance of the liability.
   Contingent lease payments are accounted for by revising the minimum lease payments over the
   remaining term of the lease when the lease adjustment is confirmed.
Z. Financing income and expenses
   Financing income comprises interest income on funds invested (including interest income from
   available-for-sale financial assets that constitute a part of the Group's liquid resources),
   dividend income from marketable securities (other than affiliated companies), gains on the
   disposal of available-for-sale financial assets, an increase in the fair value of financial assets at
   fair value through profit or loss, foreign currency gains and gains on hedging instruments that
   are recognized in profit or loss and the gain from early redemption of debentures. Interest
   income is recognized as it accrues in profit or loss, using the effective interest method.
   Dividend income is recognized in profit or loss on the date that the Group’s right to receive
   payment is established, which in the case of quoted securities is the ex-dividend date.
   Financing expenses comprise interest expense on borrowings, linkage differences on
   borrowings, changes in time value of provisions, a decrease in the fair value of financial assets
   at fair value through profit or loss, impairment losses recognized on financial assets, losses on
   hedging instruments that are recognized in profit or loss and foreign currency losses. All
   borrowing costs, which are not discounted, are recognized in profit or loss using the effective
   interest method.
   Gains and losses from foreign currency and hedging instruments are reported on a net basis.




                                                                                           IDBD Notes 45
                                                                    IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

AA. Income tax
    Income tax expense comprises current and deferred tax. Income tax expense is recognized in
    profit or loss except to the extent that it relates to items recognized directly in equity, in which
    case it is recognized in equity. Current tax is the expected tax payable on the taxable income for
    the reported period, using tax rates enacted or substantively enacted at the balance sheet date,
    and any adjustment to tax payable in respect of previous years.
    Deferred tax is recognized using the balance sheet method, providing for temporary differences
    between the carrying amounts of assets and liabilities for financial reporting purposes and the
    amounts used for taxation purposes. The Group does not recognize deferred tax for the
    following temporary differences: the initial recognition of goodwill, the initial recognition of
    assets or liabilities in a transaction that is not a business combination and that affects neither
    accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly
    controlled entities and affiliated companies to the extent that it is probable that they will not
    reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to
    be applied to the temporary differences when they reverse, based on the laws that have been
    enacted or substantively enacted by the balance sheet date. Deferred tax assets and liabilities
    are offset by the Group if there is a legally enforceable right to offset current tax liabilities and
    assets, and they relate to income taxes levied by the same tax authority on the same taxable
    entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a
    net basis or their tax assets and liabilities will be realized simultaneously.
    A deferred tax asset is recognized to the extent that it is probable that future taxable profits will
    be available against which the temporary difference can be utilized. Deferred tax assets are
    reviewed at each balance sheet date and are reduced to the extent that it is no longer probable
    that the related tax benefit will be realized.
    Deferred tax in respect of intra-company transactions in the consolidated financial statements is
    recorded according to the tax rate applicable to the buying company.
    Additional income taxes that arise from the distribution of dividends are recognized at the same
    time as the liability to pay the related dividend is recognized.
BB. Earnings per share
    The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares.
    Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the
    Company by the weighted average number of ordinary shares outstanding during the period.
    Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders
    and the weighted average number of ordinary shares outstanding for the effects of all dilutive
    potential ordinary shares, which comprise convertible notes, share options and share options
    granted to employees.
CC. Segment reporting
    IFRS 8 regarding operating segments was adopted early for the first time in these financial
    statements. Segment information is presented in respect of the Company’s business segments
    and it is based on the Company’s management and internal reports. Accordingly, the Company
    is split into reportable operating segments on the basis of the Company’s investment in each
    company it owns which is reviewed routinely by the senior party responsible for operational
    decision-making at the Company.
    Information relating to prior periods was restated.
    See Note 46 for segment reporting details.




                                                                                             IDBD Notes 46
                                                                   IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

DD. Reclassification
    These financial statements include the reclassification of data relating to 2007 that was included
    in the financial statements of the Company for the third quarter of 2008. These classifications
    had no effect on the capital or on the profit, except for the Company’s policy change regarding
    employee post-employment benefits and the insignificant actuarial profits/losses were directly
    allocated to profit and loss and not to the Company’s equity (also see paragraph T.7 above).
EE. New standards and interpretations not yet adopted
    1. Revised IAS 23, Borrowing Costs (hereunder – "Standard 23") – removes the option to
         expense credit costs to profit and loss and requires that an entity capitalize credit costs
         directly attributable to the acquisition, construction or production of a qualifying asset as
         part of the cost of that asset. Standard 23 is effective for annual periods beginning on or
         after January 1, 2009. In accordance with the transitional provisions, the Group will apply
         Standard 23 to qualifying assets for which capitalization of credit costs commences on or
         after the effective date.
         The initial implementation of Standard 23 is not anticipated to have a material effect on
         the results of operations and financial position of the Group.
    2. Revised IAS 1, Presentation of Financial Statements (hereunder – "Standard 1") –
         requires the aggregation in the financial statements of information having common
         characteristics and the presentation of a statement of comprehensive income. Standard 1
         allows the presentation of income and expense items and components of other
         comprehensive income either in a single statement of comprehensive income with
         subtotals, or in two separate statements (a separate income statement followed by a
         statement of comprehensive income). The titles of some of the financial statements were
         changed in order to reflect their function more clearly (for example, the balance sheet is
         renamed a statement of financial position). Standard 1 will come into effect for annual
         periods beginning on or after January 1, 2009. Early implementation is permitted. The
         implementation of the Standard might have an effect on the presentation of the Company’s
         consolidated financial statements.
    3. Revised IFRS 3, Business Combinations, and Revised IAS 27, Consolidated and
         Separate Financial Statements – The principal relevant revisions in the Standards are as
         follows:
         (1) Transactions resulting in discontinuance of consolidation are to be accounted for at
              full fair value, so that the residual holding after discontinuance of the consolidation is
              remeausred on the date of discontinuing the consolidation, at fair value, through profit
              or loss.
         (2) Transactions resulting in the consolidation of financial statements (that were not
              consolidated before) are to be accounted for at full fair value, so that the original
              holding before the consolidation is remeasured on the first date of consolidation, at
              fair value, through profit or loss.
              See Note 3.H to the financial statements for indication, in terms of present data, of
              possible quantitative effects of any transactions executed as mentioned in (1) and (2)
              above. There is no certainty that any such transactions will be executed or regarding
              their dates and terms.
         (3) Acquisitions of additional shares or partial sales of existing shares, without the
              Company discontinuing consolidation of the financial statements of the companies
              that performed the transactions, are to be accounted for so that all the differences
              deriving from the transactions are included directly in equity (including differences
              that in the past would have been included in profit or loss or as goodwill).
         (4) Transaction costs are recognized immediately in profit or loss.
         (5) Measurement at fair value of contingent considerations in business combinations with
              changes in estimates being recognized in profit or loss.




                                                                                           IDBD Notes 47
                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

EE. New standards and interpretations not yet adopted (cont'd)
    3. Revised IFRS 3, Business Combinations, and Revised IAS 27, Consolidated and
       Separate Financial Statements (cont'd)
       (6) Goodwill is not to be adjusted in respect of the utilization of carry-forward tax losses
             that existed on the date of acquiring the businesses.
       (7) The definition of a business has been broadened, which is likely to result in more
             acquisitions being treated as business combinations.
       (8) Any non-controlling (minority) interest will be measured at either fair value, or at its
             proportionate interest in the identifiable assets and liabilities of the acquiree, on a
             transaction-by-transaction basis.
       (9) The attribution of comprehensive income to all the shareholders including in cases of
             a deficit in capital of subsidiaries.
       These standards shall apply to annual periods beginning on or after July 1, 2009, and early
       adoption is permitted (both standards at the same time). Accordingly, the Group is
       examining the possibility of early adoption, and such standards, if and when they are
       adopted, may have a materiel effect on the results of operations and financial position of
       the Group.
       As regards implementation in respect of 2009 or after then, the principal revisions of these
       standards shall be applied prospectively, meaning in respect of transactions as from the
       initial date of implementation.
       The aforementioned revisions will have an effect on the Company’s results of operations
       and financial position, as from the date of their implementation.
    4. Revised IFRS 2, Share-Based Payment (hereunder – "Standard 2") – provides that
       vesting conditions are conditions that determine whether the Group is receiving the
       services that entitle the other party to a share-based payment, and they are restricted to
       service and performance conditions. Non-vesting conditions will be reflected in the fair
       value of the share-based payment on the grant date, and after the grant date the Group shall
       not adjust the fair value in respect of these conditions. Furthermore, Standard 2 specifies
       the accounting treatment of non-compliance with non-vesting conditions. Standard 2 shall
       apply retroactively to annual periods beginning after January 1, 2009 and permits early
       adoption along with disclosure.
       The initial implementation of this standard is not anticipated to have a material effect on
       the results of operations and financial position of the Group.
    5. Revised IAS 32, Financial Instruments: Presentation, and IAS 1, Presentation of
       Financial Statements – The standards require classifying as equity certain puttable
       financial instruments and obligations arising on liquidation and instruments requiring the
       entity to deliver to a third party, only upon liquidation, a pro rata share of the net assets of
       the entity, in certain circumstances. Furthermore, it provides disclosure requirements
       regarding puttable financial instruments that are classified as equity. These standards shall
       apply to annual reporting periods beginning on or after January 1, 2009 and early adoption
       is permitted.
       The initial implementation of these standards is not anticipated to have a material effect on
       the results of operations and financial position of the Group.
    6. In the framework of the Improvements to IFRSs project, in May 2008 the IASB published
       and approved 35 amendments to various IFRS on a wide range of accounting issues. The
       amendments are divided into two parts: (1) Amendments that result in accounting changes
       for presentation, recognition or measurement purposes and (2) Terminology or editorial
       amendments that are expected to have either no or only minimal effects on accounting.
       Most of the amendments shall apply to periods beginning on or after January 1, 2009 and
       permit early adoption, subject to the specific conditions of each amendment and subject to
       the transitional provisions relating to a first-time adopter of IFRS.




                                                                                          IDBD Notes 48
                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

EE. New standards and interpretations not yet adopted (cont'd)
      6. cont'd.
         Presented hereunder are the amendments that may be relevant to the Group and are
         expected to have an effect on the financial statements:
         (1) Revised IFRS 5, Non-current Assets Held for Sale and Discontinued Operations
              (hereunder – "IFRS 5"). In accordance with the amendment, when the parent
              company decides on the disposal of part of its holdings in a subsidiary so that after the
              disposal the parent company is left with a non-controlling interest (for example, rights
              that confer significant influence), all the assets and liabilities attributed to the
              subsidiary are to be classified as held for sale and the relevant instructions of IFRS 5
              shall apply, including presentation as a discontinued operation. The amendment to the
              standard shall be implemented prospectively as from financial statements for periods
              beginning on or after January 1, 2010. Earlier adoption is permitted with appropriate
              disclosure.
         (2) Revised IAS 40, Investment Property (hereunder – "IAS 40"). The amendment
              provides that investment property under construction and/or development shall be
              measured in accordance with IAS 40. An entity that measures its investment property
              according to the fair value model shall measure its investment property according to
              fair value when the fair value of the investment property under construction is reliably
              determinable; and when the fair value is not reliably determinable, according to cost
              during the construction period until either construction is completed or its fair value
              becomes reliably determinable, whichever earlier. The amendment shall be applied on
              a prospective basis as from financial statements for periods beginning on January 1,
              2009.
              The initial implementation of these amendments is not anticipated to have a material
              effect on the results of operations and financial position of the Group.
    7. IFRIC 15, Agreements for the Construction of Real Estate (hereunder – "IFRIC 15") –
         IFRIC 15 provides guidance for examining whether transactions for the construction of
         real estate are subject to IAS 18, Revenue, by which revenue from the construction of real
         estate is recognized at the same time and according to the same method as revenue from
         the sale of a product or the rendering of a service, or are subject to IAS 11, Construction
         Contracts, by which revenue is recognized in accordance with the stage of completion of
         the real estate.
         IFRIC 15 is to be applied for annual periods beginning on or after January 1, 2009, on a
         retrospective basis. Earlier application is permitted while providing disclosure.
         The initial implementation of IFRIC 15 is not anticipated to have a material effect on the
         results of operations and financial position of the Group.
    8. IFRIC 16, Hedges of a Net Investment in a Foreign Operation (hereunder – "IFRIC
         16") – IFRIC 16 refers to an investment in a foreign operation and provides guidance
         regarding the hedging of such an investment. Inter alia, IFRIC 16 refers to the nature of the
         hedged risk and the amount of the hedged item for which a hedging relationship may be
         designated, where the hedging instrument is held in a group of companies and the
         accounting treatment of the capital reserve upon disposal of a foreign operation.
         IFRIC 16 shall apply to annual periods beginning on or after October 1, 2008. Earlier
         application is permitted while providing disclosure.
         The initial implementation of IFRIC 16 is not anticipated to have a material effect on the
         results of operations and financial position of the Group.
    9. IFRIC 13, Customer Loyalty Programs (hereunder – "IFRIC 13") – In accordance with
         IFRIC 13, when products and services are sold together with sale incentives (such as
         award credits or free products) the arrangement is considered a multiple-element
         arrangement and the proceeds received in its respect are to be allocated to the various
         components according to their fair value.




                                                                                          IDBD Notes 49
                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 2- Significant accounting principles (cont'd)

EE. New standards and interpretations not yet adopted (cont'd)
    9. IFRIC 13, Customer Loyalty Programs (cont'd)
        IFRIC 13 shall be applied retroactively to periods beginning on or after July 1, 2008.
        Earlier application is permitted with appropriate disclosure.
        The initial implementation of IFRIC 13 is not anticipated to have a material effect on the
        results of operations and financial position of the Group.
    10. IFRIC 17, Distributions of Non-cash Assets to Owners (hereunder – "IFRIC 17") –
        IFRIC 17 provides that the obligation of a company for the distribution of non-cash assets
        to owners is to be accounted for as a liability for the payment of a dividend and be
        measured at the fair value of the assets to be distributed with any changes in fair value
        until the date of distribution being recognized in equity. At the time of the distribution, any
        difference between the carrying amount of the assets and the amount of the liability is
        recognized in profit or loss, as a separate line item. IFRIC 17 is to be applied prospectively
        for annual periods beginning on or after July 1, 2009. Earlier application is permitted
        provided that IAS 27 and IFRS 3 (as they were revised in 2008) and IFRS 5 (as revised in
        IFRIC 17) are applied at the same time.
        The initial implementation of IFRIC 17 is not anticipated to have a material effect on the
        results of operations and financial position of the Group.
    11. IFRIC 18, Transfer of Assets from Customers (hereunder – "IFRIC 18") – IFRIC 18
        addresses the accounting treatment of transfers of fixed assets from customers to the
        reporting entity that are used to connect the customer to a network enabling the receipt of
        services or goods, or provide the customer with continuous access to such services or
        goods, or both. IFRIC 18 provides guidance regarding recognition of the fixed assets and
        measurement on the date of initial recognition, as well as guidance regarding the method
        of recognizing revenue relating to the receipt of the asset. IFRIC 18 shall be effective for
        transfers of assets from customers that are received by the reporting entity on or after July
        1, 2009 on a prospective basis. Earlier application is possible under certain circumstances.
        The Company is currently examining the anticipated effect of IFRIC 18 on its financial
        statements.
    12. Revised IFRS 7, Financial Instruments: Disclosures (hereunder – "IFRS 7") – IFRS 7
        enhances the disclosures required with respect to fair value measurements of financial
        instruments, particularly with respect to financial instruments whose fair value is measured
        by means of valuation techniques. Furthermore, IFRS 7 enhances the disclosures required
        with respect to liquidity risk. The amendment to IFRS 7 is to be applied on a prospective
        basis for annual periods beginning on or after January 1, 2009. Earlier application is
        permitted with disclosure.
        The Company is currently examining the anticipated effect of IFRS 7 on its financial
        statements.




                                                                                          IDBD Notes 50
                                                                             IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 - Investments
A list of the main companies is attached as Appendix A to the financial statements.
A. Composition of investments and the Group's share in revenues

                                                                                     As at December 31
                                                                              2008                       2007
                                                                                         Affiliates
                                                                                        NIS Millions
     Investment in shares:
     Original cost of shares                                                           5,388                     5,843
     Group's equity in earnings as of acquisition date                                   344                       811
     Translation adjustments as of acquisition date
         less impairment provision                                                      (31)                     (229)
                                                                                       5,701                     6,425
     Other investments:
     Convertible debentures                                                               10                         -
     Capital notes, loans and long term collectibles                                   1,199                       680
                                                                                       1,209                       680
     Total                                                                             6,910                     7,105


B.   Details regarding attributed surplus costs and goodwill arising from the acquisition of
     affiliates
                                                                                     As at December 31
                                                                              2008                       2007
                                                                                        NIS Millions
     Allocated excess of cost – original amount                                          344                       993
     Allocated excess of cost – balance for amortization, net                            250                       681
     Goodwill – original amount                                                          857                     1,213
     Goodwill balance                                                                    758                     1,146

C. Capital notes, loans and long term collectibles
                                                 Interest rates as                   As at December 31,
                                                 at December 31,             2008                     2007
                                                       2008
                                                        %                               NIS millions
     In dollars or linked thereto                      6-15                              862                      292
     Linked to the CPI                                   -                                20                       80
     In other currency or linked thereto                3-6                              194                      234
     Not linked                                         0-7                              123                       74
                                                                                       1,199                      680


D. Details regarding investment in non-convertible debentures and long term loans and
   collectibles
   Details by maturity dates:
   The following are details by maturity dates of investments in non-convertible bonds and long-
   term loans and debit balances, after deducting current maturities:
                                                   As at December 31, 2008
         2010                                                               11
         2012                                                                2
         No fixed maturity date                                          1,186
                                                                         1,199




                                                                                                         IDBD Notes 51
                                                                                IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)
E.   Movement in investments in affiliated companies in 2008

                                                                                                Year ended at December
                                                                                                       31, 2008
                                                                                                      NIS millions
          Balance as at January 1, 2008                                                                          7,105
          Investment in shares                                                                                    457
          Changes in loans and capital notes                                                                      603
          Dividends and returns on investment                                                                   (582)
          Company's equity in earnings (losses) of affiliates, net                                                175
          Change in investment as a result of sale and issuance to a third party                                (142)
          Adjustments resulting from translation of financial statements
              of affiliated companies                                                                           (318)
          Changes in investments due to first time consolidated companies*                                       (27)
          Changes in investments due to companies ceasing to be consolidated                                    (295)
          Company's share in allocation to a hedge fund of equity-basis investees                                (42)
          Company's share in allocation to fair-value capital reserves in respect of
              available-for-sale financial assets of affiliated companies                                         149
          Company's share of revaluation reserves of affiliates                                                 (192)
          Company's share in hedge fund recognition in profit or loss of affiliates                                 1
          Company's share in recognition of fair-value capital reserves in respect of
              available-for-sale financial assets in profit or loss of affiliates                                   (1)
          Company's share in capital reserves from translation differences recognition in
              profit or loss of affiliantes                                                                       140
          Other changes                                                                                         (120)
          Balance as at December 31, 2008                                                                       6,910

      *       including affiliates of first time consolidated companies
F.   Details regarding convertible securities of subsidiaries and other companies
     Several investee companies of the Company issued option notes to employees and to others in
     previous years. The following are data regarding the possible effect of these securities on the
     companies that directly hold the companies issuing the options, as of December 31, 2008.
                                                                Exercise           Before exercise      After exercise
                                                                 Period           Equity and voting    Equity and voting
                                                                                          %                    %
          Companies directly held by the Company
          Clal insurance Enterprise Holdings                   2009-2024                57.53               53.69
          Koor                                                 2009-2012                13.25               13.11
          Companies held by Discount Investments
          Elron Electronic Industries Ltd.                     2009-2014                48.71               48.13
          Expand Networks Ltd.                                 2009-2013                22.61               20.34
          Given Imaging Ltd.                                   2009-2014                16.13               13.42
          Galil Medical Ltd.                                   2009-2018                12.80               10.88
          Ham-Let (Israel-Canada) Ltd.                         2009-2013                46.25               43.01
          Property and Building Corporation Ltd.               2009-2011                83.43               82.56
          Koor Industries Ltd.                                 2009-2012                62.28               60.00
          Hadera Paper Ltd.                                    2009-2014                21.45               20.45
          Netvision Ltd.                                       2009-2016                32.30               28.70
          Cellcom Israel Ltd. (by vote 52%)                    2009-2012                46.86               46.26
          Cosmocom Inc.                                        2009-2013                 9.63                6.05
          Shufersal Ltd.                                       2009-2012                39.70               39.26
          Companies held by Clal Industries
          Netvision Ltd.                                       2008-2016                25.30               22.40
          Hadera Paper Ltd.                                    2009-2014                38.00               36.20
          Clal Biotechnology Industries Ltd.                   2008-2013                66.90               58.30
          Golf A.K. Group Ltd.                                 2008-2012                73.40               56.80
          Fundtech Ltd.                                        2008-2015                55.90               50.80
          Cargal Ltd.                                          2008-2012                26.40               26.40
          Nova Measuring Instruments Ltd.                      2009-2018                21.40               18.00
          ECTel Ltd.                                           2008-2016                17.00               14.90
          Jordan Valley Semiconductors Ltd.                    2008-2013                32.50               30.20
          Curetech Ltd.                                        2008-2018                64.60               56.80
          Companies held by Koor
          Makhteshim Agan Industries                           2009-2015                41.93               41.92



                                                                                                          IDBD Notes 52
                                                                                                                                                             IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)
     G. Condensed financial data regarding equity-basis investee companies treated using the equity method
         The following are condensed financial data regarding equity-basis investee companies treated using the equity method, without
         adjustment for ownership rates, and without inclusion of surplus costs attributed to these investments and to the period of holding, held
         by the group:

                                                                           Rate of equity          Total assets        Total liabilities      Income             Expenses        Profit (loss)
                                                                                 %                                                          NIS Millions
       2008:
       Companies held by Discount Investments
       Elron Electronic Industries Ltd. *                                                49                    991                    254               30                415               (385)
       Given Imaging Ltd. (1) *                                                          16                    676                    121              491                484                    7
       Shufersal Ltd.                                                                    40                  5,449                  4,200           11,094             10,812                 282
       Expand Networks Ltd. *                                                            23                     54                     79               92                173                (81)
       Gemini Israel Fund Limited Partnership * ***                                       -                      1                      -                -                  -                    -
       Galil Medical Ltd. * (3)                                                          13                     93                     52               94                209               (115)
       GVT (Holding) N.V. * (2)                                                         9.6                    515                      1              423                  1                 422
       Ken Tech Ventures Ltd.                                                            24                      2                      *                *                  *                    *
       Maagan Eden Limited Partnership                                                 24.5                     36                      9               21                 16                    5
       Mehadrin Ltd                                                                   45.41                    815                    493              846                803                  43
       Science-based Industry Park                                                       50                    167                     38               10                  4                    6
       Maxima Air-Separation Center Ltd.                                                 78                    183                     50              134                106                   28
       TPD Investment Limited                                                            20                  3,077                  3,320              562                571                  (9)
       Lobito International B.V                                                        42.5                    562                    551               40                 33                    7
       PBEL Real Estate Limited                                                          45                    466                    558                4                 24                (20)
       GTC Investments B.V                                                               50                  1,045                    943               70                 64                    6
       Queensbridge Towers LLC                                                           16                    883                    696              355                368                (13)
       Sahara Hualapai LLC                                                               15                     87                      4                -                  1                  (1)
       Great Wash Park LLC                                                            7.436                    803                    899                -              (120)               (120)
       Ein Gedi Tourism Limited Partnership                                           32.30                     37                     48               20                 19                    1

       *      The data are according to US GAAP.
       **     The company was classified as a consolidated company for part of 2008.
       ***    The company was liquidated in the fourth quarter of 2008, therefore the related data is detailed as at September 30, 2008.

       Data regarding companies in which the company holds less 20% and which are accounted for on the equity basis
       (1) Held at the rate of 48% by DIC together with Elron (affiliated) and R.D.C Rafael Development Ltd. (subsidiary of Elron).
       (2) Was held at the rate of 33% by the company together with DIC, until December 2008.
       (3) Held at the rate of 42% by DIC together with Elron and with R.D.C Rafael Development Ltd. (subsidiary of Elron).




                                                                                                                                                                                  IDBD Notes 53
                                                                                                                                     IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

     Note 3 – Investments (cont'd)
     G. Condensed financial data regarding equity-basis investee companies treated using the equity method
        The following are condensed financial data regarding equity-basis investee companies treated using the equity method, without
        adjustment for ownership rates, and without inclusion of surplus costs attributed to these investments and to the period of holding, held
        by the group:
                                                            Rate of equity    Total assets     Total liabilities      Income             Expenses         Profit (loss)
                                                                  %                                                 NIS Millions
       2008:
       Companies held by Clal Industries
       Mashav                                                            36              264                (153)              230                  228                  2
       Cargal                                                            26              963                (646)              781                  808               (27)
       Jaf – Ora                                                         30              613                (231)              878                  815                 63
       Jordan Valley                                                     33               70                 (27)               38                   62               (24)
       Nova                                                              21              136                 (51)              140                  159               (19)
       ECtel                                                             17              189                 (55)               90                  120               (30)
       Infinity 2                                                        39               89                  (1)                -                    4                (4)
       Infinity 2 Management                                             30               13                 (13)                4                    5                (1)
       Millennium                                                        50               10                    -                -                    1                (1)
       Millennium 2                                                      13               87                    -                -                   20               (20)
       Anex                                                              34                3                    -                -                    -                  -
       Infinity 3                                                        12               65                 (11)                -                    5                (5)
       Infinity 3 Management                                             25               12                 (15)               23                   25                (2)
       Eternity                                                          10                4                 (15)                1                   25               (24)
       Parking Square                                                    25                8                  (1)               15                   15                  -
       Med 1                                                             31               44                (208)               24                   23                  1
       Tal Limouzine Services Ltd.                                       50                5                  (3)               11                   11                  -
       BioKin Therapeutics Ltd.                                          33                3                  (1)                -                    4                (4)
       Biocancell Therapeutics Inc.                                      27               12                  (9)                9                   17                (8)
       D-Pharm Ltd.                                                      41               24                 (17)                1                   40               (39)
       Thrombotech Ltd.                                                  40                4                  (2)                -                    4                (4)
       Polyheal Ltd.                                                     35                4                  (6)                -                    7                (7)
       Companies held by Koor
       Makhteshim Agan Industries Ltd.                                   42           12,826               7,934             9,367              8,584                 783
       Epsilon Investment House Ltd.                                     50               79                  33                39                 52                 (13)
       ECtel                                                             21              189                  55                90                120                 (30)
       A.K.A Development Ltd.                                            33              407                 268                64                 39                   25




                                                                                                                                                          IDBD Notes 54
                                                                                                                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

     Note 3 – Investments (cont'd)
     G. Condensed financial data regarding equity-basis investee companies treated using the equity method
        The following are condensed financial data regarding equity-basis investee companies treated using the equity method, without
        adjustment for ownership rates, and without inclusion of surplus costs attributed to these investments and to the period of holding, held
        by the group:

                                                                            Rate of equity        Total assets       Total liabilities         Income                Expenses        Profit (loss)
                                                                                  %                                                          NIS Millions
       2008:
       Companies held by Clal Insurance Enterprises Holdings
       Clal Finance Derivatives Ltd.                                                         44              998                   976                      51                  35                   16
       Eva Financial                                                                         33              147                   124                      94                  75                   19
       Galila Deposits (SPE)                                                                 50            6,528                 6,527                       2                   1                    1
       Exa                                                                                   33               27                    11                       2                   2                    -
       Shagrir                                                                               33               77                     -                       3                   2                    1
       Companies held by Clal Tourism
       Time Elevator Jerusalem Ltd.                                                          49                  2                       9                  4                   4                      -
       Companies held by Hadera Paper
       Mondi Business Hadera Paper Ltd.                                                  49.9                484                   361                  732                   713                     19
       Hogla Kimberly Ltd.                                                               49.9                962                   520                1,609                 1,519                     90
       Carmel Containers Systems Ltd. *                                                   *89                307                   195                  418                   426                    (8)
       Frenkel - C.D. Ltd.                                                                 55                115                    93                  117                   124                    (7)
       Cicletech                                                                           30                  2                    16                    2                     5                    (3)

       * First time consolidated during 2008. Held at the rate of 36% until consolidation.




                                                                                                                                                                                      IDBD Notes 55
                                                                                                                                                         IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

       Note 3 – Investments (cont'd)
       G. Condensed financial data regarding equity-basis investee companies treated using the equity method
          The following are condensed financial data regarding equity-basis investee companies treated using the equity method, without
          adjustment for ownership rates, held by the group:
                                                                         Rate of equity         Total assets        Total liabilities     Income             Expenses        Profit (loss)
                                                                               %                                                        NIS Millions
       2007:
       Companies held by Discount Investments
       Elron Electronic Industries Ltd. *                                              49                  1,150                  101               89                252               (163)
       Given Imaging Ltd. (1) *                                                        16                    682                  160              437                384                  53
       Shufersal Ltd. **                                                                40                 5,539                4,105           10,041              9,804                 237
       Maxima Air-Separation Center Ltd.                                                24                   133                   27              111                 92                   19
       Expand Networks Ltd. *                                                           31                    65                   74               78                146                (68)
       GVT (Holding) N.V. * (2)                                                        16                    799                    1            1,223                254                 969
       Gemini Israel Fund Limited Partnership *                                         32                     1                    -                -                  -                    -
       Galil Medical Ltd. * (3)                                                         13                   204                   48              100                136                (36)
       Ken Tech Ventures Ltd.                                                          24                      2                    -                -                  2                  (2)
       Mehadrin Ltd                                                                    45                    785                  463              954                895                  59
       Science-based Industry Park                                                     50                    159                   37               10                  5                    5
       TPD Investment Limited                                                           20                 4,431                4,263              767                725                  42
       Lobito International B.V                                                        42                    599                  575               49                 31                  18
       PBEL Real Estate Limited                                                         45                   520                  485                2                  2                    -
       GTC Investments B.V                                                              50                 1,069                  976               81                 56                  25
       Queensridge Towers LLC                                                            7                 1,172                1,020              813                688                 125
       Sahara Hualapai LLC                                                               7                    87                    2                -                  -                    -
       Great Wash Park LLC                                                               7                   374                  347                4                  7                  (3)
       Maagan Eden Limited Partnership                                                24.5                    35                    8               20                 15                    5
       Ein Gedi Tourism Limited Partnership                                            32                     37                   49               38                 35                    3

       *      The data are according to US GAAP.
       **     Shufersal was consolidated in the Company's financial statements until September 30, 2007.

       Data regarding companies in which the company holds less 20% and which are accounted for on the equity basis
       (1) Held at the rate of 39% by DIC together with Elron (affiliated) and R.D.C Rafael Development Ltd. (subsidiary of Elron).
       (2) Was held at the rate of 33% by the company together with DIC, until December 2008.
       (3) Held at the rate of 42% by DIC together with Elron and with R.D.C Rafael Development Ltd. (subsidiary of Elron).




                                                                                                                                                                              IDBD Notes 56
                                                                                                                                      IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

       Note 3 – Investments (cont'd)
       G. Condensed financial data regarding equity-basis investee companies treated using the equity method
          The following are condensed financial data regarding equity-basis investee companies treated using the equity method, without
          adjustment for ownership rates, held by the group:

                                                            Rate of equity    Total assets     Total liabilities       Income             Expenses        Profit (loss)
                                                                  %                                                  NIS Millions
       2007:
       Companies held by Clal Industries
       Fundtech                                                          43              493                (101)               401                430                   29
       Mashav                                                            36              255                (141)               217                231                   14
       Cargal                                                            27            1,001                (734)               598                684                   86
       Jaf – Ora                                                         30              567                (200)               793                860                   67
       Jordan Valley                                                     33               85                 (18)                53                 54                    1
       Nova                                                              21              186                 (80)               255                239                (16)
       ECtel                                                             17              219                 (53)               122                 86                (36)
       Infinity 2                                                        39               99                  (1)                 2                  9                    7
       Infinity 2 Management                                             30               13                 (12)                 7                  8                    1
       Millennium                                                        50               10                     -                3                  -                  (3)
       Millennium 2                                                      13              103                     0               12                  0                (12)
       Anex                                                              34               12                     -                3                 29                   26
       Infinity 3                                                        12               27                  (7)                 2                  3                    1
       Infinity 3 Management                                             25                9                  (9)                 5                  5                    -
       Eternity                                                          10               12                   (2)               21                  -                (21)
       Parking Square                                                    25                9                  (10                14                 14                    -
       Med 1                                                             31               39                (203)                28                 23                  (5)
       Goldbond – sold in 2007                                                                                                   25                 30                    5
       ECI – sold in 2007                                                                                                     1,880              1,988                 108
       Maman                                                             45              271                (138)               208                230                   22
       BioKin Therapeutics Ltd.                                          33                2                  (1)                 1                  -                  (1)
       Biocancell Therapeutics Inc.                                      23               12                  (5)                17                  4                (13)
       D-Pharm Ltd.                                                      34               24                 (10)                96                  4                (92)
       Thrombotech Ltd.                                                  40                7                  (2)                 1                  -                  (1)
       Polyheal Ltd.                                                     33                8                  (5)                 5                  -                  (5)




                                                                                                                                                           IDBD Notes 57
                                                                                                                                                IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

       Note 3 – Investments (cont'd)
       G. Condensed financial data regarding equity-basis investee companies treated using the equity method
          The following are condensed financial data regarding equity-basis investee companies treated using the equity method, without
          adjustment for ownership rates, held by the group:
                                                               Rate of equity     Total assets       Total liabilities         Income               Expenses        Profit (loss)
                                                                     %                                                       NIS Millions
       2007:
       Companies held by Koor
       Makhteshim Agan Industries Ltd.                                      39            11,454                 6,312                8,693                8,047                646
       Epsilon Investment House Ltd.                                        50                94                    33                   53                   39                  14
       ECtel                                                                21               219                    54                   87                  123                (36)
       A.K.A Development Ltd.                                               33               361                   247                   44                   27                  17
       ECI (*)                                                              28                 -                     -                2,107                1,998                109
       Companies held by Clal Insurance Enterprises Holdings
       Clal Finance Derivatives Ltd.                                        44               217                   198                   50                    34                    16
       Eva Financial                                                        33                22                    27                   18                    22                   (4)
       Galila Deposits (SPE)                                                50             6,576                 6,575                    1                     1                     -
       Exa                                                                  33               124                    93                  142                    89                    53
       Shagrir                                                              33                84                     8                    5                     2                     3
       Landau Yuval – Insurance Agency                                      40                 3                     2                    9                     8                     1
       Ramon Granit Toren Marine Insurance Agency                           30                 9                     8                    8                     5                     3
       The Israeli Title Insurance Agency                                   40                 -                     2                    -                     -                     -
       Companies held by Clal Tourism
       Time Elevator Jerusalem Ltd.                                         49                   2                       8                  4                  4                      -
       Companies held by Hadera Paper
       Mondi Business Hadera Paper Ltd.                                    49.9              497                   390                  770                  752                  18
       Hogla Kimberly Ltd.                                                 49.9              928                   527                1,376                1,406                (30)
       Carmel Containers Systems Ltd. *                                      36              328                   208                  471                  463                   8
       Frenkel - C.D. Ltd.                                                   28              122                    92                  123                  124                 (1)
       Cicletech                                                             30                3                    13                    2                    4                 (2)

       * The data are according to US GAAP.




                                                                                                                                                                     IDBD Notes 58
                                                                           IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)
H. Information regarding investment in listed securities by the Company, DIC, Clal Industries,
   Clal Insurance Enterprises Holdings and Koor

                                                                 Book value                 Market value
                                                                31.12.2008(2)      31.12.2008(1)     29.3.2009(1)
 Held by the Company
 Consolidated
     Discount Investment Corporation                                     3,863             1,839              2,874
     Clal Insurance Enterprises Holdings                                 1,741               613                927
     Clal Industries                                                       958               777                917
     Koor Industries                                                       684               253                431
 Held by Discount Investment
 Consolidated
     Cellcom                                                             1,884             3,860              4,088
     Koor Industries                                                     3,498             1,182              2,012
     Ham-Let (Israel-Canada)                                             124(3)               48                 61
     Property and Building                                               1,890               675              1,030
     Hadera Paper                                                          166               118                178
     Netvision                                                             450               231                307
     Maxima Air-Separation center                                          145               119                119
 Affiliated
     Elron Electronic Industries                                           297                72                148
     Given Imaging                                                         154               138                150
     Shufersal                                                             585             1,042                998
 Held by Clal Industries
 Consolidated
     Golf A.K.                                                             150               316                399
     Clal Biotechnology Industries                                         144               118                243
     Maman – Cargo Terminals & Handling                                     80                35                 52
     Hadera Paper                                                          295               210                314
     Netvision                                                             320               180                240
     Fundtech                                                              324               207                275
 Affiliated
     ECtel                                                                  23                 6                  4
     Biocounsil                                                              8                 2                  5
     Nova Measuring Instruments                                             17                 8                 12
     Beit Shemesh Engines Holdings (1997)                                   38                 7                 12
 Held by Clal Insurance Enterprises Holdings
 Consolidated
     Clal Finance                                                          314               140                232
     Titanium                                                              178               263                251
 Held by Koor
 Affiliated
     Makhteshim Agan                                                     3,515             2,216              3,370
     ECtel                                                                  25                 8                  5
     (1) On the basis of the shares held by the Group companies as at December 31, 2008 (without adjustment for any
            dividends distributed during the period).
     (2) Including allocated to investments excess of cost
     (3) Including minority put-options to sell its holdings (7%) to DIC

I.   The Company examined the need for implementing the accounting policy regarding write-downs
     with respect to its directly held investee companies, and the IDB Group companies that have
     investments in investee companies examined the need for write-downs with respect to the
     companies held by them, as mentioned in Note 2.Q.
     In advance of the publication of the annual financial statements for 2008, the Company and
     investee companies of the Company received assessments from independent external assessors who
     checked whether, in relevant cases, the recoverable amount of investments in equity-basis investee
     companies, with balances of goodwill or assets, is greater than the related balances on the books as
     at December 31, 2008. In cases in which the assessors determined that the recoverable value of the
     investments in equity-basis investee companies, goodwill or assets was lower than their balance-
     sheet book value as at December 31, 2008, the related balances in the books were written down and
     stated according to the recoverable value as determined in the assessments.


                                                                                                     IDBD Notes 59
                                                                     IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

I. cont'd
   Assessments of the Plaza project in Las Vegas and of the commercial and office project in Las
   Vegas (the Tivoli project) of the Company and Property & Building were attached to the
   Company's report, via a referral to the said assessments which were attached to the financial
   statements of Property & Building for 2008. See also Sections K.2.(D)(1) and (2) below.
   Additional assessments performed were not detailed and/or attached, as relevant, because in the
   opinion of the Management of the Company they are not considered to be "material or highly
   material assessments," respectively, as defined in Section 8B of the Securities Regulations
   (Periodic and Immediate Reports) – 1970. See also Note 2.J.
J. Additional information on investments of the Company and its investee companies:
   The Company and some of its investee companies are subject, in certain cases, to legal restrictions
   with respect to carrying out new investments or increasing existing investments in investee
   companies. The business activities of the Company and some of its investee companies are also
   subject to restrictions provided in the law or in the directives of various regulators, in Israel and
   abroad, such as directives regarding the supervision of insurance business (including the
   prohibition to control a bank in Israel or to hold a bank’s means of control at a rate the law requires
   receiving an approval or permit, without the approval of the Capital Market, Insurance and Savings
   Division of the Ministry of Finance), directives of the Ministry of Communications, directives
   regarding restrictive practices, directives regarding the requirement to hold tenders, directives
   regarding price control of products and services, directives regarding consumerism and restrictions
   deriving from benefits or approvals from the tax authorities, and benefits or approvals from the tax
   authorities. In addition, the provisions of certain laws and some of the terms of licenses in the
   communications sector, which were granted to a number of the Company's investee companies,
   include prohibitions against cross ownership (which generally means that they cannot hold means
   of control in competitors).
   The aforementioned restrictions provided in the law, in the directives of various regulators and
   various contractual restrictions may limit the Company’s ability to take advantage of business
   opportunities for new investments or to increase or sell existing investments. Furthermore, the
   Company and some of its investee companies are subject to legal and contractual restrictions which
   may limit the possibility of these holdings being sold by the Company or its investee companies.
   A number of the Company’s investee companies operate in foreign countries and their results are
   affected by the economic situation (including changes in foreign currency exchange rates and
   inflation and crisis implications on the finance markets), the political situation and the legal and
   regulatory situation in those countries.
K. Development of investments in investee companies – principal changes in the reported period
   1. Cellcom
        In 2008 DIC sold 8.66% of the share capital of Cellcom for the amount of NIS 834 million. As
        a result, the Company recorded its share in a gain in the amount of NIS 310 million in 2008
        and its rate of holding in Cellcom decreased from 56% to 46.9% of its share capital and from
        61.5% to 52.3% of its voting power.
   2. Property and Building and Las Vegas Projects
        (a) In 2008 DIC purchased in a number of transactions 18% of the share capital of Property
             & Building for the amount of NIS 262 million. The aforementioned includes DIC’s
             purchase of 10.4% of the issued share capital of Property & Building in the framework of
             two ordinary purchase offers DIC published in May and November 2008. After these
             purchases, DIC holds 83.4% of the equity and voting power in Property & Building. As a
             result of the said purchases, DIC acquired negative goodwill in the amount of NIS 156
             million, the Company's share in the negative goodwill was approximately NIS 115
             million, which it recorded as other income in the statement of income.




                                                                                             IDBD Notes 60
                                                                     IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   2. Property and Building and Las Vegas Projects (cont'd)
       (b) In March 2008 K.B.A. Townbuilders Group Ltd. (“K.B.A.”), sold its rights in land in
            Ashdod for the amount of NIS 126 million. Accordingly, in 2008 the Company recorded
            it share in the net gain in the amount of NIS 31 million.
       (c) In September 2008 K.B.A. sold two land sectors to third parties for the total amount of
            approximately NIS 90 million. As a result of the said sale, the Company recorded it share
            in the net gain in the amount of NIS 18 million.
       (d) Investments in Las Vegas, USA
            (1) In August 2007 the acquisition of 34.5 acres of real estate (of which 16.2 acres are
                  leased) on the strip of Las Vegas was completed. It is planned to build on the real
                  estate a unique real estate project, the Las Vegas Plaza project (hereunder – the
                  "project"). The real estate was acquired by Elad IDB Las Vegas LLC (hereunder –
                  the "project company"). The project company is held in equal parts by IDB Group
                  USA Investments Inc. (hereunder – "IDBG"), a wholly owned subsidiary of Property
                  & Building (the Company’s parent company), and by Elad Properties Las Vegas
                  LLC, a company of the Elad Group.
                  In March 2008 the Las Vegas planning authorities approved plans that were
                  submitted to them which include building rights for the project in the amount of 1.5
                  million square meters.
                  The project is anticipated to include a prestigious hotel, casino, modern commercial
                  center and exclusive residential towers, and will be built in a number of stages.
                  The investment in the real estate amounted to $ 1.24 billion. Acquisition of the real
                  estate for the project was financed, inter alia, by a loan in the amount of $ 625
                  million from banking and financial institutions that the project company received for
                  one year (which is repayable until August 2008), with an option to extend it by two
                  half year periods each, under certain circumstances, including the payment of a fee at
                  the rate of 0.25% for each period of extension. In August 2008 the loan was
                  extended for a half year until February 2009, according to the aforementioned,
                  without any change in the original terms. The weighted interest in respect of the
                  extension period is the Libor interest rate plus 3.1%, earning that the interest in
                  annual terms, including the Libor tension fee, amounts to 6.29%. See Note 49.A.2
                  regarding the extension of the said loan in March 2009. The Group’s share in the
                  loan in the amount of NIS 594 million is presented in the balance sheet as at
                  December 31, 2008 under current liabilities in the framework of the current
                  maturities of long-term loans. The balance of the investment, in the amount of $ 600
                  million, was financed by the parties.
                  In order to examine the recoverable value of the project as at September 30, 2008, in
                  November 2008 the Company and Property & Building received two valuations in
                  respect of the project from external independent American appraisers. In accordance
                  with the valuations, the value of the land on which it is planned to build the project,
                  in the financial statements of the company for September 30, 2008, does not exceed
                  its recoverable value (that was calculated in accordance with the instructions of
                  International Accounting Standard 36 (hereunder – "IAS 36") using the "value in
                  use" method on the basis of the discounted cash flows anticipated from the project).
                  According to the valuation for September 30, 2008, the recoverable value amounts to
                  $ 1.5 billion.
                  In light of the situation of the markets, the planning and beginning of construction of
                  Stage A of the project was postponed until the end of 2011. Accordingly, the
                  Company and Property & Building received in March 2009 a valuation of the project
                  from an external independent American appraiser, which reassessed the value in use




                                                                                            IDBD Notes 61
                                                                     IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   2. Property and Building and Las Vegas Projects (cont'd)
       (d) Investments in Las Vegas, USA (cont'd)
            (1) cont'd
                 of the project as at December 31, 2008, following which the recoverable amount was
                 assessed to be USD 1.25 billion. The discount rates that were used in the valuation
                 are 15.6% for the hotel, casino, convention center and business areas and 26% for
                 the residential apartments. This valuation is included in these financial statements,
                 by reference to the valuation attached to the financial statements of Property &
                 Building for December 31, 2008, which were submitted to the Securities Authority
                 on March 22, 2009 in the framework of a supplementing report (reference no. 2009-
                 01-063468). As a result, the carrying amount of the project was written-down by
                 USD 233 million. In the fourth quarter the Company wrote-down its share in the
                 asset by the amount of NIS 334 million (including it's share in Property & Buildings'
                 write-down) on the basis of the aforementioned valuation.
            (2) In March and April 2008, the authorized entities of the Company and of Property
                 and Building approved resolutions with regard to updated financing principles and
                 with regard to the financing of additional acquisitions at the Real Estate Companies.
                 According to the updated financing principles, projects of the Real Estate Companies
                 may be financed by the holders of rights to the Real Estate Companies other than
                 according to their relative shares (direct and/or indirect) in the Real Estate
                 Companies, but in any case, project financing provided by the Company and by
                 Property and Building will be provided pro rata between them, according their
                 relative shares (direct and/or indirect) in the capital of the Real Estate Companies (as
                 they stand from time to time). Pursuant to the resolution regarding the financing of
                 additional acquisitions at the Real Estate Companies, the Company and Property and
                 Building will be permitted to provide financing to IDBG for the purpose of acquiring
                 additional rights to the Real Estate Companies and to their assets (including for the
                 acquisition of the additional rights according to the Acquisition Agreements),
                 provided that the financing is performed pro rata between the Company and Property
                 & Building, according to their relative shares of the capital of IDBG.
                 According to the aforesaid resolutions, the amount of the financing for projects of
                 the Real Estate Companies to be provided by each of the Company and Property &
                 Building, plus the amount of financing to be provided by the Company for additional
                 acquisitions at the Real Estate Companies, as noted above (including under the
                 Acquisition Agreements), will not exceed a cumulative total of USD 120 million
                 (not to include completion guarantees or similar obligations, if any, provided to
                 financing entities, including indemnification in respect of such guarantees provided
                 by others). Until the date of the reports, the amount of the financing that was
                 provided by each of the Company and Property & Building, as noted above, totaled
                 USD 92 million.
            (3) As of March 28, 2008, an agreement of understandings and cooperation (the
                 "Agreement of Understandings") has been signed between the holders of the rights to
                 three American corporations engaged in real-estate projects in Las Vegas, USA,
                 which are also held by IDBG: Queensridge Towers LLC ("QT"), Great Wash Park
                 LLC ("GW"), and Sahara Hualapai LLC ("SH") (the "Real Estate Companies"). The
                 following are the key points of the agreement:
                 -     Subject to certain conditions, IDBG will control the Real Estate Companies and
                       the projects, as long as it provides financing or collateral to the Real Estate
                       Companies beyond the relative share which it is obligated to provide under the




                                                                                            IDBD Notes 62
                                                                     IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   2. Property and Building and Las Vegas Projects (cont'd)
       (d) Investments in Las Vegas, USA (cont'd)
            (3) cont'd
                     existing agreements. For that purpose, and for as long as the aforesaid condition
                     is fulfilled, some of the holders of rights to the Real Estate Companies will
                     grant IDBG a power to vote on their behalf on all matters brought before the
                     assemblies of holders of rights to the Real Estate Companies for approval (with
                     certain exceptions), and will grant IDBG the right to appoint additional
                     members to the boards of directors of the Real Estate Companies on their
                     behalf, so that IDBG will have the right to appoint 5 members of 12 members
                     on each of the boards of directors of the Real Estate Companies. In addition,
                     subject to the completion of the agreements for the acquisition of additional
                     rights by IDBG in the Real Estate Companies (the "Acquisition Agreements"),
                     the sellers will grant IDBG a power to vote, in respect of their remaining rights
                     not sold under the Acquisition Agreements, on all matters brought before the
                     assemblies of holders of rights to the Real Estate Companies for approval (with
                     certain exceptions), and IDBG will have the right to appoint additional
                     members to the boards of directors of the Real Estate Companies, in accordance
                     with the terms of the Acquisition Agreements.
                -    Profits accrued by QT will be used, first, to settle new loans or financing (if
                     any) granted to QT by the holders of rights to QT ("New QT Financing");
                     second, to carry out certain distributions for the purpose of payment of taxes
                     applicable to the holders of rights to QT; subsequently, to repay owner loans
                     given to QT and GW, in the established order (including repayment of the
                     owner loan mentioned below); and finally, for distribution to the holders of
                     rights to QT, according to the priorities established in the development and
                     establishment agreements of the Real Estate Companies. In the event that IDBG
                     (or related entities) participates in the New QT Financing, IDBG (and the said
                     entities) will be entitled to receive rights to Stage I of the QT project, which are
                     held by certain holders of rights to QT (who are related to the local partner in
                     QT), and rights to Stage I of the GW project, which are held by certain holders
                     of rights to GW (who are related to the local partner in GW). As stipulated in
                     the development and establishment agreements of the Real Estate Companies,
                     subject to the Agreement of Understandings, the local partner in the Real Estate
                     Companies is entitled to distribution of profits accrued at the three Real Estate
                     Companies, at varying rates, from 17.74% to 57.65%, according to the profits
                     accrued at the three Real Estate Companies. In accordance with the Agreement
                     of Understandings, and in light of IDBG's participation in the New QT
                     Financing, the rights of the local partner in QT and in GW (representing 40.5%
                     of the capital of the Real Estate Companies) were transferred to IDBG in July
                     2008, including rights to profit distribution in respect thereof, with regard to
                     Stage I of the QT project and Stage I of the GW project.
                -    GW will act to obtain a construction loan for the GW project, and some of the
                     holders of rights to GW will participate, subject to certain conditions, in the
                     provision of self-financing for the project in the amount of approximately USD
                     100 million, via an owner loan, which will bear annual interest of 15% ("Self
                     Financing for GW"). It is hereby clarified that IDBG (or related entities) may
                     also participate in the financing in amounts exceeding USD 100 million.




                                                                                            IDBD Notes 63
                                                                      IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   2. Property and Building and Las Vegas Projects (cont'd)
       (d) Investments in Las Vegas, USA (cont'd)
            (3) cont'd
                      IDBG had agreed to provide a completion guarantee, as required by the
                      financing entity. IDBG's relative share of such a guarantee may be higher than
                      its share in the capital of GW.
                      Note that , IDBG and an additional corporation, which is part of the group that
                      includes IDBG and the additional corporation and which first invested in the
                      Real Estate Companies in September 2005 (the "Additional Corporation") have
                      agreed that the division between them of the participation in financing of the
                      Real Estate Companies and the projects (including the completion guarantees)
                      will be as agreed between them.
                -     Despite the statements in the development and establishment agreements of the
                      Real Estate Companies, subject to certain conditions, profits arising from Stage
                      I of the GW project ("Stage I Profits") will be distributed as follows: (a) 40% of
                      the Stage I Profits to be distributed among the holders of rights to GW,
                      according to their relative share of the Self Financing for GW; (b) 15% of the
                      Stage I Profits to be distributed to the local partner in GW or per its instructions;
                      (c) the remaining 45% of the Stage I Profits to be distributed among the holders
                      of rights to GW, according to distribution priorities established in the
                      development and establishment agreements of the Real Estate Companies.
                      As long as the self-financing loan is not repaid to GW, IDBG will be entitled,
                      starting in April 2009, to cause part or all of the assets of the real-estate
                      corporations to be placed under lien, in order to provide collateral for a lender
                      granting GW a loan in order to repay the self-financing loan to GW; and
                      starting in March 2010, IDBG will be entitled to initiate the sale of part or all of
                      the assets of the real-estate corporations in order to repay the self-financing loan
                      to GW.
                -     In addition, agreements were reached on various matters related to the GW
                      project budget and the rights to sign on behalf of the Real Estate Companies.
                Up to the date of publication of this report, IDBG provided loans to the Real Estate
                Companies according to the aforesaid Agreement of Understandings, loans in the
                amount of approximately USD 191 million (the share of the Company and of
                Property & Building is approximately USD 95.5 million each).
                Furthermore, up to the date of this report, contracts were signed for the sale of 149
                housing units in the two residential towers of the QT project, and 136 housing units
                were occupied, at a monetary consideration in the amount of approximately USD
                296 million. The project's rate of sale has slowed down considerably following the
                crisis on the markets and since the fourth quarter no apartments were sold. GW has
                commenced the first stage of a project comprised mainly of a commercial center.
                In light of the difficult economic situation in the USA the rate of the project leases
                has slowed down, following which it is planned to slow down the rate of
                construction in 2009 and match it to the rate of leases. At this stage, the project is
                planned to open in 2011. Accordingly, the project was valued as at December 31,
                2008 by an external independent appraiser. As a result of the valuation, its value on
                the balance sheet of the abovementioned real estate company was written-down.
                Impairment in the amount of NIS 152 million was recorded as a result in the
                financial statements and was included in the item of the Group’s share in the net




                                                                                              IDBD Notes 64
                                                                    IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   2. Property and Building and Las Vegas Projects (cont'd)
       (d) Investments in Las Vegas, USA (cont'd)
            (3) cont'd
                 earnings (loss) of affiliated companies, net. The Company's share in the impairment
                 amounts to NIS 125 million. The said valuations are included in these financial
                 statements, by reference to the valuations attached to the financial statements of
                 Property & Buildings for December 31, 2008, which were submitted to the
                 Securities Authority in the framework of four supplementing reports on March 22,
                 2009 (references no. 2009-01-063522, 2009-01-063528, 2009-01-063534 and 2009-
                 01-063543).
            (4) In July 2008, in accordance with the Acquisition Agreements of March 2008, a
                 transaction was completed in which IDBG acquired additional rights to two real-
                 estate companies in Las Vegas – approximately 18% of the capital of QT and
                 approximately 14% of the capital of SH – in consideration for approximately USD
                 13.5 million. The transaction for the acquisition of approximately 25% of the capital
                 of an additional real-estate company in Las Vegas, GW, in consideration for
                 approximately USD 8 million, has not yet been completed, as the suspending
                 conditions for its completion have not yet been fulfilled. The parties to the GW
                 transaction have agreed to postpone the deadline for its completion to July 31, 2009;
                 each party is entitled to postpone the deadline by six additional months.
                 In July 2008, an agreement was signed for the extension of a construction loan
                 granted to QT, in which the final settlement date of the said loan was set at the end
                 of May 2009. In the loan extension agreement, the lenders confirmed that the
                 technical violation caused by the imposition of liens by certain contractors on QT's
                 rights to the land has been corrected. In addition, dates were set for interim payments
                 of part of the balance of the loan, and the interest rate on the loan was updated, such
                 that during the first six months from the date of the loan extension agreement the
                 interest rate will be the Libor rate plus 3.75%, and in the remainder of the period the
                 interest rate will be the Libor rate plus 4.25%. The balance of the principal of the
                 loan as of the aforesaid date is approximately USD 101 million (the original amount
                 of the loan was USD 380 million).
                 Within the loan extension agreement, IDBG provided a guarantee for damages of the
                 lenders in respect of certain violations of the loan agreement (if any), and under
                 special circumstances only a guarantee for payment of the balance of the debt (in
                 addition to the existing collateral within the loan).
                 In September 2008 an agreement was signed for the extension of a loan in the
                 amount of $ 75 million that another of the real estate companies received from a
                 banking institution, so that the final repayment date of the loan is the end of
                 December 2010. The interest on the loan was set at Libor plus 5% p.a. At the date of
                 the loan extension, the real-estate corporation partially settled the loan, with an
                 amount of approximately USD 10 million. As of the date of the report, the balance of
                 the loan is approximately USD 65 million.
   3. Shufersal
       (a) In March 2008 Shufersal signed an agreement for the sale of its entire holdings (50%) in
            Israel Kanyonim Ltd. (“Kanyonim”) for the price of NIS 157 million. In June 2008, the
            sale was completed. Following the said agreement, the investment property on the books
            of Kanyonim was revalued on the basis of a valuation that was prepared on the basis of
            the sale transaction.
            As a result Shufersal recognized a gain in the amount of NIS 24 million in 2008 in respect
            of its share in the revaluation of the investment property net of the deferred taxes
            recorded on the books of Kanyonim.


                                                                                           IDBD Notes 65
                                                                   IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   3. Shufersal (cont'd)
       (a) cont'd.
            In addition, Shufersal recorded an after-tax capital loss in the amount of NIS 3 million in
            respect of the said sale. The share of the Company in the aforementioned results, net,
            amounted to a gain of NIS 7 million.
       (b) In March 2008 Shufersal signed an agreement for the sale of one of its investment
            properties for the price of NIS 47 million, which was paid on April 30, 2008. NIS 10
            million of the consideration was paid in the form of a loan of Shufersal to the buyer that
            is payable on April 30, 2010, against a bond of the buyer. Following the said agreement,
            Shufersal revalued the investment property in respect of this asset according to the price
            of the transaction, and accordingly recorded in 2008 an after-tax gain in the amount of
            NIS 12 million. The Company’s share in the said gain amounted to NIS 4 million.
       (c) In December 2008 the Tax Authorities approved the merger of Clubmarket Marketing
            Chains Ltd. (hereinafter – Clubmarket), a wholly owned subsidiary of Shufersal, with and
            into Shufersal, in a tax exempt transaction in accordance with the provisions of Section
            103 of the Income Tax Ordinance, with effect from December 31, 2007 (hereunder – the
            "merger date"). According to the said approval, as from the 2008 tax year Shufersal may
            offset the business losses and capital losses that were accumulated by Clubmarket and
            Shufersal before the date of the merger, providing that in each tax year in the 10 years
            following the date of the merger the amount of the offset does not exceed the lower of:
            50% of the taxable income of Shufersal in that same tax year or 10% of the total amount
            of losses.
            In accordance with the 2007 tax returns of Clubmarket, it has business losses in the
            amount NIS 713 million and capital losses in the amount of NIS 85 million.
            In January 2009 DIC undertook towards Shufersal to comply with certain restrictions
            regarding any sale of shares of Shufersal by DIC until December 31, 2009, this in relation
            to the provisions of the aforementioned merger approval of the Tax Authorities.
   4. Koor
       (a) In 2008 the Company and DIC invested in Koor the total amount of NIS 374 million and
            NIS 1,211 million, respectively. As at December 31, 2008 the Company and DIC hold
            75.3% of the equity and voting power in Koor. The said investments were made in a
            number of transactions:
            1. In January and February 2008 DIC purchased 2.7% of the issued share capital of
                 Koor on the Tel Aviv Stock Exchange Ltd. (hereinafter – "TASE") for the price of
                 NIS 110 million, following which the Company and DIC held, at that time, 59.5% of
                 the equity and voting power in Koor. As a result of the said purchase the Company
                 acquired excess cost of NIS 55 million, which is allocated to goodwill.
            2. In June 2008 Koor issued ordinary shares that were offered by means of rights to its
                 ordinary shareholders, this in accordance with a prospectus it published in May 2008.
                 The consideration from the issuance amounted to NIS 383 million, net.
                 The Company and DIC utilized the rights offered to them pursuant to the prospectus
                 within the aforesaid offering. In addition, the Company acquired approximately
                 602,000 additional rights during the rights trading day. These rights granted the
                 Company the right to acquire approximately an additional 3.3% of the issued share
                 capital of Koor.
                 Within the aforesaid issuance of rights and acquisition of rights, the Company and
                 DIC paid a total of NIS 187 million and NIS 190 million, respectively. The rate of
                 holdings of the Company and DIC in Koor is approximately 13.3% and 49.5%,
                 respectively.




                                                                                          IDBD Notes 66
                                                                    IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   4. Koor (cont'd)
       (a) 2. cont'd.
                 As a result of the aforesaid, goodwill in the amount of NIS 90 million was generated.
            3. In September 2008 Koor issued ordinary shares that were offered by means of rights
                 to its ordinary shareholders, this in accordance with a prospectus it published in May
                 2008. The consideration from the issuance amounted to NIS 678 million, net. In
                 addition to the rights that were offered to the Company and to DIC as
                 aforementioned, DIC purchased additional rights in the amount of NIS 5 million. The
                 Company and DIC exercised all the rights that were offered to them as
                 aforementioned, as well as the additional rights DIC purchased, for an overall amount
                 of NIS 90 million and NIS 369 million, respectively.
            4. In the fourth quarter of 2008 DIC purchased 3.3% of Koor's issued share capital for
                 the price of NIS 72 million.
            5. In December 2008 Koor issued ordinary shares that were offered by means of rights
                 to its ordinary shareholders, this in accordance with a prospectus Koor published in
                 May 2008. The consideration from the issuance amounted to NIS 599 million, net. In
                 addition to the rights that were offered to DIC in this issuance of rights, DIC
                 purchased additional rights for the price of NIS 48 million. The Company and DIC
                 took advantage of all the rights that were offered to them as aforementioned, and DIC
                 exploited the additional rights it purchased, for a total amount of NIS 80 million and
                 NIS 414 million, respectively.
            As a result of the purchases and the utilization of rights in the fourth quarter of 2008 the
            Company’s and DIC's holding increased to 75.3% of the equity and voting power in
            Koor. The Company's share in the acquired negative goodwill in the amount of NIS 125
            million, was recorded as income in the statement of income.
       (b) In 2008 Makhteshim Agan purchased its own shares for the price of NIS 344 million. In
            2008 Koor purchased 1.5% of the share capital of Makhteshim Agan for the price of NIS
            164 million. After the said purchases, Koor holds 41.5% and 41.9% of the share capital
            and voting rights in Makhteshim Agan, respectively. As a result of the aforementioned
            purchases excess cost in the amount of NIS 98 million was recognized as goodwill.
       (c) In March, April and May 2008 Koor announced that in light of the situation of the
            international markets and the present and future business opportunities presented by such
            markets, the board of directors of Koor authorized its management to purchase, from time
            to time, shares of European financial institutions that are publicly traded in Europe and/or
            the USA, up to the total amount of NIS 1.5 billion. In April 2008 Koor reported that the
            bank shares that were authorized by the board of directors to be purchased as
            aforementioned include, inter alia, shares of Credit Suisse Group (hereinafter – “Credit
            Suisse”). In July 2008 the board of directors of Koor decided to increase the investment
            in shares of Credit Suisse up to a total of NIS 3 billion, and in November 2008 the board
            of directors of Koor decided to increase the maximum amount of the investments in
            shares of Credit Suisse to NIS 5 billion. All this, as decided by Koor from time to time
            and according to the assessments of Koor regarding the developments on the markets,
            with the shares being purchased as a financial investment, and not for the purpose of
            acquiring control over a financial institution.
            In 2008 Koor purchased and sold shares of Credit Suisse on the stock exchange in
            Switzerland in a number of transactions. Furthermore, in October 2008 Koor entered into
            an agreement with Credit Suisse pursuant to which it invested in Credit Suisse a total




                                                                                           IDBD Notes 67
                                                                      IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   4. Koor (cont'd)
       (c) cont'd.
            of 1.2 billion Swiss francs. The investment was effected by purchasing ordinary shares of
            Credit Suisse from Credit Suisse (out of its treasury shares) which immediately after their
            purchase constituted 3% of the share capital of Credit Suisse.
            The purchase was mainly financed by Koor’s own resources. Accordingly, an amount of
            SFR 900 million was financed out of the liquid balances of Koor and an amount of SFR
            300 million was financed by a recourse credit facility that was provided to Koor by
            Goldman Sachs. As regards the credit that was provided by Goldman Sachs for the
            purchase of Credit Suisse shares and compliance with financial covenants, see Note
            21.a.3.c.(4).
            In accordance with the credit line, a part of the Credit Suisse shares is deposited with
            Goldman Sachs and pledged in its favor. Goldman Sachs is permitted to lend, pledge or
            make other dispositions of the pledged shares, and therefore the pledged shares are
            presented under the item of other pledged investments.
            As at December 31, 2008 Koor holds 3.28% of the shares of Credit Suisse, at a total
            investment of NIS 4.35 billion. See also Note 49.a.4.
            In respect of the shares of Credit Suisse that were sold in 2008, Koor recorded a gain in
            the amount of NIS 575 million and the Company recorded a net gain of NIS 288 million
            in respect of its share in the said gain of Koor.
            Koor classifies its investment in the shares of Credit Suisse as an available-for-sale
            investment, and therefore the investment in the said shares is measured at each balance
            sheet date, with the changes in fair value being recognized directly in equity (insofar as
            there is no sharp and/or prolonged impairment), in a capital reserve or available-for-sale
            assets (hereunder – the "capital reserve"). Due to there being two principal trading arenas
            for the shares of Credit Suisse (the SIX Swiss Exchange in Switzerland and the NYSE in
            New York), the fair value of the investment in Credit Suisse is measured on the cutoff
            dates in accordance with the most available updated price of these two markets. The most
            available updated price as at December 31, 2008 was the price on the NYSE stock
            exchange in New York. Accordingly, in its financial statements for December 31, 2008
            Koor recorded a negative capital reserve for available-for-sale assets in the amount of
            NIS 246 million in respect of its investment in shares of Credit Suisse. The Company’s
            share in the said negative capital reserve amounted to NIS 105 million.
            In accordance with the accounting treatment described above, if the market value of
            Koor’s investment in Credit Suisse, according to the share price of Credit Suisse on the
            stock exchange, is lower than the value of this investment on the books of Koor, the
            equity of Koor will be adversely affected, and in certain circumstances of a significant
            and/or continuing difference in value, also the profit or loss of Koor may be adversely
            affected.
            Koor will be required to record a tax provision in respect of the increase in fair value
            beyond the original cost of the shares that is accumulated in equity, to the extent any
            accumulates, against a capital reserve (so that the capital reserve will represent the
            increase in fair value after tax effects). Against such a provision and in the same amount,
            Koor shall record deferred tax assets (up to the amount of carried forward losses) through
            profit or loss. In this respect, a reduction in the capital reserve in subsequent periods shall
            result in a decrease in the provision, and in a corresponding decrease in the deferred tax
            asset and the recognition of tax expenses through profit or loss.




                                                                                              IDBD Notes 68
                                                                    IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   4. Koor (cont'd)
       (c) cont'd.
            Utilization of the deferred tax asset included in the financial statements of Koor, to the
            extent they include a positive balance of the reserve and against a provision, depends on
            the investment to which the capital reserve relates being realized at a profit. There is no
            certainty that this will occur.
       (d) In 2008 Koor wrote-down its investments in investee companies by an amount of NIS 51
            million. The Company’s share in the said loss amounts to NIS 28 million.
   5. Clal Insurance Enterprises Holdings
       (a) During the reported period, the Company included its share of net income in the amount
            of NIS 189 million in respect of the cancellation of changes in fair value, the recording of
            negative excess cost, and profit from early redemption of investments of Clal Insurance
            Enterprises Holdings held by Clal Insurance against profit-participatory policies and by
            index certificate companies in shares and bonds of companies under the control of the
            Company. For further details, see Note 2.B.10.
       (b) Due to the deepening crisis in the capital market and the continued weakening of the
            activity of mutual funds, during the third quarter of 2008 Clal Finance wrote down a total
            of NIS 80 million in respect of the decline in value of goodwill attributed to the activity
            of the mutual funds under its ownership. The Company's share of the said write-down is
            approximately NIS 37 million. Due to the continued weakening of the activity of the
            group's funds in the fourth quarter of 2008, and due to the deepening crisis in the capital
            market, a report was obtained from an external assessor, as of December 31, 2008,
            according to which Clal Finance was required to write down the value of goodwill by an
            additional amount of approximately NIS 103 million. The Company's share of the
            additional deduction is approximately NIS 47 million. In the report, the original
            parameter concerning the growth rate was not changed from the report previously
            received by Clal Finance in September 2008, remaining at a growth rate of 3%. The
            discounting rate after tax in the report is 11.5%. According to estimates by Clal Finance,
            there is no need to apply more severe economic assumptions than those at the basis of the
            opinion of the external assessor, as noted above.
       (c) For the purpose of preparing the financial statements as at December 31, 2008, Titanium
            a subsidiary of Clal Finance that operates in the area of management of customers’
            portfolios abroad, examined the value of goodwill and other intangible assets that are
            reported in its balance sheet. In addition, Clal Finance examined the goodwill reported in
            its financial statements in respect of its investment in Titanium. In accordance to
            appraisals received by Titanium and Clal Finance from an independent external appraiser,
            there should be an amortization in the amount of about NIS 42 million and NIS 40
            million, respectively. The Company's share in the aforementioned amortizations is about
            NIS 28 million.
       (d) In the first half of 2008 the Company purchased NIS 1.33 million par value shares of Clal
            Insurance Enterprises Holdings, constituting 2.5% of the issued share capital of Clal
            Insurance Enterprises Holdings, for the price of NIS 104 million. As a result of the said
            purchases the Company holds 57.5% of the issued share capital of Clal Insurance
            Enterprises. The excess of the cost of acquisition over the net asset value acquired, in the
            amount of NIS 20 million, was allocated to goodwill.




                                                                                           IDBD Notes 69
                                                                      IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   6. GVT
       (a) In February 2008, GVT, a private company, which is held by the Company and DIC at
            the rate of 16% each, sold 3.5% of its shares in a Brazilian company of which it held
            26.4%, for a total consideration of BRL 167 million. The shares of the Brazilian company
            are traded on a stock exchange in Brazil. As a result of the transaction, the Company
            recorded its share in the gain in the first quarter of 2008 in the amount of NIS 64 million.
            In March 2008 GVT distributed a cash dividend totaling USD 90 million. The
            Company’s direct share in the said dividend amounted to NIS 50 million.
       (b) In November 2008 the Company, together with DIC, entered into an agreement with
            GVT – Global Village Telecom (Holland) B.V. (hereunder – the "Dutch company") – a
            private company wholly owned by GVT, and a foreign company from the Swarth group
            (hereunder – the "buyer"), pursuant to which the Company and DIC shall sell to GVT
            their holdings in it, all or part, in two portions, in consideration for the net amount (net of
            tax) that is received from the Dutch company selling part of its shares in GVT (Holding)
            S.A. – a Brazilian company the shares of which are traded in Brazil (hereinafter – the
            Brazilian company), to the buyer. On the date of signing the said agreement, the Dutch
            company held 22.9% of the share capital of the Brazilian company.
            In accordance with this agreement, the Dutch company sold to the buyer 3.9% of the
            share capital of the Brazilian company for a consideration based on a price of BRL 21.50
            per share, net of Brazilian withholding tax. The aforementioned consideration (net of
            taxes related to the transfer) was transferred from the Dutch company to GVT. The net
            proceeds after taxes were used by GVT to acquire shares of GVT from the Company,
            DIC and another shareholder of GVT that held 1.3% of its issued share capital and
            exercised its right to tag along in the transaction.
            In this framework the Company and DIC sold 8.5% of the issued share capital of GVT for
            a total consideration of NIS 83 million, each, following which the Company recorded a
            net gain of NIS 3 million in 2008. As a result of the transaction being completed, the
            Company’s and DIC's holding in the issued share capital of GVT decreased to 9.6%,
            each, and the Dutch company’s holding in the share capital of the Brazilian company
            decreased to 19%.
            All the taxes required in respect of the sale of the shares in the Brazilian company by the
            Dutch company, in respect of the transfer of the proceeds from the Dutch company to
            GVT and in respect of GVT’s purchase of its own shares from the Company, DIC and the
            other shareholder will be paid by the sellers of the GVT shares, and if any such taxes are
            paid by others, they will be indemnified in respect of such amounts. It was also provided
            in the agreement that any sale of shares of GVT by the Company or DIC until December
            31, 2009 requires the consent of the buyer, and that after then the buyer will have right of
            first refusal with respect to any sale of shares of GVT by the Company or DIC until
            December 31, 2014 (this right shall apply to shares regarding which the other
            shareholders in GVT do not exercise their right of first refusal in the said sale). The
            agreement also provides certain restrictions on selling to the benefit of the Company and
            DIC part of the shares of the Brazilian company by the Dutch company in the period until
            December 31, 2014.
            As from the date of the said sale the investment in GVT is accounted for as an available-
            for-sale financial asset. See also Note 49.a.3.




                                                                                              IDBD Notes 70
                                                                     IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   7. Taavura Holdings Ltd.
       In February 2008, Taavura Holdings Ltd. ("Taavura"), a proportionately consolidated
       company, increased its holdings in Maman after completing a special purchase offer in the
       framework of which it acquired another 5% of Maman's issued and paid-in share capital ("the
       purchase offer") in consideration of NIS 14 million. At the end of March 2008, Taavura
       increased its holdings in Maman following the exercise of the call option that was granted to it
       by Naftali S.S. Investments Ltd. ("Naftali") under an option agreement signed between the two
       (as amended). In the framework of the exercise of said call option, Taavura acquired from
       Naftali the latter's entire interest in Maman, representing on said date some 18.2% of Maman's
       issued and paid-in share capital, in consideration of NIS 51 million. In the third quarter of
       2008, Taavura purchased another 9% of Maman's share capital in consideration of NIS 14
       million.
       As of the date of these financial statements, Taavura holds some 77% of Maman's issued and
       paid-in share capital.
       As a result of the increase in the rate of holding in Maman, the financial statements of Maman
       were consolidated for the first time as from the first quarter of 2008.
       Taavura has engaged an independent appraiser for evaluating the fair value of Maman's assets
       and liabilities, including intangible assets, and for assessing the remaining useful lives of these
       assets. Said evaluation found that the fair value of the assets and liabilities is not materially
       different from their carrying amount. Accordingly, Taavura did not make any adjustments
       regarding said purchase.
   8. Clal Biotechnology Industries Ltd.
       In February 2008, Clal Biotechnology Industries Ltd. ("CBI"), a subsidiary of Clal Industries
       held at 67%, and Teva Pharmaceutical Industries Ltd. ("Teva") signed an agreement that
       replaces the letter of understandings that the parties signed in June 2007 in connection with an
       option conferred to Teva to acquire CBI's entire interest in Andromeda.
       Teva was granted an option to invest USD 10 million in Andromeda and institutional investors
       were granted an option to invest simultaneously with Teva an additional amount of USD 7.5
       million ("the institutional investment"), based on a pre-investment valuation of Andromeda of
       USD 90 million ("the first investment"). If and as far as Teva exercises the option, the
       royalties that Teva was entitled to under former agreements between Andromeda and Teva
       will be cancelled.
       In addition to the first investment, Teva will give Andromeda a shareholders' loan of USD 3.5
       million, which will be used to repay part of the shareholders' loans that CBI extend to
       Andromeda and upon receipt of the permit to market the product, Teva will give Andromeda
       another shareholders' loan that will serve to fully repay the balance of CBI's loans to
       Andromeda ("Teva's loans"). Teva's loans are repayable to Teva only out of royalties on sales,
       net, according to the terms set out in the agreement.
       Under the first investment, Teva and institutional investors will be granted an option to invest,
       within a certain time frame from receiving the final report regarding the clinical trials, an
       additional amount of USD 10 million and USD 7.5 million, respectively based on a pre-
       investment valuation of Andromeda of USD 170 million.
       Andromeda maintains Put options for three additional investments of Teva in Andromeda in
       an aggregate amount of up to $ 15 million.
       Andromeda's shareholders maintain two Put options to sell to Teva, based on their relative
       share, Andromeda's shares in an aggregate amount of approximately USD 96 million, subject
       to receipt of the permit to market the product in EU countries and in the U.S. in a respective
       value of USD 480 million and USD 555 million, respectively.
       With the completion of the first investment, Teva shall be granted an exclusive license to
       manufacture, develop, market and distribute the product around the world for all indications.
       In consideration for said license, Teva will pay to Andromeda royalties at a certain percentage
       out of product sales, additional royalties on cumulative sales and additional payments for other
       indications of the product (all as set in the agreement).
                                                                                             IDBD Notes 71
                                                                     IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   8. Clal Biotechnology Industries Ltd. (cont'd)
       If and as far as up to the date of the first investment, institutional investors do not join the
       agreement, CBI committed to undertake the provision of Andromeda with financing up to the
       amount that had to be received from the institutional investment, all as set in the agreement.
       In August 2008, Teva decided to exercise the option and invest an amount of USD 10 million
       in Andromeda under the terms specified in the amendments to the agreement signed by the
       parties in August 2008 and February 2009.
       In the third quarter of 2008 Teva invested an amount of approximately USD 3 million in
       Andromeda. The Company's share in CBI's gain rising from decrease of it stake on
       Andromeda resolved at NIS 4 million. After balance sheet date Teva invested an additional
       amount of USD 1.5 million. Following the investment, CBI's stake in the issued share capital
       of Andromeda decreased to 95%.
       The completion of this investment is subject to fulfilling all the prerequisites established in the
       agreement. Once Teva's investment in Andromeda is completed, CBI's stake in Andromeda
       will decrease to about 90% (about 86% on a fully diluted basis). As a result of completing the
       investment, the Company is expected to recognize an additional gain (attributable to the
       Company's shareholders) due to the change in the holding rate in this company in a total of
       approximately NIS 26 million.
       As stated in Note 2.EE.3 above, should the Company choose to early adopt starting January 1,
       2009 IAS 27 (Revised), "Consolidated and Separate Financial Statements", and IFRS 3
       (Revised), "Business Combinations", the amount that would have been recognized as gain
       would be carried directly to the Company's equity.
       Also in the context of said announcement, Teva undertook to provide to Andromeda loans for
       financing expenses relating to obtaining product marketing approval in both the U.S. and in
       Europe, excluding expenses relating to the completion of two PHASE III trials up to 65% of
       said expenses (and the balance financed by Andromeda).
   9. Other Investments
       (a) In 2008 the Company purchased in an off-floor transaction shares of Discount Investment
            of a par value of NIS 2.6 million, constituting approximately 3% of the issued share
            capital of DIC, for the price of NIS 214 million. As a result of the said acquisition the
            Company holds 74.45% of the issued share capital of DIC. The excess of the cost of
            acquisition over the net asset value acquired, in the amount of NIS 62 million, was
            allocated to goodwill. Oppositely, in respect of other purchases the company acquired
            negative goodwill in the amount of NIS 17 million which it recognized as income.
       (b) In March 2008, Clal Industries published an outline of a special tender offer to acquire
            from Fundtech's shareholders up to 2.3 million of Fundtech's shares representing 15% of
            the share capital in consideration of USD 12.5 per share. On April 7, 2008, the tender
            offer was finalized and Clal Industries acquired about 2.1 million shares representing
            some 13.5% of Fundtech's issued share capital and voting rights in consideration of
            approximately NIS 93 million. Consequently, Clal Industries’ stake in Fundtech increased
            to 56.3%. As a result of the increase in the holding rate, as of the second quarter of 2008,
            the financial statements of Fundtech were consolidated for the first time.
            Clal Industries hired an independent outside appraiser for evaluating the fair value of
            Fundtech's assets and liabilities, including intangible assets, and for estimating the
            remaining useful life of these assets. As a result of the purchase as above recorded
            adjustments to the fair value of identifiable assets and liabilities, net of NIS 98 million,
            goodwill of NIS 48 million and capital revaluation reserve of NIS 20 million. Following
            said purchase, the balance of goodwill (including in respect of previous purchases) totals
            NIS 134 million.




                                                                                             IDBD Notes 72
                                                                      IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

K. Development of investments in investee companies – principal changes in the reported period
   (cont'd)
   9. Other Investments (cont'd)
       (c) In June 2008 Elron completed the purchase of 5% of the issued share capital of Given
            Imaging Ltd. for the price of USD 24 million in accordance with a special purchase offer
            that was published by Elron. Following this, Given Imaging is 27.8% held by Elron
            (including 9% in concatenation by its subsidiary), and 16% by DIC.
       (d) In April 2008 DIC completed the acquisition of 50.02% of equity and 52.93% of voting
            rights in Maxima Air-Separation Center Ltd. (“Maxima”) for the price of NIS 85 million.
            As a result, DIC holds 75% of the share capital and 77% of the voting rights in Maxima,
            and as from the second quarter of 2008 fully consolidates the financial statements of
            Maxima in its financial statements. The aforementioned acquisition resulted in
            adjustments to the fair value of identifiable assets and liabilities, net, in the amount of
            NIS 39 million, goodwill in the amount of NIS 2 million and a revaluation capital reserve
            in the amount of NIS 13 million.
       (e) As a result of the economic crisis recently being experienced by the Japanese economy
            and a considerable decline in the volume of activity of the line of products for the ultra
            clean industries in a Japanese subsidiary of Ham-Let (Israel Canada) Ltd. (hereunder –
            "Ham-Let"), and in accordance with the valuation that was made with respect to the
            assets of the said subsidiary, Ham-Let recorded a loss from impairment of fixed assets,
            write-downs of inventories and write-down of an intangible asset in the total amount of
            NIS 38 million. The Company's share in the loss amounts to NIS 15 million. In March
            2009 the Board of Directors of Ham-Let decided to discontinue the manufacturing
            activity of the subsidiary in Japan and to concentrate all the manufacturing activity of
            Ham-Let in Israel.
   10. Dividends distributed by the directly held investee companies of the Company
                                                                          The Company's
                                                          Amount of       share in the
           Name of the company                            dividend        dividend
           Discount Investments                                     150                111
           Discount Investments                                     270                199
           Discount Investments                                     180                134
           Discount Investments(1)                                1,000                739
           Clal Insurance Enterprises Holdings                      360                203
           Clal Industries                                          126                 76
            (1) In October 2008 the Court approved Discount Investment's request to approve a
            distribution in accordance with Section 303 of the Companies Law in the amount of NIS 1
            billion, out of amounts included in its shareholders’ equity that are not retained earnings. In
            November 2008 DIC distributed to its shareholders cash in the amount of NIS 1 billion,
            constituting NIS 11.73 per each ordinary share, in accordance with the approval awarded as
            aforementioned by the Court.
            The Company’s share in the said dividend amounts to NIS 739 million.
            For details regarding distribution of dividends by DIC after balance sheet date, see Note
            49.a.7.
L.   Addition of the financial statements of a material equity-basis investee company
     The financial statements of Great Wash Park LLC ("GW") were not added to the financial
     statements of the Company as the statements of a material equity-basis investee company, despite
     the fact that the Company's share in the profits of GW for the year ended on December 31, 2008,
     mainly arising from write-downs performed at GW, as noted in Section K.2.(D)(1) above,
     constitute more than ten percent of the profit of the Company for the relevant period (the "Profit
     Test"), because in the preceding reporting year the Profit Test did not apply, and it is not expected
     to apply in the next reporting year.




                                                                                              IDBD Notes 73
                                                                                     IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

M. Acquisitions of first time consolidated subsidiaries during the financial statements period
   1. Following is the fair value of the identified assets and identified liabilities of subsidiaries
      consolidated for the first time in the books at the acquisition date:
                                                                              Book value                        Values
                                                                              before           Fair value       recognized
                                                                              acquisition      adjustments      at acquisition
                                                                                                NIS millions
    Trade and other receivables                                                         506                 -                   506
    Inventory                                                                            84                 2                    86
    Fixed assets                                                                        395                42                   437
    Investment property                                                                  35                 -                    35
    Loans and long term receivables                                                   1,738                 -                 1,738
    Other investments, including derivatives                                             57                 -                    57
    Intangible assets                                                                   148               319                   467
    Lend assets, land and deferred expenses                                               4                 -                     4
    Provisions                                                                         (28)                 -                  (28)
    Deferred taxes                                                                     (32)              (86)                 (118)
    Long term financial liabilities                                                   (223)                 -                 (223)
    Liabilities in respect of non-yield dependant insurance
       contracts and investment contracts                                            (1,758)                -            (1,758)
    Creditors and other liabilities                                                    (346)               34              (312)
    Current financial liabilities                                                       (78)                -               (78)
    Identifiable assets and liabilities, net                                             502              311                813
    Goodwill at acquisition                                                                                                  145
    Negative goodwill at acquisition (attributed to profit and loss)                                                        (23)
                                                                                                                             935

    Consideration paid in cash                                                                                                (456)
    Cash and cash equivalents in acquired
        companies at acquisition                                                                                               167
    Net cash disposed of                                                                                                       289


    Fair value adjustments in respect of fixed and intangible assets and liabilities are as follows:
                                                    NIS millions              Amortization period in years
    Customer relations                                                 196    5-20, and according to the economic benefits
                                                                              anticipated from the customers in each period
    Orders backlog                                                     100    Up to 3 years, and according to the economic
                                                                              benefits anticipated
    Trade name/Brand                                                    23    5-10, and according to the economic benefits
                                                                              anticipated from the trade mark or brand in
                                                                              each period
    Inventory                                                             2   During 2008
    Fixed assets                                                         42   10
    Deferred income                                                      34   1
    Provision for tax                                                  (86)   Corresponding to the items for which the
                                                                              provision was created
                                                                       311


    2.    If the business combinations as from January 1, 2008 had been executed, the shareholder's loss
          for 2008 would total NIS 253 millions and the consolidated earnings for 2008 would total NIS
          15,731 million.
    3.    See Notes 3.K.7, 3.K.9(b) and 3.K.9(d) for additional details.




                                                                                                                  IDBD Notes 74
                                                                       IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 3 – Investments (cont'd)

N. Financial data of proportionately consolidated companies
                                                                         As at December 31,
                                                                        2008              2007
                                                                             NIS millions
      Current assets                                                          698              458
      Non-current assets                                                    1,292            1,013
      Current liabilities                                                     792                591
      Non-current liabilities                                               2,213                525


                                                                      Year ended December 31,
                                                                       2008              2007
                                                                            NIS millions
      Income                                                                1,281                908
      Costs                                                                 1,415                947

Note 4 – Financial investments for yield dependent contracts
A. Details regarding financial investments against          insurance     and       investment     contracts,
   presented at fair value though profit or loss:

                                                                         As at December 31,
                                                                        2008              2007
                                                                             NIS millions
      Quoted debt instruments                                               8,741            7,336
      Unquoted debt instruments                                             4,023            5,024
      Shares                                                                2,502            6,690
      Others                                                                2,392            2,054

                                                                           17,658           21,104


B.   Market Risks
     Yield dependent contracts are liabilities for contracts where the insurance rewards to which the
     policyholder is entitled depend on the yield of certain of the Company's investments less
     management fees as described below:
     1. Policies issued up to 2004 – fixed management fees as well as variable management fees at a
          rate of 15% of the real return after deducting the fixed management fees.
     2. Policies issued as of 2004 and thereafter – fixed management fees.
     As for the assets and liabilities in respect of these products, the insurance companies are not
     directly exposed to changes in interest, in the fair value of the investments or in the index. The
     effect of the monetary results on the insurance company's profits is reduced to the exposure derived
     from the variable management fees based on the fluctuations in the yield carried to the
     policyholders only with respect to yield dependent policies issued up to 2004 and from the overall
     scope of the liability from which the fixed management fees of the insurer are derived with respect
     to the total yield dependent products.
     In view of the above, the sensitivity tests and maturity dates of the liabilities detailed below do not
     include yield dependent contracts.
     The scope of liabilities under yield dependent contracts for policies issued until 2004 at December
     31, 2008 amounts to approximately NIS 17 billion. Any change of 1% in the scope of this liability
     affects the fixed management fees by approximately NIS 1 million. Any change of 1% in the real
     yield in the portfolio affects the variable management fees by approximately NIS 25 million. When
     the real yield of these contracts is negative, Clal Insurance does not charge variable management
     fees and will not be able to collect them as long as it does not achieve a positive yield to cover the
     accumulated negative yield. Since at December 31, 2008, a net real negative yield of 23.06% has
     been accumulated as stated in Notes 3.V.3 and 32.D and according to the directives, there can be
     no collection of variable management fees until the entire accumulated negative yield is covered.


                                                                                                 IDBD Notes 75
                                                                     IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 4 – Financial investments for yield dependent contracts (cont'd)

B.   Market Risks (cont'd)
     Accordingly, there is no immediate effect of a 1% change in the real yield on investments in yield
     dependent contracts on the variable management fees as long as the cumulative yield is negative as
     above.
     Liquidity Risks
     Yield dependent contracts, in life assurance – according to the terms of the contracts, the owners
     are entitled to receive only the value of the said investments. Hence, if the investment value
     decrease for any reason there will be a corresponding decrease in the Company's liabilities. For
     details in regard of the aforementioned liabilities see Note 19.B.

C. Composition in accordance to linkage basis

                                                                       As at December 31, 2008
                                                                                  In foreign
                                                                       Linked to currency or
                                                        Not linked     CPI        linked to        Total
                                                                             NIS millions

      Tradable assets                                          4,854        5,839          1,944           12,637
      Non-tradable assets                                        292        3,959            770            5,021
                                                               5,146        9,798          2,714           17,658

                                                                       As at December 31, 2007
                                                                                  In foreign
                                                                       Linked to currency or
                                                        Not linked     CPI        linked to        Total
                                                                             NIS millions

      Tradable assets                                          6,392        5,696         3,059           15,147
      Non-tradable assets                                        352        4,839           766            5,957
                                                               6,744       10,535         3,825           21,104




                                                                                          IDBD Notes 76
                                                                             IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 4 – Financial investments for yield dependent contracts (cont'd)
D.   Credit risks for assets in Israel
      As at December 31, 2008
                                                                             Local rating
                                            AA                BBB             Lower
                                            and above         to A            than BBB      Not rated        Total (**)
                                                                             NIS million
      Debt assets in Israel:
      Government debentures                         4,670                -              -            -             4,670
      Other debt assets - tradable                  2,920              796              8          111             3,835
      Other debt assets – non-tradable              3,489              578             14            -             4,081
      Total debt assets in Israel                  11,079            1,374             22          111            12,586
      From this – debt assets at internal
      rating                                            887           123               9               -          1,019

      As at December 31, 2007
                                                                             Local rating
                                            AA                BBB            Lower
                                            and above         to A           than BBB       Not rated        Total (**)
                                                                             NIS million
      Debt assets in Israel:
      Government debentures                         3,089                -              -            -             3,089
      Other debt assets - tradable                  3,288              493              4          244             4,029
      Other debt assets – non-tradable              4,213              799             12            -             5,024
      Total debt assets in Israel                  10,590            1,292             16          244            12,142
      From this – debt assets at internal
      rating                                            845           227               -               -          1,072

*    The sources of ratings in Israel are the rating agencies Maalot and Midroog. Midroog data were converted
     into rating symbols based on commonly accepted conversion coefficients. Each rating includes all ranges of
     that rating; for example, A includes A- to A+.
**   The book value constitutes an approximation of the maximum credit risk. Thus, the "Total" column
     represents maximum credit risk.
E.   Credit risks for assets in abroad

      As at December 31, 2008
                                                                  International rating (*)
                                            AA                          Lower
                                            and above         BBB       than BBB        Not rated            Total (**)
                                                                        NIS million

      Total debt assets abroad                          122            37              15               4             178


      As at December 31, 2007
                                                                       International rating (*)
                                            AA                              Lower
                                            and above         BBB           than BBB       Not rated          Total (**)
                                                                             NIS million

      Total debt assets abroad                          162            12               1               43                218

      *)  The sources for the rating level aboard are the rating companies S&P, Moody's and Fitch, which were
          approved by the Supervisor of Insurance. Each rating includes all the ranges, for example: A includes
          A- through A+.
      **) The book value forms a proximity to the maximum credit risk. Therefore, the total column represents
          the maximum credit risk.

                                                                                                   IDBD Notes 77
                                                                         IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 5 – Reinsurers assets

                                                                                   As at December 31,
                                                                                  2008             2007
                                                                                       NIS million
     A. Composition
     Assets in respect of insurance contracts and non-yield dependant
        investment contracts:
      Life assurance and long-term savings                                                42               49
      Health insurance contracts                                                          70               25
      General insurance contracts                                                      2,303            2,442
                                                                                       2,415            2,516

     Assets in respect of insurance contracts and yield dependant
       investment contracts                                                               88               87
                                                                                       2,503            2,603

     For details regarding reinsurance credit risks see Note 2.E.2.

B.    Policy in risk management in relation to reinsurers
      The Group insures part of its business by reinsurance, most of which is done through reinsurers
      abroad. However, the reinsurance does not release the direct insurers from their commitment
      towards their policyholders according to the insurance policies.
      The Group is exposed to risks resulting from uncertainty regarding the reinsurers' ability to pay
      their share in the liabilities in respect of insurance contracts ("reinsurance assets") and their debts in
      respect of claims paid. This exposure is managed by a current follow-up of the reinsurers rating in
      the international market and their following through on monetary liabilities.
      The Company is exposed to concentrated credit risk to an individual reinsurer, due to the
      reinsurance market structure and the limited amount of reinsurers with sufficient rating.
      In accordance with the Regulator’s directives, once a year the Boards of Directors of the Insurance
      subsidiaries in Israel determine the limits of the maximum exposure to the reinsurers with whom
      the Company has engaged and/or will engage, which is mainly based on their international rating.
      These exposures are managed in the Company by individual valuation of each of the reinsurers
      separately.
      In addition, the Company's exposures are dispersed between various reinsurers, and the principal
      ones are reinsurers who are rated at high international ratings.




                                                                                                  IDBD Notes 78
                                                                                                                                                                                        IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 5 – Reinsurers assets (cont'd)
C.   Credit risks exposure of reinsurers

     As at December 31, 2008
                                                                                                        Reinsurance assets net of reinsurers
                                                                                                         share in deferred acquisition costs
                                                                                                                                          In branches
                                                                                                                                          valued on
                                                                                                                                          the basis                             Amount
                                                                                                                                          underwriting                          of credit
                                                     Total                Balances                                                        years in                              letter                           Debts in arrears
                                                     reinsurers           in debit                          In             In             Europe and          Deposits          received          Total          Between
                                                     premiums             (credit)        In life           health         property       in insurance        by                from              exposure       half a year         Over one
                                                     for 2008             net (b)         assurance         insurance      insurance       liabilities        reinsurers        reinsurers        (a)            and one year        year
                                                                                                                                              NIS million
     Rating group
     AA and above

     Munich Reinsurance Co.                                        228           (11)                 45              9            144                 103                72                  -           219                    -               -
     Others                                                        267             15                 16             12            354                 261                72                  -           585                    -               -
     Total                                                         495              4                 61             21            498                 364               144                  -           804                    -               -

     A
     Swiss Re                                                      210           (24)                 68              7            145                 225                69                 46           307                    -               -
     Lloyd's                                                       133             21                  -              -             47                 166                 4                  -           230                    -               -
     Others                                                        266              7                  -             26            243                 323                68                 21           508                    1               -
     Total                                                         609              4                 68             33            435                 714               141                 67         1,045                    1               -
     BBB                                                            13              1                  -              -             24                   2                 -                 34            (7)                   -               -

     Lower than BBB – or unrated                                    99               4                 1             16             82                 119                 7                 32           184                    3              1

     Total                                                        1,216              13               130            70          1,039               1,199               292              133           2,026                    4              1

     (a)        The total exposure to reinsurers is: net debt (credit), reinsurance assets, net of the deposits and net the amount of letters of credit received from the reinsurers as guarantee for their liabilities.
     (b)        After deduction of the provision for doubtful debts in an amount of NIS 25 million. The balances do not include balances of insurance companies in respect of joint insurance.
     (c)        The total provisions for doubtful debts, plus the reduction of reinsurers’ share in outstanding claims, amounts to NIS 42 million, constituting 2.1% of the total exposure.
     (d)        The rating is determined mainly according to the S&P rating company. In cases where S&P did not provide a rating, the rating was determined by another rating company whose rating was converted in accordance with a
                special formula as determined pursuant to the Ways of Investment Regulations.
     (e)        The total exposure of the reinsurers in the event of an earthquake at the feasibility of damage of 1.5% (MPL), in the residential and mortgage branch 2.5% (MPL) in other branches is NIS 8,988 million. Out of this, the
                portion of the reinsurer who has the most significant part in this exposure is 24.1%.
     (f)        There are no other reinsurers apart from those specified above that the exposure in their respect is higher than 10% of the total exposure of reinsurers in general insurance, or that the premium in their respect is higher than
                10% of the total premiums for reinsurance in general insurance for the year 2008.
     (g)        The non-rated group includes balances for outstanding claims through brokers up to and including the year 2003 whose exposure amounts to NIS 24 million.
     (h)        The data includes balances of companies in Israel, which were included in accordance with the said (paragraph d above) conversion chart, in the amount of NIS 1 million.




                                                                                                                                                                                                                         IDBD Notes 79
                                                                                                                                                                                       IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 5 – Reinsurers assets (cont'd)
C.   Credit risks exposure of reinsurers (cont'd)
     As at December 31, 2007
                                                                                                     Reinsurance assets net of reinsurers
                                                                                                      share in deferred acquisition costs
                                                                                                                                       In branches
                                                                                                                                       valued on
                                                                                                                                       the basis                              Amount
                                                                                                                                       underwriting                           of credit
                                                    Total               Balances                                                       years in                               letter                           Debts in arrears
                                                    reinsurers          in debit                         In             In             Europe and           Deposits          received          Total          Between
                                                    premiums            (credit)       In life           health         property       in insurance         by                from              exposure       half a year           Over one
                                                    for 2007            net (b)        assurance         insurance      insurance       liabilities         reinsurers        reinsurers        (a)            and one year          year
                                                                                                                                           NIS million
     Rating group
     AA and above

     Munich Re                                                   230            (19)               48              11            114                 135                73                  -           216                    -                -
     Swiss Re                                                    215            (28)               72               8            136                 268                71                  -           385                    -                -
     Gen Re                                                       29             (4)               11               2              4                  97                11                  -            99                    -                -
     Others                                                      281               3                3               4            432                 254                91                 21           584                    -                -
     Total                                                       755            (48)              134              25            686                 754               246                 21         1,284                    -                -

     A
     Lloyd's                                                     146            (12)                 -               -            45                 113                  7                 -           140                   -                 -
     Others                                                      232               4                 -               -           342                 226                 46                16           510                   2                 -
     Total                                                       378             (8)                 -               -           387                 339                 53                16           650                   2                 -

     BBB                                                          18             (4)                 -               -            17                   1                  -                 -            13                    -                -

     Lower than BBB – or unrated                                  51            (15)                3                -            23                 170                 6                  -           175                   1                 -

     Total                                                     1,202            (75)              137              25          1,113               1,264               305                 37         2,122                   3                 -

     (a)       The total exposure to reinsurers is: net debt (credit), reinsurance assets, net of the deposits and net the amount of letters of credit received from the reinsurers as guarantee for their liabilities.
     (b)       After deduction of the provision for doubtful debts in an amount of NIS 21 million. The balances do not include balances of insurance companies in respect of joint insurance.
     (c)       The total provisions for doubtful debts, plus the reduction of reinsurers’ share in outstanding claims, amounts to NIS 42 million, constituting 1.9% of the total exposure.
     (d)       The rating is determined mainly according to the S&P rating company. In cases where S&P did not provide a rating, the rating was determined by another rating company whose rating was converted in accordance with a
               special formula as determined pursuant to the Ways of Investment Regulations.
     (e)       The total exposure of the reinsurers in the event of an earthquake at the feasibility of damage of 1.5% (MPL), in the residential and mortgage branch 2.5% (MPL) in other branches is NIS 7,909 million. Out of this, the
               portion of the reinsurer who has the most significant part in this exposure is 19.8%.
     (f)       There are no other reinsurers apart from those specified above that the exposure in their respect is higher than 10% of the total exposure of reinsurers in general insurance, or that the premium in their respect is higher than
               10% of the total premiums for reinsurance in general insurance for the year 2007.
     (g)       The non-rated group includes balances for outstanding claims through brokers up to and including the year 2003 whose exposure amounts to NIS 36 million.
     (h)       The data includes balances of companies in Israel, which were included in accordance with the said (paragraph d above) conversion chart, in the amount of NIS 1 million.




                                                                                                                                                                                                                        IDBD Notes 80
                                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 6 – Investments, including derivatives

A. Non-current investments
                                                                                     As at December 31,
      Composition according to type of investment                                  2008              2007
                                                                                        NIS millions
      Available-for-sale financial assets (1)                                           8,586               7,171
      Investments held to maturity                                                         16                   8
      Financial assets designated at fair value through profit or loss                    792                 681
      Derivatives used for hedging                                                         76                   2
      Derivatives not used for hedging                                                     30                  14
                                                                                        9,500               7,876

      (1) Available-for-sale financial assets                      As at December 31, 2008       As at December 31, 2007
                                                                             Not                           Not
                                                                   Listed    listed              Listed    listed
                                                                   for       for                 for       for
                                                                   trading   trading    Total    trading   trading    Total
                                                                           NIS millions                  NIS millions
      Non-convertible debentures                                      5,568         52   5,620      5,320         63   5,383
      Shares                                                          1,994        448   2,442        860        355   1,215
      Mutual fund participation certificates                            183        341     524        225        348     573
      Total available-for-sale financial assets                       7,745        841   8,586      6,405        766   7,171


B.   Other pledged investments
                                                                                     As at December 31,
      Composition according to type of investment                                  2008              2007
                                                                                        NIS millions
      Available-for-sale financial assets – shares listed for trade *                   2,517                   -
      * See Note 3.K.4.c regarding the investment in shares of Credit Suisse.

C. Current investments
                                                                                      As at December 31,
                                                                                     2008             2007
                                                                                         NIS millions
      Financial assets at fair value through profit or loss
      Debentures                                                                         3,705              3,963
      Shares and options                                                                 1,113              1,479
      Mutual fund participation certificates                                               151                405
      Short-term treasury notes                                                              5                229
      Derivatives used for hedging                                                          14                  -
      Derivatives not used for hedging                                                      91                135
      Other                                                                                 16                  3
                                                                                         5,095              6,214
      Available-for-sale financial assets
      Debentures                                                                           192                  -
      Mutual fund participation certificates and exchange-traded notes                      95                  -
      Short-term treasury notes                                                            139                  -
      Other                                                                                 16                  -
                                                                                           442                  -
                                                                                         5,537              6,214


D. Reclassification of financial assets
   As a result of the serious crisis on the capital markets in Israel and around the world, following
   which the prices of corporate and government debentures decreased sharply, as from September
   2008 a subsidiary has been reexamining its policy for managing the marketable securities portfolio
   held by it and its subsidiaries. At the beginning of October 2008 the said subsidiary decided to
   change the management policy of the portfolio so that it will not longer be held for trade, but will
   be held until there is an increase in value, or until the money is required in order to finance
   investments. As a result of the change in the management policy of the portfolio, the said


                                                                                                              IDBD Notes 81
                                                                                      IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 6 – Investments, including derivatives (cont'd)

D. Reclassification of financial assets (cont'd)
   subsidiary decided to reclassify the portfolio as an available-for-sale portfolio as from the fourth
   quarter of 2008 (on the basis of the revision to IAS 39 that was issued in October 2008). The
   amount of NIS 930 million
   was reclassified as aforementioned. If the amount had not been reclassified, a loss in the amount of
   NIS 20 million would have been included in financing expenses in 2008 (the Company's share in
   the said expenses is approximately NIS 13 million).
   Presented hereunder are details regarding the effective interest and the cash flows expected to be
   received from the debentures included in the available-for-sale portfolio as at December 31, 2008:
                                                              Forecasted cash flow
                                                                                                    More
         Effective          Within                                                                 than 5
     annual interest       one year      1-2 years     2-3 years     3-4 years   4-5 years          years          Total
            %                                                       NIS millions
     0-3                           1              9            12             4           -               3             29
     3-6                          18             25            26            35         32              150            286
     6-9                           5              8             8             8          8               23             60
     9-12                          3              4             7             7          7               11             39
     12-15                         1              -             1             -          1                -              3
                                  28             46            54            54         48              187            417


Note 7 –Loans and Debit Balances

A. Non-current loans and debit balances
                                                                                         As at December 31,
                                                                                         2008          2007
                                                                                            NIS millions
     1. Composition
     Long-term loans and deposits                                                           14,985                12,456
     Long-term debit balances                                                                   28                    17
                                                                                            15,013                12,473
     Less current maturities for loans                                                       (109)                  (41)
     Less current maturities for debitors                                                       (1)                   (2)
                                                                                            14,903                12,430
     2. Repayment schedule
     Second year *                                                                           1,603                 1,933
     Third year                                                                                848                   598
     Fourth year                                                                             1,215                 1,014
     Fifth year                                                                                946                 1,032
     From sixth to tenth year                                                                4,548                 3,734
     As from eleventh year                                                                   5,636                 4,076
     Without fixed date of repayment                                                           107                    43
                                                                                            14,903                12,430
      * including current maturities in respect of insurance liabilities, that are not classified as short-term

    3. Classification of long-term loans according to borrower groups
                                                                                      As at December 31,
                                                                       2008           2007         2008                2007
     Balance per single borrower                                    Number of borrowers             NIS millions
     Up to Nis 100 thousand                                            97,722       70,893                 548                 363
     From NIS 101 thousand to NIS 5,000 thousand                        3,145        3,464               1,587               1,522
     From NIS 5,001 thousand to NIS 10,000 thousand                        65           47                 444                 314
     Over NIS 10,001 thousand                                              42           44              11,199               8,932
                                                                      100,974       74,448              13,778              11,131




                                                                                                                      IDBD Notes 82
                                                            IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 7 –Loans and Debit Balances (cont'd)

B. Short-term loans and deposits
                                                              As at December 31,
                                                            2008              2007
                                                                 NIS millions
     Bank deposits                                                 805             1,362
     Loans and other deposits                                       90               133
     Current maturities                                            109                41
                                                                 1,004             1,536




                                                                                     IDBD Notes 83
                                                                                                                                                                     IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 8 - Fixed Assets
A.      Composition:
                                                                       Land
                                                                    designated                                                                  Computers,                                        Orchards
                                                                      for the                                                                      office                            Fixed           and
                                                      Land and     construction        Machinery,     Telecom-                                   furniture,      Installations       assets       irrigation
                                                      buildings    of buildings        Plant and     munications     Motor       Telephone      equipment       and leasehold        under         facilities
                                                         (1)        for sale (2)       equipment      network       vehicles    switchboards     and other     improvements       construction        (3)       Total
                                                                                                                                 NIS millions
Cost
Balance as at January 1, 2007                             4,420                12           8,315          7,941          501            118          2,179              1,399               49             9     24,943
Acquisition through business combination                     52                 -               1            479            1              -            293                 41                -             -        867
Additions                                                   102                 6             270            362         104               -            127                 74                -             -      1,045
Disposals                                                  (32)                 -            (38)             (4)        (63)              -          (269)               (22)             (28)             -      (456)
Disposals following discontinuance
 of consolidation                                       (2,390)                 -         (2,315)          (230)         (45)          (118)          (190)            (1,022)                -            -      (6,310)
Transfer to investment property                            (34)                 -                -             -            -              -               -                  -               -            -         (34)
Transfer to inventory of buildings held for sale               -             (10)                -             -            -              -               -                  -               -            -         (10)
Transfer to assets held for sale                           (10)                 -                -             -            -              -               -                  -               -            -         (10)
Effect of changes in exchange rates                          (4)                -            (26)              -          (1)              -             (5)                (2)               -            -         (38)
Less investment grant                                          -                -              (2)             -            -              -             (2)                  -               -            -          (4)
Balance as at December 31, 2007                           2,104                 8           6,205          8,548         497               -          2,133                468               21            9      19,993

Acquisition through business combination                    155                    -          699              -           25              -            173                  12              -              -       1,064
Additions                                                    82                    5         346             343         118               -            194                 78             217              -       1,383
Disposals                                                    (9)                   -         (23)       *(2,377)         (47)              -          (213)                 (8)              -              -     (2,677)
Transfer to investment property                            (54)                    -            -              -            -              -              -                   -              -              -        (54)
Transfer from investment property                            24                    -            -              -            -              -              -                   -              -              -          24
Revaluation of property transferred
 to investment property                                      34                 -                -             -           -               -               -                  -              -             -          34
Transfer to assets held for sale                               -                -              (6)             -           -               -             (3)                (1)              -             -        (10)
Transfer to inventory of buildings held for sale               -              (4)                -             -           -               -               -                  -              -             -          (4)
Effect of changes in exchange rates                          (5)                -              (2)             -           -               -               6                  -              -             -          (1)
Less investment grant                                        (1)                -            (35)              -           -               -               -                  -              -             -        (36)
Balance as at December 31, 2008                           2,330                 9           7,184          6,514         593               -          2,290                549             238             9      19,716

* In 2008 a subsidiary wrote-off a communication network that is no longer in use.
As at December 31, 2008, fixed assets in the amount of NIS 2,640 million that have been fully depreciated are still in use.




                                                                                                                                                                                                  IDBD Notes 84
                                                                                                                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 8 - Fixed Assets (cont'd)
A.      Composition: (cont'd)
                                                                       Land
                                                                    designated                                                                 Computers,                                            Orchards
                                                                      for the                                                                     office                                                and
                                                      Land and     construction        Machinery,     Telecom-                                  furniture,      Installations    Fixed assets        irrigation
                                                      buildings    of buildings        Plant and     munications    Motor       Telephone      equipment       and leasehold        under             facilities
                                                         (1)        for sale (2)       equipment      network      vehicles    switchboards     and other     improvements       construction            (3)        Total
                                                                                                                                NIS millions
Depreciation and impairment losses
Balance as at January 1, 2007                             1,717                    -        6,218          6,160        303              81          1,670                823                   -              8    16,980
Depreciation for the year                                     53                   -          238            494         46               -            182                  75                  -              -     1,088
Impairment loss                                              10                    -             4             -          -               -              -                   -                  -              -        14
Transfer to investment property                              (4)                   -             -             -          -               -              -                   -                  -              -        (4)
Cancellation of impairment loss                                -                   -           (7)             -          -               -              -                 (3)                  -              -      (10)
Offset of accumulated depreciation on fixed
  assets transferred to investment property                (13)                    -            -              -           -              -              -                   -                  -              -       (13)
Acquisition through business combination                     15                    -            -            355           -              -            233                  36                  -              -        639
Disposals                                                   (8)                    -         (20)          (160)        (36)              -          (317)                (28)                  -              -      (569)
Disposals following discontinuance
  of consolidation                                        (755)                    -      (1,663)          (145)        (24)           (81)          (151)              (598)                   -             -     (3,417)
Effect of changes in exchange rates                          (1)                   -         (19)              -           -              -             (1)                 -                   -             -        (21)
Balance as at December 31, 2007                           1,014                    -        4,751          6,704        289               -          1,616                305                   -             8     14,687

Depreciation for the year                                     37                   -          172            438          47              -            191                  39                  -             -         924
Impairment loss                                               11                   -             4             -           -              -               1                  2                  -             -           18
Transfer to investment property                            (25)                    -             -             -           -              -               -                  -                  -             -        (25)
Transfer to assets held for sale                               -                   -           (5)             -           -              -             (2)                  -                  -             -          (7)
Disposals                                                      -                   -         (13)       *(2,396)        (25)              -          (212)                 (5)                  -             -     (2,651)
Acquisition through business combination                      46                   -          412              -          14              -            122                   9                  -             -         603
Effect of changes in exchange rates                          (1)                   -           (2)             -           -              -               3                (1)                  -             -          (1)
Balance as at December 31, 2008                           1,082                    -        5,319          4,746        325               -          1,719                349                   -             8     13,548


Book value
as at January 1, 2007                                     2,703                12           2,137          1,781        198              37            509                576              49                 1       7,963
as at December 31, 2007                                   1,090                 8           1,454          1,844        208               -            517                163              21                 1       5,306
as at December 31, 2008                                   1,248                 9           1,865          1,768        268               -            571                200             238                 1       6,168

* In 2008 a subsidiary wrote-off a communication network that is no longer in use.




                                                                                                                                                                                                    IDBD Notes 85
                                                                            IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 8 - Fixed Assets (cont'd)

B.   Additional information
        (1)     Land and buildings item include:

                                                                 Final year of
                                                                  lease period
                                                                    (including             Consolidated
                                                                      option to            December 31
                                                                       Extend)      2008                  2007
                                                                         Years             NIS millions

               Freehold                                                                    796                   657
               Capitalized leases                                 2032-2059                452                   443

        (2)    Part of the propety registered in the names of subsidiaries on the books of the Registrar of
               Lands.
       (3)     The plantations are on land covering an aggregate area of 259 dunams (22 dunams freehold and
               237 dunams leased until the year 2062). The net book value reflects the cost of the land.
       (4)     Fixed assets include capitalized costs of NIS 72 million.
       (5)     The net book value in the consolidated balance sheet is stated after deducting an investment
               grant of NIS 128 million as at December 31, 2008 (2007 – NIS 97 million).
       (6)     The balance of the provision for impairment of fixed assets amounts to NIS 57 million as at
               December 31, 2008 (2007 – NIS 40 million).
       (7)     Land that the planning and building committee approved a plan for changing its designation
               from agricultural to residential and commercial. In the reporting period the subsidiary changed
               the designation of part of the land, following which it transferred to inventory land in the
               amount of NIS 5 million (2007 – NIS 10 million)
      (8)      For information regarding liens on assets, see Note 29.J.
C.    The fair value of fixed assets recognized as a result of a business combination is based on the estimated
      amount for which the fixed asset could be exchanged on the date of valuation with another asset having
      similar use characteristics between a willing buyer and a willing seller in an arm’s length transaction
      wherein the parties each acted knowledgeably. The market value of items of plant, equipment and
      furniture, and fixtures is based on the quoted market prices for similar items.




                                                                                                    IDBD Notes 86
                                                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 9 - Investment Property

A.         Changes in fair value of investment property
           1. Year 2008
                                                                                         Available              Rental         Total fair
                                                                                           land              buildings (1)      value
                                                                                                            NIS millions
     Balance at January 1, 2008                                                                    555               6,297          6,852

     Additions during the year:
     Increase in fair value (2)                                                                      34                270             304
     Net translation differences from translation of
       financial statements of foreign operation                                                      -                 (9)             (9)
     Acquisitions and investments in existing property                                               36                533             569
     Transfer from fixed assets                                                                       -                 36              36
     Additions in respect of company consolidated for the
       first time                                                                                    12                  23             35
     Transfer from investment property under construction                                             -                183            183
     Costs and expenses which capitalized                                                             -                 (2)            (2)
     Total additions                                                                                 82              1,034          1,116

     Disposals during the year:
     Sales                                                                                           -                 218            218
     Transfer to fixed assets                                                                        -                  24             24
     Transfer to investment property under construction                                             39                   -             39
     Changes in fair value                                                                           -                   4              4
     Total disposals                                                                                39                 246            285
     Balance as at December 31, 2008                                                               598               7,085          7,683

           2.     Year 2007
                                                                                                                Rental          Total fair
                                                                                       Available land        buildings (1)       value
                                                                                                            NIS millions
     Balance at January 1, 2007 (2)                                                                427               5,691          6,118

     Additions during the year:
     Increase in fair value (2)                                                                         -              290             290
     Net translation differences from translation of
       financial statements of foreign operation                                                     -                (29)           (29)
     Acquisitions and investments in existing property                                            138                  900          1,038
     Transfer from fixed assets                                                                      -                  24             24
     Transfer from investment property under construction                                         (10)                 109             99
     Total additions                                                                              128                1,294          1,422

     Disposals during the year:
     Sales                                                                                           -                 173            173
     Discontinuance of consolidation of company                                                      -                 515            515
     Total disposals                                                                                 -                 688            688
     Balance as at December 31, 2007                                                               555               6,297          6,852

     (1)        For yield dependant contracts:
                As at December 31, 2008 – NIS 1,213 million
                As at December 31, 2007 – NIS 838 million
     (2)        See Note 2.J. regarding the methods by which the fair value of investment property was determined.



                                                                                                                              IDBD Notes 87
                                                                              IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 9 - Investment Property (cont'd)

B.    Principal purchases and disposals of investment property by the group companies in 2008:
(1)   In December 2008 an agreement was signed regarding the sale of all the rights in the Givataim Mall
      (50%) for the price of NIS 795 million. after receiving all the necessary approvals, including the approval
      of the Commissioner of Restrictive Trade Practices. As a result of the transaction the fair value of the
      asset was updated, following which the company recorded in the year 2008 its share in gain of NIS 34
      million. On March 31, 2009 the said transaction was completed and the consideration remains of it have
      been received (excluding an amount of approximately NIS 39 million, which was deposited with a trustee
      to secure the provision of tax certifications required in order to transfer the rights to the buyer's name.)
(2)   In November 2008 wholly owned subsidiaries of Property & Building sold all their rights in two
      properties for a total of NIS 158 million. As a result of the sale, the company recorded in the fourth
      quarter of 2008 its share in a net loss of NIS 6 million.
C.    Land rights:

                                                                                           As at December 31
                                                                     Final year           2008             2007
                                                                   of lease period            NIS millions


      Under freehold                                                                          2,352          2,112
      Under capitalized lease (1)                                     *2061                   5,136          4,565
      Under non-capitalized lease                                      2048                     195            175
                                                                                              7,683          6,852

      (1) Under capitalized lease
          Land as at December 31, 2008 is NIS 1,005 million (2007: NIS 748 million) are leased in capitalized
          leasing from The Israel Land Administration from the years 2022 up to 2053.
      * Some of the land has been registered in the names of the companies on the Land Registry, mainly
          because the property rights in certain areas in which part of the assets are located have not yet been
          arranged.

D.    Amounts that were recognized in the statement of income:

                                                                                         For the year ended
                                                                                            December 31,
                                                                                       2008              2007
                                                                                           NIS millions

      Amounts recognized as rent                                                            606                 599
      Direct operating expenses deriving from investment property*                           80                 110
      Gain from realization of investments and assets or loss from
        realization and reductions of investments and assets                                (14)                 14
      Increase in fair value of investment property, net                                    226                 171
      *   Including expenses in the amount of NIS 3 million in 2007 in respect of investment property that did not
          produce rental revenue.




                                                                                                      IDBD Notes 88
                                                                        IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 9 - Investment Property (cont'd)

E.        Lease agreements

                                                                                   For the year ended
                                                                                      December 31,
                                                                                 2008              2007
                                                                                      NIS millions

          Up to one year                                                               617               512
          One year to five years                                                     1,408             1,388
          More than five years                                                       1,099               464
                                                                                     3,124             2,364

Note 10 - Investment Property under Construction

                                                                                   as at December 31,
                                                                                 2008               2007
                                                                                       NIS millions

A.        Opening balance                                                              155                   87
          Increase in fair value of land                                                 2                    -
          Costs invested during the period                                             215                 167
          Transfer from investment property                                             39                    -
          Transfer to investment property                                            (183)                 (99)
          Closing balance                                                              228                 155

     B.     As at December 31, 2008 buildings in the amount of NIS 110 million are being constructed on
            capitalized leasehold land until 2048 and in the amount of NIS 118 million on freehold land.
     C.     Including capitalized borrowing costs in the amount of NIS 22 million (2007 – NIS 8 million).

Note 11 – Trade Receivables

A. Long term trade receivables

                                                                                   As at December 31
                                                                                 2008              2007
                                                                                      NIS millions

          Open debts and accrued income                                              1,156               992
          Credit card companies                                                        121               180
                                                                                     1,277             1,172
          Less/-
          Deferred interest income                                                    (53)              (49)
          Provision for doubtful debts                                                  (1)               (3)
          current maturities                                                         (670)             (632)
                                                                                       724               684
                                                                                       553               488




                                                                                                IDBD Notes 89
                                                                             IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 11 – Trade Receivables (cont'd)

B.   Current trade receivables

                                                                                         As at December 31
                                                                                       2008              2007
                                                                                            NIS millions

      Open debts                                                                          3,093             2,406
      Checks receivable                                                                     411               522
      Credit card companies                                                                 341               324
      Current maturities of long-term customers                                             670               632
                                                                                          4,515             3,884
      Less provision for doubtful debts                                                   (308)             (239)
                                                                                          4,207             3,645

Note 12 – Inventory

A. Presented as non-current assets

      Non-current inventory
                                                                                         As at December 31
                                                                                       2008              2007
                                                                                            NIS millions
      Freehold land (1),(2)                                                               1,737             1,871
      Capitalized development rights and leased land (2)                                      1                 5
      Payments in respect of future construction                                             97                15
      Other                                                                                   2                 4
                                                                                          1,837             1,895

      Changes in non-current inventory
                                                                                         As at December 31
                                                                                       2008              2007
                                                                                            NIS millions
      Opening balance                                                                     1,895               229
      Additions                                                                             264             1,860
      Disposals                                                                           *(71)             (100)
      Translation differences from translation of financial statements
       of foreign operation                                                                (15)              (94)
      Provision for loss(2)                                                               (236)                 -
      Closing balance                                                                     1,837             1,895
       * Including transfer to inventory of buildings held for sale in the amount of NIS 33 million.
       (1) Including NIS 14 million in respect of land rights that have not yet been registered in the name of the
           subsidiary. Caveats have been registered on the land registry in respect of such land.
       (2) Regarding Las Vegas Plaza project – see also Note 3.K.2(d)(1).




                                                                                                     IDBD Notes 90
                                                                             IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 12 – Inventory (cont'd)

B.   Presented as current assets

      Current inventory
                                                                                        As at December 31
                                                                                      2008              2007
                                                                                           NIS millions
      Manufactured products
      Raw and auxiliary materials                                                           469                459
      Work in process                                                                       152                134
      Finished goods                                                                        188                147
      Merchandise                                                                           288                231
                                                                                          1,097                971

      Materials in transit                                                                    4                  3
      Payments on account of inventory                                                        -                  3
                                                                                              4                  6

      Other inventory and purchased goods                                                    48               28
      Spare parts                                                                            99               23
      Cellular phones and other telecommunication equipment                                 126              245
                                                                                          1,374            1,273
The fair value of inventory acquired in a business combination is determined based on the estimated selling
price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit
margin based on the effort required to complete and sell the inventories. The fair value of inventory of raw
materials acquired is a business combination is determined based on its replacement value.

Note 13 - Deferred Expenses

A. Composition

                                                                                        As at December 31
                                                                                      2008              2007
                                                                                           NIS millions

      Operating lease (B), (C), (D)                                                       1,219            1,317
      Other deferred expenses*                                                            1,311            1,254
                                                                                          2,530            2,571
      * In 2007 includng NIS 1 million in respect of Purchase tax on long-term lease contracts.

B.   Minimum future lease payments in respect of non-cancellable lease contracts:

                                                                                        As at December 31
                                                                                      2008              2007
                                                                                           NIS millions
      Up to one year                                                                         68                 14
      One year to five years                                                                164                 39
      More than five years                                                                  828                794
                                                                                          1,060                847




                                                                                                    IDBD Notes 91
                                                                              IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 13 - Deferred Expenses (cont'd)

C.   Presented hereunder are details regarding lease payments that were paid in advance with respect
     to:

                                                              Final years               As at December 31
                                                            of lease period           2008              2007
                                                                                           NIS millions
     Land rights:
     Under non-capitalized lease                             2033-2097                     910             1,008
     Under capitalized lease                                 2041-2049                      80               102
                                                                                           990             1,110
     Usage rights in telecommunication lines                                               229               207
                                                                                         1,219             1,317

D.   After impairment provision on the Las Vegas Plaza project in the amount of NIS 181 million, see also
     Note 3.K.2.(d)(1).




                                                                                                    IDBD Notes 92
                                                                                                                                              IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 14 - Intangible Assets

A.    Changes in intangible assets:
                                                                                                                                               Acquisition
                                                                                                                                               expenses for
                                                                                Technology                                                     life assurance
                                                                                    and                                                        and general
                                                                 Brands and     development                     Customer                       insurance
                                                      Goodwill   trade names     in process     Licenses        relations        Software      portfolios           Other          Total
                                                                                                           NIS millions

Cost
Balance as at January 1, 2007                            5,332            435             36          667              762           1,244                  599        191          9,266
Acquisition through business combination                 1,076             31              6           12              142             116                   83        323          1,789
Acquisition of minority interest                           230              -              -            -                -               -                    -          -            230
Acquisitons                                                 21             20             20            6              228             129                    8         83            515
Disposals following discontinuance of consolidation    (1,177)              -              -        (116)            (122)           (168)                    -       (62)        (1,645)
Disposals in the framework of sale of investee
 company                                                 (958)          (128)               -           -            (170)              (7)                    -         -        (1,263)
Goodwill adjustments                                        20              -               -           -                -                -                    -         -             20
Effect of changes in exchange rates                       (15)              -             (3)         (1)                -              (1)                  (4)       (5)           (29)
Others                                                       2              -             47            -                -                -                    -         -             49
Balance as at January 1, 2008                            4,531            358            106         568               840           1,313                  686       530           8,932
Acquisition through business combination                   237             23             44            -              211             125                     -      105             745
Acquisition of minority interest                            89              -               -           -                -                -                    -         -             89
Acquisitons                                                395              2             11            -                3             117                   11          3            542
Disposals in the framework of sale of investee
 company                                                 (357)           (45)               -         (1)                 (69)            -                     -           -       (472)
Goodwill adjustments                                      (18)              -               -           -                    -            -                     -           -          18
Assets classified as held for sale                           -              -            (20)           -                    -            -                     -           -        (20)
Goodwill adjustments in respect of put option             (30)              -               -           -                    -            -                     -           -        (30)
Effect of changes in exchange rates                          3              1               -           -                    5          (1)                     -           2          10

Balance as at December 31, 2008                          4,850            339            141         567                  990        1,554                  697       640           9,778




                                                                                                                                                                                IDBD Notes 93
                                                                                                                                               IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 14 - Intangible Assets (cont'd)

A.    Changes in intangible assets: (cont'd)
                                                                                                                                                Acquisition
                                                                                                                                                expenses for
                                                                                 Technology                                                     life assurance
                                                                                     and                                                        and general
                                                                  Brands and     development                     Customer                       insurance
                                                      Goodwill    trade names     in process     Licenses        relations        Software      portfolios           Other       Total
                                                                                                            NIS millions

Amortization and impairment losses
Balance as at January 1, 2007                              357               7              -           93                  262         760                  494         36       2,009
Amortization for the year                                    -              12             12           41                 154          191                   42         44         496
Disposals following discontinuance of consolidation      (168)               -              -            -                 (46)       (125)                    -       (15)       (354)
Disposals in the framework of sale of investee
  company                                                 (52)             (7)              -            -                 (55)          (7)                    -        -        (121)
Impairment loss                                             28               -              -            -                    -            -                    -        -            28
Effect of changes in exchange rates                          -               -              -          (1)                    -          (1)                  (1)        -           (3)
Balance as at January 1, 2008                              165              12             12         133                   315         818                  535        65        2,055
Amortization for the year                                   97              10             16           36                  141         192                    32      105          629
Disposals following discontinuance of consolidation          -               -             23          (1)                   12            5                    -        -            39
Disposals in the framework of sale of investee
  company                                                   (9)              -               -         (1)                 (40)            -                     -        -        (50)
Impairment loss                                            273              22               6           -                    -            -                     3        7         311
Reversal of impairment loss                                   -              -             (5)           -                    -            -                     -        -          (5)
Assets classified as held for sale                            -              -             (7)           -                    -            -                     -        -          (7)
Effect of changes in exchange rates                           -              -               3           -                    1          (1)                     1      (3)            1

Balance as at December 31, 2008                            526              44             48         167                  429        1,014                  571       174        2,973

Carrying amounts
as at January 1, 2007                                    4,975             428             36         574                  500          484                  105       155        7,257
as at December 31, 2007                                  4,366             346             94         435                  525          495                  151       465        6,877
as at December 31, 2008                                  4,324             295             93         400                  561          540                  126       466        6,805




                                                                                                                                                                              IDBD Notes 94
                                                                             IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 14 - Intangible Assets (cont'd)

B.   The fair value of intangible assets acquired in a business combination was determined on the date
     of the business combination as follows:
     Customer relations
     The fair value is determined on the basis of the discounted cash flows expected to be derived from the
     existing customers on the date of the business combination, after deducting a fair return on all other assets
     that are part of creating the related cash flows.
     Brand
     The fair value is determined by the relief from royalty method, by which the fair value of the asset is
     assessed by estimating the amount of royalties that theoretically would have been paid to a third party for
     the use of the asset. The economic value of the brand is due to the ownership over the asset releasing the
     owner of the asset from paying royalties as aforementioned to a third party for the use of the asset. The
     rate of royalties that was used to determine the fair value of the brands is 1%-1.5% (mainly 1.5%) of
     expected revenues.
     Licenses
     Rights to use cellular frequencies in Israel are assessed according to their carrying amount on the books of
     the acquired company on the date of the business combination, since there is no market for such rights in
     Israel.
C.   Goodwill and a brand of Cellcom that has an indefinite useful life amount to NIS 2 billion as at December
     31, 2008.
     The value of Cellcom’s activity, which is based on its value on the stock exchange as at December 31,
     2008, is higher than the value of the said activity on the financial statements of the Group.
D.   On December 31, 2008 Clal Insurance examined the impairment in the goodwill value in respect of
     provident funds management activities, including the provident funds whose management rights are held
     by Clal Insurance and those whose management rights are held by Clal Provident Funds and are all
     managed by Clal Gemel. For lthis purpose a statement was received from an independent external
     appraiser, according to which there is no need to depreciate the value of the aforementioned goodwill. For
     the valuation, the long term annual growth rate was estimated at 1.8%, and the capitalization rate of the
     provident funds activity after tax deduction is 11.5%. Capitalization rate not including taxes was
     estimated at 19.5%.
E.   The provision was included in the following items of profit or loss:

                                                                                 Year ended December 31
                                                                                      2008              2007
                                                                                           NIS millions
     Cost of sales                                                                          94                 199
     Selling and marketing expenses                                                          5                  24
     General and administrative expenses                                                   288                 128
                                                                                           387                 351




                                                                                                     IDBD Notes 95
                                                                      IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 15 - Debtors and Debit Balances
                                                                                As at December 31
                                                                              2008              2007
                                                                                   NIS millions

     Affiliated companies                                                           88                95
     Insurance companies and insurance brokers                                     413               458
     Institutions                                                                   37                56
     Employees                                                                      15                 8
     Accrued income                                                                181               136
     Debtors in respect of factoring in a subsidiary                               562               740
     Prepaid expenses                                                              145               134
     Advances to suppliers                                                         188               172
     Lease fees paid in advance                                                     25                33
     Other                                                                         225               418
                                                                                 1,879             2,250

Note 16 - Inventory of buildings held for sale
                                                                                As at December 31
                                                                              2008              2007
                                                                                   NIS millions
A.   Composition:

     Costs invested:
     Land                                                                           188                201
     Construction and other                                                        415                 408
                                                                                   603                 609
     Less provision for loss                                                       (43)                (28)
                                                                                   560                 581
     Inventory of completed buildings                                              116                 122

                                                                                   676                 703

B.   Changes in inventory of buildings for sale:
     Balance as at January 1                                                        703              590
     Additions                                                                      347              322
     Disposals                                                                    (392)            (198)
     Translation differences in respect of translation of financial
      statements of foreign operation                                                 4                (11)
     Transfer from fixed assets and real estate                                      37                   -
     Provision for loss                                                            (23)                   -

     Balance as at December 31                                                     676                 703




                                                                                            IDBD Notes 96
                                                                          IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 17 - Cash and cash equivalents
                                                                                     As at December 31
                                                                                        2008               2007
                                                                                        NIS millions
A.   Composition:
     Bank balances                                                                     1,513              1,365
     Call deposits                                                                     6,479             10,124
                                                                                       7,992             11,489
      Cash and cash equivalents in respect of yield dependant
       contracts                                                                        481                425

B.   Presented cash and cash equivalents:
     As current assets                                                                 7,992             11,489
     Less overdrafts                                                                    (20)               (15)
     In statement of cash flows                                                        7,972             11,474


Cash balances in the amount of NIS 89 million serve as security for credit, as required in the loan agreement
with Goldman Sachs. See Note 21.A.3.c.(4).




                                                                                                 IDBD Notes 97
                                                                                                                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 18 – Equity

A.        Movement in capital

                                                                                                               Attributable to the equity holders of the Company
                                                                                                                            Capital
                                                                                                                          reserves in                                        Total equity
                                                                                                    Capital               respect of                                         attributable
                                                                                                   reserves                available                                         to the equity
                                                                                                     from                   for sale                                          holders of
                                                              Share      Share     Other         translation    Hedge      financial    Revaluation    Treasury   Retained        the        Minority    Total
                                                              capital   premium   reserves       differences   reserves      assets      reserves       shares    earnings     company       Interests   equity
                                                                                                                                        NIS millions

For the year ended December 31, 2007
Balance as at January 1, 2007                                      61    2,146        248                  -      (16)          133               -       (32)       1,701         4,241       7,678      11,919
Dividend paid                                                       -        -          -                  -         -            -               -          -     (1,058)       (1,058)           -     (1,058)
Share of the minority in dividends paid by subsidiaries             -        -          -                  -         -            -               -          -           -              -    (1,369)     (1,369)
Acquisition of the company's shares by a subsidiary                 -        -          -                  -         -            -               -        (5)           -            (5)          -          (5)
Sale of rights to the minority*                                     -        -          -                  -         -            -               -          -           -              -      1,808       1,808
Acquisition of minority interests                                   -        -          -                  -         -            -               -          -           -              -      (577)       (577)
Acquisition of first-time consolidated companies                    -        -          -                  -         -            -               -          -           -              -        471         471
Decrease in minority interest following
 discontinuance of consolidation                                    -         -              -             -          -             -             -           -          -               -   (1,083)     (1,083)
Cancellation of linkage of the exercise price of
 options in a subsidiary                                            -         -              -             -          -             -             -           -          -               -         44         44
Share-based payments granted by subsidiaries                        -         -              -             -          -             -             -           -          -               -         67         67
Decrease in reserve from revaluation following
 achievement of control, carried retained earnings                  -        -          -                -           -             -           (11)          -         11              -           -          -
Total income (expense) for the period                               -        -          -            (381)           -          (29)             91          -      1,874          1,555       1,698      3,253
Balance as at December 31, 2007                                    61    2,146        248            (381)        (16)          104              80       (37)      2,528          4,733       8,737     13,470
       * Including issuance of shares to minority in subsidiary.




                                                                                                                                                                                                  IDBD Notes 98
                                                                                                                                                                  IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 18 – Equity (cont'd)

A.     Movement in capital (cont'd)

                                                                                                               Attributable to the equity holders of the Company
                                                                                                                            Capital
                                                                                                                          reserves in                                        Total equity
                                                                                                    Capital               respect of                                         attributable
                                                                                                   reserves                available                                         to the equity
                                                                                                     from                   for sale                                          holders of
                                                              Share      Share     Other         translation    Hedge      financial    Revaluation    Treasury   Retained        the        Minority    Total
                                                              capital   premium   reserves       differences   reserves      assets      reserves       shares    earnings     company       Interests   equity
                                                                                                                                        NIS millions

For the year ended December 31, 2008
Balance as at January 1, 2008                                     61     2,146        248            (381)        (16)          104             80        (37)      2,528          4,733       8,737      13,470
Dividend paid                                                      -         -          -                -           -            -              -           -      (784)          (784)           -       (784)
Share of the minority in dividends paid by subsidiaries            -         -          -                -           -            -              -           -          -              -     (1,637)     (1,637)
Acquisition of the company's shares by the company                 -         -          -                -           -            -              -       (354)          -          (354)           -       (354)
Sale of the company's shares by a subsidiary                       -         -          -                -           -            -              -          17          -             17           -          17
Increase in minority rights following issuance in
 subsidiaries (including rights issuance)                           -         -              -             -          -             -             -           -          -               -       454         454
Sale of rights to the minority                                      -         -              -             -          -             -             -           -          -               -        38          38
Acquisition of minority interests                                   -         -              -             -          -             -             -           -          -               -   (1,252)     (1,252)
Acquisition of minority rights through profit-
  Participatory policies and index certificates companies           -         -              -             -          -             -             -           -          -               -     (434)      (434)
Acquisition of companies consolidated for the first time            -         -              -             -          -             -             -           -          3               3       293        296
Change in classification terms of liability in subsidiaries         -         -              -             -          -             -             -           -          -               -        71         71
Share-based payments granted by subsidiaries                        -         -              -             -          -             -             -           -          -               -        96         96
Decrease in reserve from revaluation following
  achievement of control, carried retained earnings                 -         -              -           -           -            -            (17)           -        17              -           -           -
Total income (expense) for the period                               -         -              -       (117)        (15)        (250)              62           -     (249)          (569)         499        (70)
Balance as at December 31, 2008                                    61     2,146       248            (498)         (31)        (146)            125       (374)     1,515           3,046       6,865      9,911


* Including issuance of shares to minority in subsidiary.




                                                                                                                                                                                                  IDBD Notes 99
                                                                         IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 18 – Equity (cont'd)

B.   As at balance sheet date the Company’s nominal authorized, issued and fully paid-up share capital
     consists of registered Ordinary “A” shares traded on the Tel-Aviv Stock Exchange. The share capital as at
     December 31, 2008 and 2007 is as follows:

                                  Authorized              Issued and fully paid-up            Market price per share at
                                 (NIS millions)                (NIS millions)                   balance sheet date
                                  2008            2007          2008             2007                2008              2007


       Ordinary “A”
       shares of
       NIS 1 par value            100             100            57                  57           146.00           130.60

     Each Ordinary “A” share grants the right to participate and vote in general meetings, one vote per share,
     and the right to participate in the distribution of dividends in proportion to the amount of capital paid-up
     or credited as paid-up thereon.
C.   In a purchase offer of the Company completed in August 2008, the Company acquired approximately
     7.5% of the issued share capital of the Company, in consideration for a total of approximately NIS 354
     million. The shares acquired dormant and presented in the financial statements at cost, offset against the
     shareholders' equity of the Company. Additional details regarding the full response to a purchase offer of
     the Company, after the balance-sheet date, the conversion of the shares into dormant shares and the
     conversion of the Company into a private company whose shares were delisted from the TASE, see Note
     49A.1.
D.   Capital management
     The Company and some of its subsidiaries are subject to external capital requirements, as detailed in
     paragraph G below.
E.   During the year the Company distributed dividends in a total sum of NIS 786 million as detailed below:
                                                                                             Amount of         Amount per
                                                                                          dividend paid     NIS 1 par value
           Date of payment                                                                 NIS millions                NIS

           15/05/2008                                                                             270                 4.69
           06/10/2008                                                                             276                 5.18
           05/11/2008                                                                             240                 4.50

F.   See Note 49.A.8 for details regarding a dividend distributed subsequent to balance sheet date by the
     company.




                                                                                                                  IDBD 100
                                                                              IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008


Note 18 – Equity (cont'd)

G.    Capital requirments of Insurance subsidiaries in Israel
      Declaration pursuant to the Insurance Business Supervision Regulations (Minimum Required Capital of
      an Insurer), 1998, as amended in 2002 (the Capital Regulations):
                                                                               As at December 31, 2008
                                                                                Insurance subsidiaries
                                                                                                         Clal Credit
                                                                   Clal Insurance   Clal Health          Insurance
                                                                                    NIS millions
Minimum shareholders' equity:
The amount required pursuant to regulations *) (d) (e)                      3,041              287                     27
The amount calculated as per the regulations                                2,819             240                      48
Surplus (2)                                                                 (222)             (47)                     21
Additional surplus not included in calculation of equity                        -                -                      5

Transactions for capital completion performed through the
   date of signing ht efinancial statements:
Issuance of primary capital                                                   200              55
Increace in recognized subordinated capital in calculation
   purposes                                                                   150                  -
Decrease in unrecognized assets due to issuance of capital as
   specified above                                                             15                  -
Decrease in unrecognized assets                                                 9                  -
Surplus as at December 31, 2008 after transactions performed
   as above                                                                   152                  8


Primary capital:
Minimum amount required by the regulations                                     80              80                      27
Amount calculated by the regulations                                        1,880             240                      52
Surplus                                                                     1,800             160                      25

(*)                            The required amount includes also
   Deferred acquisition costs in life assurance and insurance
   against sickness and hospitalization and acquisition of
   insurance portfolio costs (c)                                              819             122                       -
   Extraordinary risks in life assurance                                      320               -                       -
   Unrecognized asets as defined in the capital requirements
   (mainly loans and advances to agents)                                      174              21                       -
                                                                            1,313             143                       -




                                                                                                              IDBD 101
                                                                               IDB Development Corporation Limited

 Notes to the Financial Statements as at December 31, 2008

 Note 18 – Equity (cont'd)

 G.    Capital requirments of Insurance subsidiaries in Israel (cont'd)

                                                                                As at December 31, 2007
                                                                                 Insurance subsidiaries
                                                                                                          Clal Credit
                                                                    Clal Insurance   Clal Health          Insurance
                                                                                     NIS millions
 Minimum shareholders' equity:
 The amount required pursuant to regulations *)                              2,978             231                      26
 The amount calculated as per the regulations                                3,254             305                      48
 Surplus                                                                       276              74                      22
 Additional surplus not included in calculation of equity                        -              29                       1

 Primary capital:
 Minimum amount required by the regulations                                     77              77                      26
 Amount calculated by the regulations                                        2,299             334                      49
 Surplus                                                                     2,222             257                      23

 (*)                            The required amount includes also
    Deferred acquisition costs in life assurance and insurance
    against sickness and hospitalization and acquisition of
    insurance portfolio costs                                                  794              96                       -
    Extraordinary risks in life assurance                                      316               -                       -
    Unrecognized asets as defined in the capital requirements
    (mainly loans)                                                             177              41                       -
                                                                             1,287             137                       -

1. (a) Including subordinated deeds in the amount of NIS 940 million (2007 – NIS 955 million) representing
        subordinated capital pursuant to the Capital Regulations.
    (b) 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.
    (c) In February 2007, the supervisor published a directive according to which, as of the first quarter of 2007,
        the provision for reserves for special risks in life assurance will be cancelled in the financial statements
        of insurance companies. Concurrently, capital requirement of 0.17% of the amount in risk in self
        retention was defined. Furthermore, it was stipulated that the minimum equity requirement for the
        amount in risk shall not be less that the requirement on the date of the transfer.
    (d) 1. In October 2007 and April 2008, amendment drafts to the Supervision of Financial Services (Capital
           Adequacy Requirement from an Insurer) Regulations, 2007 (Revised) were issued ("the draft").
           In the draft, capital requirements in the following categories are suggested in addition to the existing
           capital requirements:
           a. Return yielding programs in life assurance that are backed, in whole or in part, by designated
               debentures.
           b. Longevity risk in annuity policies in which the annuity coefficients embody promise of longevity.
           c. Operating risks
           d. Credit risks as a percentage of assets based on the level of risk that characterizes the different
               assets.
           e. Catastrophe risks in general insurance.




                                                                                                               IDBD 102
                                                                              IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 18 – Equity (cont'd)

G.    Capital requirments of Insurance subsidiaries in Israel (cont'd)

1. (d) 1. cont'd.

            According to the draft, the insurance companies will be required to increase their capital by 2010 in
            three equal annual portions. The new capital requirements are expected to significantly increase the
            required minimum capital but their effect cannot be assessed until the final formulation of the
            regulations.
      2.    In May 2008, in his letter to managers of insurance companies, the Commissioner of the Insurance
            instructed that due to the expected increase in capital required from insurance companies and in view
            of the business results of the latest quarter, until the relevant regulations are enacted in Israel, an
            insurance company will not distribute dividends in an amount exceeding half of the profits from
            ordinary activities from the beginning of 2008 unless with the Commissioner's advance approval.
      3.   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.
      4.    In July 2008, a circular was issued regarding the preparations for the adoption of the Solvency II
            Directive. The circular was issued in furtherance to the adoption of the proposed version of the
            Solvency II Directive ("the proposed Directive") by the European Union on July 10, 2007.
            The proposed Directive introduces a fundamental and comprehensive change in the Regulations
            relating to guaranteeing the solvency and the capital adequacy of insurance companies which are
            members of the European Union with the aim of improving the protection of the policyholders' funds,
            enhancing inter-market integration and competitiveness. According to the circular, the Commissioner
            of the Insurance intends to adopt the proposed Directive for insurance companies in Israel when it is
            expected to be adopted in countries of the EU, in the second half of 2012. The proposed Directive
            consists of three pillars: quantitative requirements, qualitative requirements and disclosure
            requirements.
      5.    On January 25, 2009, the Commissioner sent a letter to the insurance companies regarding mitigations
            in the capital required from the insurance companies regarding the subordinated capital rate and
            passive deviations as follows:
            In respect of any increase in the primary capital created as a result of the inflow of funds to the
            insurance companies by its controlling shareholders as from December 1, 2008 and up to June 30,
            2009 ("the increase"), the insurance company will be entitled to include up to 75% of the inflow in the
            framework of equity that was recognized as subordinated capital, and not at the rate of 50% as is
            prescribed in the Capital Regulations ("Minimal Capital Required from an Insurer") – 1998, up to a
            ceiling of 60% of the total primary capital. The increase of the subordinated capital, as mentioned in
            the above paragraph will be amortized on a straight line commencing from June 30, 2009 and up to
            June 30, 2010.
            An asset held against the Investment Regulations (unallowable asset), will not be calculated as an
            unallowable asset as defined in the Capital Regulations, on condition that the deviation from the
            limitations and the conditions was created after October 1, 2008, and due to change in the market
            value of the investment property, or due to a decrease in the total nominal value of the quoted
            securities, or due to a decrease in the security rating or the reinsurer's rating, or due to a change in the




                                                                                                               IDBD 103
                                                                           IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 18 – Equity (cont'd)

G.    Capital requirments of Insurance subsidiaries in Israel (cont'd)

1. (d) 5. cont'd.

          insurer's liabilities or due to a change in the insurer's equity, but in any case not due to a new
          investment in an investment asset.
          Companies that are interested in applying the mitigations should obtain the Commissioner's approval.
          In March 2009, Clal Insurance obtained an approval for benefiting from the mitigations regarding the
          subordinated capital rate.
2.    Insurance companies abroad meet capital requirements according to the capital regulations in their places
      of residence.
3.    Clal Insurance 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.
4.    Pursuant to the approval, effective May 2003, which was granted by the Commissioner to the controlling
      shareholders of IDB Holdings Ltd. ("IDB Holdings") (as amended on December 21, 2005, in the
      framework of the Commissioner's approval for establishment of a special purpose company for Clal
      Insurance), IDB Holdings is obligated to meet the commitment of Clal Insurance, as described in
      paragraph 2 above. In addition, it is required to maintain the capital requirements as follows, as long as
      there are pledges on their controlling holdings in IDB Holdings. According to the approval: (a) the
      shareholders' equity of Clal Insurance will not be lower, at any time, than 120% of the minimum solvency
      margin required from Clal Insurance by Capital Regulations (Minimum Capital Required from an Insurer)
      - 1998 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; (b) The shareholders' equity of the Company shall
      not be lower, at any time, than the result of multiplying the rate of the Company's holding in Clal
      Insurance Enterprises Holdings by 120% of the shareholders' equity required of Clal Insurance
      Enterprises Holdings, as noted above; (c) The shareholders' equity of IDB Holdings Ltd. shall not be
      lower, at any time, than the result of multiplying the rate of IDB Holdings Ltd. holding in Clal Insurance
      Enterprises Holdings by 120% of the shareholders' equity required of Clal Insurance Enterprises
      Holdings, as noted above. At the balance-sheet date, the capital requirements mentioned above were
      fulfilled with regard to Clal Insurance Enterprises Holdings and with regard to the Company. IDB
      Holdings believes that it complies with the capital requirements, disregarding the current holding rates in
      the chain of control, and taking into consideration the aforesaid holding rates at the date of the permit. In
      light of a possible lack of clarity due to the increase of holdings in the chain of control, and in particular
      the increase in the rate of holdings of IDB Holdings in the Company, it intends to apply to the Supervisor
      of Insurance for clarification of this issue.
      The permit includes conditions and restrictions on the pledges on holding the chain of control in Clal
      Insurance.
      IDB Holdings is acting to obtain the Commissioner of the Insurance's approval for certain executed
      purchases of the means of control of the chain of holdings in Clal Insurance and for the pledges that go
      beyond the permit.
5.    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.
6.    Clal Insurance 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 Clal Insurance controls Meitavit, directly or indirectly.
7.    Clal Insurance 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.




                                                                                                           IDBD 104
                                                                        IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 18 – Equity (cont'd)

G.   Capital requirments of Insurance subsidiaries in Israel (cont'd)

      ("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 Clal Insurance
     controls C.P.Y., directly or indirectly.
8.   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"), 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.
     In order to provide the guarantee, approval was received from the Commissioner 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.
     The approval of the Commissioner 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 and to Batucha,
     including guarantees, is not to exceed 15% of Clal Insurance's equity and that the amount of the 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
     guarantee amounts to approximately NIS 19 million.
9.   Additional insurance companies are required to comply with minimum capital requirements. As of the
     date of the financial statements, these companies had a surplus over the minimum capital. According to
     the decision of the Board of November 19, 2008, Clal Insurance has undertaken that if the capital of Clal
     Health at December 31, 2008 is lower than the required capital, it will act subject to any law to
     complement the deficiency prior to the publication of Clal Health's annual financial statements or up to
     another date as determined by the Commissioner of the Insurance.
     In March 2009, Clal Insurance invested an amount of NIS 55 million in Clal Health against the allocation
     of Ordinary shares.




                                                                                                      IDBD 105
                                                                                      IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 19 – Liabilities in Respect of Insurance Contracts and Investment Contracts

A.     Non-yield dependant

                                                                                 As at December 31,
                                                               Gross                  Reinsurance                      On retention
                                                            2008            2007      2008       2007                  2008         2007
                                                                                    NIS millions
Life assurance and long-time savings
Insurance contracts                                        12,902          12,001           42          49            12,860           11,952
Investment contracts                                        1,944              69            -           -             1,944               69
                                                           14,846          12,070           42          49            14,804           12,021

Less - contributions by subsidiary under defined
   benefit plan for Group employees                         (111)           (114)            -           -             (111)            (114)
Total life assurance and long-term savings (8)             14,735          11,956           42          49            14,693           11,907
Insurance contracts included in the health insurance
   segment (1)                                              1,235              346          70          25             1,165              321
Insurance contracts included in the general
   insurance segment (2)                                    9,955          10,016        2,303       2,441             7,653            7,575
Total liabilities in respect of non-yield dependent
   insurance contracts and investment contracts            25,926          22,318        2,415       2,515            23,511           19,803

B.     Yield dependant
                                                                                     As at December 31,
                                                               Gross                       Reinsurance               On retention
                                                       2008             2007            2008         2007         2008         2007
                                                                                        NIS millions
Life assurance and long-time savings
Insurance contracts                                       19,121          21,386            88              87    19,033              21,299
Investment contracts                                        118               70             -               -      118                  70
                                                          19,239          21,456            88              87    19,151              21,369
Less - contributions by subsidiary under defined
   benefit plan for Group employees                          (57)           (55)            -            -           (57)                (55)
Total life assurance and long-term savings (8)            19,182         21,401            88           87        19,094              21,314
Insurance contracts included in the health insurance
   segment (1)                                                293              233            -              -          293               233
Total liabilities in respect of yield dependent
   insurance contracts and investment contracts           19,475         21,634            88           87        19,387              21,547

(1) Insurance contracts included in the health insurance segment
a. Details of the insurance liabilities
                                                                                    As at December 31, 2008
                                                                        Long-term care        Sickness and
                                                                    Individual     Group      hospital fees                   Total
                                                                                          NIS millions
Insurance liability in accordance to financial exposure
   Yield dependant                                                         266              -                     -                266
   Guaranteed yield                                                         26            963                     -                989
   Other                                                                     -              -                   272                272
Total insurance liability                                                  292            963                (* 272              1,527




                                                                                                                               IDBD 106
                                                                                            IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 19 – Liabilities in Respect of Insurance Contracts and Investment Contracts (cont'd)

B. Yield dependant (cont'd)
(1) Insurance contracts included in the health insurance segment (cont'd)
a. Details of the insurance liabilities (cont'd)

                                                                                     As at December 31, 2007
                                                                         Long-term care          Sickness and
                                                                     Individual      Group     hospital fees                       Total
                                                                                           NIS millions
Insurance liability in accordance to financial exposure
   Yield dependant                                                               217                  -                -                   217
   Guaranteed yield                                                               16                127                -                   143
   Other                                                                           -                  -              219                   219
Total insurance liability                                                        233                127           (* 219                   579

*) The composition and valuation basis are as follows
                                                                                             As at December 31,
                                                                  2008           2007         2008       2007         2008       2007
                                                                         Gross                  Reinsurance             On retention
                                                                                                NIS millions

Provision for unearned premium                                        17                8             -       -             17               8
Provision for premium deficiency                                     147              125             5       8            142             117
Outstanding claims                                                   106               85            14       9             92              76
Other                                                                  2                1             -       -              2               1

Total sickness and hospitalization branch                            272              219            19      17            253             202

b. Details of results according to types of policies
                                                                                 Year ended December 31, 2008
                                                                      Long-term care      Sickness and
                                                                   Individual    Group    hospital fees     Other                     Total
                                                                                         NIS million

 Gross premiums                                                              83             166           (*)518              -            767
 Profit (loss) from health insurance business                              (19)             (40)              65            (8 )            (2 )

(*) Of this, individual premiums total NIS 396 million and group premiums total NIS 121 million.

                                                                                  Year ended December 31, 2007
                                                                       Long-term care      Sickness and
                                                                    Individual    Group      hospital fees   Other                   Total
                                                                                          NIS millions

 Gross premiums                                                                  70            51          (*)486            -             607
 Profit (loss) from health insurance business                                     6          (18)              73           14              75


(*) Of this, individual premiums total NIS 385 million and group premiums total NIS 101 million.




                                                                                                                           IDBD Notes 107
                                                                                                  IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 19 – Liabilities in Respect of Insurance Contracts and Investment Contracts (cont'd)

B.     Yield dependant (cont'd)
(2)      Insurance contracts included in the general insurance segment
                                                                                               As at December 31,
                                                           2008              2007              2008           2007                2008         2007
                                                                    Gross                          Reinsurance                      On redemption
                                                                                                   NIS million
Motor act and liability branches in Israel
   and branches valued based on
   underwriting years in Europe:
Provision for unearned premium                                    395               396               66                72             329             324
Excess of income over expenses (accruals)                         159               165               75                89              84              76
Outstanding claims and provision for deficient
   premium                                                     5,570              5,658            1,070            1,113            4,500            4,545
Total motor act and liability branches in Israel
   and branches valued based on underwriting
   years in Europe                                             6,124              6,219            1,211            1,274            4,913            4,945
Property and other branches
Provision for unearned premium                                 1,009              1,032              237              252              772              780
Outstanding claims                                             2,823              2,765              855              914            1,968            1,851
Total property and other branches                              3,832              3,797            1,092            1,166            2,740            2,631

Total liabilities in respect of insurance
   contracts included in general insurance
   segments                                                    9,956            10,016             2,303            2,440            7,653            7,576

Deferred acquisition costs (including other
  deferred costs)
Motor act and liability branches in Israel and
  branches valued based on underwriting
  years in Europe                                                  58                57               12                10              46              47
Property and pther branches                                       221               241               53                53             168             188
Total deferred acquisition costs                                  279               298               65                63             214             235
Liabilities in respect of general insurance
   contracts net of deferred acquisition
   costs:
Motor act and liability branches (3)                           6,065              6,162            1,199            1,264            4,866            4,898
Property and other branches (4)                                3,611              3,556            1,039            1,113            2,572            2,443
Total liabilities in respect of general insurance
   contracts net of deferred acquisition costs                 9,676              9,718            2,238            2,377            7,438            7,341
(3) Motor act and liability branches in Israel and branches valued based on underwriting years in
    Europe:
                                                                                              As at December 31,
                                                           2008              2007              2008          2007                 2008          2007
                                                                    Gross                         Reinsurance                        On retention
                                                                                                  NIS million

Balance at the beginning of the year                           6,162              6,072            1,264            1,365            4,898            4,707
Total change in cumulative cost of claims                      1,311              1,340              200              176            1,111            1,164
Total payments                                               (1,164)            (1,106)            (165)            (217)            (999)            (889)
Total accrual change                                              (7)              (88)             (14)             (43)                7             (45)
Effect of changes of foreigh exchange rates in
   foreign operations                                          (237)               (56)             (86)             (17)            (151)             (39)
Balance at the end of the year                                 6,065              6,162            1,199            1,264            4,866            4,898
1. The opening and closing balances include outstanding claims, provision for deficient premium, accruals, unearned premium and less deferred
   acquisition costs.
2. The ultimate cost of claims is the balance of non-cumulative outstanding claims, provision for deficient premium, unearned premium less deferred
   acquisition costs with the addition of total claims paid including direct and indirect claims settlement expenses.
3. The payments include indirect claims settlement expenses (general and administrative expenses recorded in claims) attributed to the underwriting
   years.



                                                                                                                                      IDBD Notes 108
                                                                                          IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 19 – Liabilities in Respect of Insurance Contracts and Investment Contracts (cont'd)

B.     Yield dependant (cont'd)
(4)    Property and other branches

                                                                                       As at December 31,
                                                      2008             2007            2008           2007             2008          2007
                                                               Gross                       Reinsurance                    On retention
                                                                                           NIS million

Balance at the beginning of the year                      3,556            1,554           1,113             694           2,443            860
Total change in cumulative cost of claims                 1,516            1,372             349             300           1,167          1,072
Total payments                                          (1,421)          (1,253)           (378)           (297)         (1,043)          (956)
Change in provision for unearned premium,
   net of deferred acquisition costs                         (4)           (106)            (14)            (27)              10            (79)
Effect of changes of foreigh exchange rates in
   foreign operations                                     (36)             (120)            (31)            (48)              (5)          (72)
Change due to business combinations                          -             2,109               -             491                -         1,618
Balance at the end of the year                           3,611             3,556           1,039           1,113           2,572          2,443

1. The opening and closing balances include outstanding claims with the addition of provision for deficient premium
2. The ultimate cost of claims for events in the reported year includes the balance of outstanding claims at the end of the reported year with
   the addition of total claims paid in the reported year
3. The payments for settling claims during the year include payments for events preceding the reported year with the addition of the change
   in the balance of outstanding claims for events preceding the reported year.
4. The payments for settling claims include direct and indirect claims settlement expenses (general and administrative expenses recorded in
   claims) attributed to the damage years.




                                                                                                                           IDBD Notes 109
                                                                                                        IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 19 – Liabilities in Respect of Insurance Contracts and Investment Contracts (cont'd)

B.      Yield dependant (cont'd)
(5)     Examination of run-off of valuation of liabilities in respect of insurance contracts net of gross
        deferred acquisition costs, in the motor act and liability branches in Israel and in branches valued
        based on underwriting years in Europe:
                                                                           As at December 31, 2008
                                                            NIS in thousands adjusted to the CPI of November 2008 1)
Underwriting year              2001            2002           2003        2004        2005        2006     2007 2)                   2008 2)     total
                                                                                  NIS million

Claims paid (cumulative) as at the end of the year:

After the first year                21            31             21             15            16                 16             32        65
After two years                    125           121           127              99           110                100            266
After three years                  225           226           233             228           234                213
After four years                   317           315           351             351           345
After five years                   404           424           465             466
After six years                    485           518           563
After seven years                  570           596
After eight years                  647
Estimate of cumulative claims (including payments and accruals) at the end of the year:
After the first year               949         1,058         1,217          1,075          1,026            (*)918          1,257      1,316
After two years                    978         1,180         1,240          1,103       (*)1,080               929          1,297
After three years                1,074         1,218         1,280       (*)1,164          1,102               950
After four years                   882         1,090      (*)1,109          1,065            983
After five years                   920      (*)1,039         1,099          1,043
After six years                 (*)948         1,044         1,066
After seven years                  935           976
After eight years                  954
Excess (deficiency)
 after release of fund 3)         (72)            54             43             23                                                                       48
Deviation rate after
release of fund in
percentage                    (8.222%)         5.260%          3.855%        2.138%                                                              1.152%
Estimated cumulative
cost of claims at
December 31, 2008                   954               976        1,066          1,043            983            950         1,298      1,316       8,586
Cumulative payments
up to December 31,
2008                                647               596          563            466            345            213            266        65       3,161
Balance of outstanding
claims                              307               380          503            577            638            737         1,032      1,251       5,425

Outstanding claims for the years through the 2000 underwriting year                                                                                  506
Outstanding claims for the years through the 2006 underwriting year in a European subsidiary                                                         135

Total liabilities in respect of insurance contracts in motor act and liability branches in Israel and in branches value based on
   underwriting years in Europe, less deferred acquisition costs at December 31, 2008                                                              6,066

Addition to estimated
 claims provision for
 indirect claims
 settlement expenses *)                8               10            11             13            15             21                                      78
*)         The addition was performed for balances at the end of 2006 upon the transition to IFRS reporting.
1)          The above amounts are presented in values adjusted for the effects of inflation in order to allow the examination of the
            development based on real values.
2)         Starting from 2007 and forwards, includes the data of a subsidiary in Europe.
3)          Excess between the valuation of cumulative claims in the fourth year (the first after release from accruals) and the valuation of
            cumulative claims as of the date of the report.

Comment: the level of significance of the actuarial models is larger when examining the development of claims at the level of total
underwriting years. Accordingly, it is better to examine the development of Clal Insurance Enterprises Holdings' valuations at the level
of total underwriting years and not per underwriting year.



                                                                                                                                         IDBD Notes 110
                                                                                                        IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 19 – Liabilities in Respect of Insurance Contracts and Investment Contracts (cont'd)

B.      Yield dependant (cont'd)
(5)     Examination of run-off of valuation of liabilities in respect of insurance contracts net of retained
        deferred acquisition costs, in the motor act and liability branches in Israel and in branches valued
        based on underwriting years in Europe: (cont'd)
                                                                            As at December 31, 2008
                                                            NIS in thousands adjusted to the CPI of November 2008 1)
Underwriting year              2001            2002           2003         2004        2005       2006     2007 2)                   2008 2)     total
                                                                                  NIS million

Claims paid (cumulative) as at the end of the year:

After the first year                14            29             21                15             16             16             31        65
After two years                     79          115            126                 97            108            100            233
After three years                  142          216            230               226             229            212
After four years                   201          296            347               348             339
After five years                   255          397            461               461
After six years                    313          483            556
After seven years                  368          551
After eight years                  417
Estimate of cumulative claims (including payments and accruals) at the end of the year:
After the first year               601          891          1,054               904            879         (*)806          1,033      1,053
After two years                    634        1,004          1,013               933         (*)910            804          1,060
After three years                  708        1,018          1,099            (*)971            946            832
After four years                   597          883          1,008               966            886
After five years                   602          889          1,010               971
After six years                 (*)600          889            994
After seven years                  603          857
After eight years                  602
Excess (deficiency)
 after release of fund 3)           (5)           26             14               (4)                                                                    31
Deviation rate after
release of fund in
percentage                    (0.786%)         2.981%          1.371%         (0.441%)                                                           0.899%
Estimated cumulative
cost of claims at
December 31, 2008                   602               857          994              971          886            832          1,060     1,053       7,255
Cumulative payments
up to December 31,
2008                                418               551          556              461          339            212            232        65       2,834
Balance of outstanding
claims                              184               306          438              510          547            620            828       988       4,421

Outstanding claims for the years through the 2000 underwriting year                                                                                  384
Outstanding claims for the years through the 2006 underwriting year in a European subsidiary                                                          60

Total liabilities in respect of insurance contracts in motor act and liability branches in Israel and in branches value based on
   underwriting years in Europe, less deferred acquisition costs at December 31, 2008                                                              4,865

Addition to estimated
 claims provision for
 indirect claims
 settlement expenses *)                8               10            11             13            15             21                                      78
*)         The addition was performed for balances at the end of 2006 upon the transition to IFRS reporting.
1)          The above amounts are presented in values adjusted for the effects of inflation in order to allow the examination of the
            development based on real values.
2)         Starting from 2007 and forwards, includes the data of a subsidiary in Europe.
3)          Excess between the valuation of cumulative claims in the fourth year (the first after release from accruals) and the valuation of
            cumulative claims as of the date of the report.

Comment: the level of significance of the actuarial models is larger when examining the development of claims at the level of total
underwriting years. Accordingly, it is better to examine the development of Clal Insurance Enterprises Holdings' valuations at the level
of total underwriting years and not per underwriting year.



                                                                                                                                         IDBD Notes 111
                                                                                            IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 19 – Liabilities in Respect of Insurance Contracts and Investment Contracts (cont'd)
B.     Yield dependant (cont'd)
(6 )    Examination of the run-off of the valuation of gross outstanding claims in property and other
       branches:

                                                                                                             As at December 31
                                                                                                               Damage year
                                                                                                     2007           2008              total
                                                                                                                NIS million
Adjusted to the CPI of November 2008 *)
Paid (cumulative) claims at year end
After the first year                                                                                  (**)768               761
After two years                                                                                         1,174
Cumulative claims (including payments)
At the end of the first year                                                                             1,692            1,714
After two years                                                                                          1,673

Estimated cumulative costs at December 31, 2008                                                          1,673            1,714             3,387
Cumulative payments at December 31, 2008                                                                 1,175              761             1,936
Balance of outstanding claims                                                                              498              953             1,451
Outstanding claims for the years through 2006 as the damage year                                                                            1,372
Total outstanding claims in property and other branches at December 31, 2008                                                                2,823

*)         The amounts are presented in values adjusted for the effects of the inflation (arising from Israeli activities) or in revalued
           values according to an exchange rate at the balance sheet date (arising from foreign investees) in order to allow the
           examination of the development based on real values.
**)        Includes payments made prior to the business combination in a U.S. subsidiary in a total of NIS 22 million.



(7 )   Examination of the run-off of the valuation of outstanding claims on retention in property and other
       branches in Israel:

                                                                                                             As at December 31
                                                                                                               Damage year
                                                                                                     2007           2008              total
                                                                                                                NIS million
Adjusted to the CPI of November 2008 *)
Paid (cumulative) claims at year end
After the first year                                                                                  (**)618               603
After two years                                                                                           915
Cumulative claims (including payments)
At the end of the first year                                                                             1,274            1,278
After two years                                                                                          1,265

Estimated cumulative costs at December 31, 2008                                                          1,265            1,278             2,543
Cumulative payments at December 31, 2008                                                                   915              603             1,518
Balance of outstanding claims                                                                              350              675             1,025
Outstanding claims for the years through 2006 as the damage year                                                                              943
Total outstanding claims in property and other branches at December 31, 2008                                                                1,968



*)         The amounts are presented in values adjusted for the effects of the inflation (arising from Israeli activities) or in revalued
           values according to an exchange rate at the balance sheet date (arising from foreign investees) in order to allow the
           examination of the development based on real values.
**)        Includes payments made prior to the business combination in a U.S. subsidiary in a total of NIS 22 million.




                                                                                                                              IDBD Notes 112
                                                                                        IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 19 – Liabilities in Respect of Insurance Contracts and Investment Contracts (cont'd)
B.      Yield dependant (cont'd)

(8 )    Life assurance and long-term savings segment
(a)     Details of the liabilities in respect of insurance contracts and investment contracts according to
        exposure:
Data as at December 31, 2008:
                                                Policies including savings component (including          Policies not including
                                                   riders) according to policy's date of issue            savings component
                                                                                                         Risk sold as separate
                                                                             From the year 2004                  policy
                                               Up to       Up to      Non- yield      Yield
                                              1990 (*)     2003       dependent     dependent           Individual      Group            Total
                                                                                   NIS million
A.     According to insurance exposure
       Liabilities in respect of insurance
          contracts
         Annuity with secured coefficients
       Up to May 2001                            8,665       9,959                -                -             -             -          18,624
       From June 2001                                -         678              78            1,089              -             -           1,845
       Annuity in payment                          282          60               -                 -             -             -             342
       Capital (without annuity option)          2,902       5,993              63            1,668              -             -          10,626
       Other risk components                        48           5               -                -            279           253             585
       Less - contributions under defined
          benefit plan to Company
          employees                              (110)        (54)                -               (3)             -               -        (167)
       Total in respect of insurance
          contracts                             11,787      16,641             141            2,754            279           253          31,855

       Liabilities in respect of investment
          contracts in life assurance                -           -              44              118              -             -             162
       Total life assurance                     11,787      16,641             185            2,872            279           253          32,017
       Guaranteed yield in provident funds                                                                                                 1,900
       Total                                                                                                                              33,917

 B.    According to financial exposure
       Yield dependent                             235      16,144               -            2,757              -              -         19,136
       Guaranteed yield                         11,550           -             185                -              -             -          11,735
       Other                                       112         551               -              118            279           253           1,313
       Less - contributions under defined
          benefit plan to Company
          employees                              (110)        (54)               -               (3)             -             -           (167)
       Total life assurance                     11,787      16,641             185            2,872            279           253          32,017
       Guaranteed yield in provident funds                                                                                                 1,900
       Total                                                                                                                              33,917
       (*) The products issued up to 1990 (including increments in their respect) were mainly guaranteed yields and principally/partly
           secured by designated bonds.




                                                                                                                        IDBD Notes 113
                                                                                          IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 19 – Liabilities in Respect of Insurance Contracts and Investment Contracts (cont'd)
B.        Yield dependant (cont'd)

(8 )      Life assurance and long-term savings segment (cont'd)
(a)       Details of the liabilities in respect of insurance contracts and investment contracts according to
          exposure: (cont'd)
.
Data as at December 31, 2007:
                                                  Policies including savings component (including          Policies not including
                                                     riders) according to policy's date of issue            savings component
                                                                                                           Risk sold as separate
                                                                               From the year 2004                  policy
                                                 Up to       Up to      Non- yield      Yield
                                                1990 (*)     2003       dependent     dependent           Individual      Group            Total
                                                                                     NIS million
    A.   According to insurance exposure
         Liabilities in respect of insurance
            contracts
           Annuity with secured coefficients
         Up to May 2001                            7,960      11,583                -                -             -             -          19,543
         From June 2001                                -         619              37              418              -             -           1,074
         Annuity in payment                          202          51               -                 -             -             -             253
         Capital (without annuity option)          2,900       7,331              68            1,665              -             -          11,964
         Other risk components                        47           5               -                -            252           250             554
         Less - contributions under defined
            benefit plan to Company
            employees                              (115)        (52)                -               (3)             -               -        (170)
         Total in respect of insurance
            contracts                             10,994      19,537             105            2,080            252           250          33,218

         Liabilities in respect of investment
            contracts in life assurance                -           -              69               70              -             -             139
         Total life assurance                     10,994      19,537             174            2,150            252           250          33,357



    B.   According to financial exposure
         Yield dependent                             300      18,826               -            2,074              -              -         21,200
         Guaranteed yield                         10,700           -             174                -              -             -          10,874
         Other                                       109         763               -               79            252           250           1,453
         Less - contributions under defined
            benefit plan to Company
            employees                              (115)        (52)               -               (3)             -             -           (170)
         Total life assurance                     10,994      19,537             174            2,150            252           250          33,357

         (*) The products issued up to 1990 (including increments in their respect) were mainly guaranteed yields and principally/partly
             secured by designated bonds.




                                                                                                                          IDBD Notes 114
                                                                                           IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 19 – Liabilities in Respect of Insurance Contracts and Investment Contracts (cont'd)
B.      Yield dependant (cont'd)

(8 )    Life assurance and long-term savings segment (cont'd)
(b)     Details of the results according to types of policies:
        Data as at December 31, 2008
                                                        Policies including savings component (including       Policies not including
                                                             riders) according policy's date of issue          savings component
                                                                                                              Risk sold as separate
                                                                               From the year 2004                     policy
                                                        Up to      Up to    Non- yield       Yield
                                                        1990 (1)   2003     dependent     dependent           Individual       Group      Total
                                                                                         NIS million
Gross premiums:
Traditional/Endowment                                       104       63               -                 -               -          -        167
Savings component                                           209    1,383              39             1,077               -          -      2,708
Other                                                        67      379               7               206             290        303      1,252
Total                                                       380    1,825              46             1,283             290        303      4,127
Receipts in respect of investment contracts allocated
   directly to insurance reserves 3)                          -         -             -                 96               -          -           96
Financial margin including management fees 2)                (3)      109            (2)                27               -          -          131
Income (loss) from life assurance business                   (3)    (217)            (3)              (78)              28         20      (253)
Income (loss) from pension and provident                                                                                                      98
Total income (loss) from life assurance and long-
   term savings                                                                                                                            (155)

Data as at December 31, 2007
                                                        Policies including savings component (including       Policies not including
                                                             riders) according policy's date of issue          savings component
                                                                                                              Risk sold as separate
                                                                               From the year 2004                     policy
                                                         Up to     Up to    Non- yield       Yield
                                                        1990 (1)   2003     dependent     dependent           Individual       Group      Total
                                                                                         NIS million
Gross premiums:
Traditional/Endowment                                       110       68               -                 -               -          -        178
Savings component                                           202    1,377              36               843               -          -      2,458
Other                                                        71      384               7               159             244        321      1,186
Total                                                       383    1,829              43             1,002             244        321      3,822
Receipts in respect of investment contracts allocated
   directly to insurance reserves                             -        -              21                79               -          -          100
Financial margin including management fees 2)               102      246               5                17               -          -          370
Income (loss) from life assurance business                   97      134               4              (54)              61         27          269
Income (loss) from pension and provident                                                                                                        80
Total income (loss) from life assurance and long-
   term savings                                                                                                                                349

1.       The products issued up to 1990 (including increments in their respect) were mainly guaranteed yields and principally/partly
           secured by designated bonds.
2.         The financial margin does not include additional income collected as a percentage of the premium and is calculated before
           investment management expenses. The financial margin in guaranteed yield policies is based on the actual income from
           investments in the reported year less the product of the guaranteed rate of return for the year multiplied by the average reserve
           for the year in the various insurance funds. In yield dependent contracts, the financial margin is the total fixed and variable
           management fees calculated based on the average return and balance of the insurance reserves.
3.         Does not include premiums for investment contracts in a subsidiary provident fund (Bar A) in a total of NIS 14 million.




                                                                                                                             IDBD Notes 115
                                                                                             IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 19 – Liabilities in Respect of Insurance Contracts and Investment Contracts (cont'd)
B.      Yield dependant (cont'd)

(9 )    Movement in liabilities in respect of life assurance contracts, investment contracts and health
        insurance
                                                                               Life assurance and long-term savings
                                                                             Insurance       Investment                           Health
                                                                             contracts        contracts        Total            insurance
                                                                                                   NIS million

Balance as at January 1, 2007                                                      29,571                65         29,636             473
                                                      1)
Interest, linkage differences and investment income                                  2,174                4           2,178              14
                                                           2)
Increase in respect of premiums allocated to liabilities                             2,733               99           2,832              68
Decrease in respect of claims, surrenders and maturity                             (1,186)             (29)         (1,215)            (49)
Changes due to revised assumptions *)                                                    -                -               -             (1)
                3)
Other changes                                                                         (14)                -            (14)              74
Balance as at December 31, 2007                                                    33,278               139         33,417             579
                                                      1)
Interest, linkage differences and investment income                                (2,879)              187         (2,692)              19
                                                           2)
Increase in respect of premiums allocated to liabilities                             2,815              109           2,924            810
Decrease in respect of claims, surrenders and maturity                             (1,184)            (131)         (1,315)               9
Changes due to revised assumptions **)                                                   -                -               -              13
                3)
Other changes                                                                        (122)                -           (122)              98
Initial consolidation *)                                                                 -            1,758           1,758               -

Balance as at December 31, 2008                                                    31,908             2,062          33,970           1,528

(*)       In respect of a guaranteed yield plan in Clal Provident.
(**)       Derived from a subsidiary's accumulated experience with respect to cost and frequency of claims and their effect on expected
          results.


1.        Interest, linkage differences and investment income – this item includes interest, linkage differences and investment income in
          respect of the balance as at the beginning of the year, with the addition of interest, linkage differences and investment income in
          respect of premiums for savings only recorded during the reported period.
2.        Increase in respect of premiums allocated to liabilities – this premium does not include all the premium recorded as income in
          the Company. The premium includes the premium for savings and part of the premium in products with fixed premium.
3.       Other changes – the item includes changes in reserve in respect of outstanding claims, reserve for future claims, IBNR, annuities
          in payment, etc. (according to assumptions used at the end of the previous year). In addition, the item includes the interest
          effect, linkage differences and investment income not included in the "interest, linkage differences and investment income"
          item, such as: interest, linkage differences and investment income for claims payment and non-saving premiums.




                                                                                                                            IDBD Notes 116
                                                                                            IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008


Note 20 – Insurance risks

Among other things, insurance risk consists of the following:

Underwriting risks: the risk of using incorrect prices due to deficiencies in the underwriting process and due to
the gap between the risk when pricing and establishing the premium and the actual occurrence so that the
collected premiums are insufficient for covering future claims and expenses. The gaps may arise from accidental
changes in business results and from changes in the cost of the average claim and/or the incidence of the claims
as a result of various factors.

Reserve risks: the risk of an incorrect assessment of the insurance liabilities which might cause the actuarial
reserves to be inadequate for covering all the liabilities and claims. The actuarial models according to which the
Company assesses its insurance liabilities are based on the fact that the pattern of the behavior of past claims
represents forward looking information. The Company's exposure is comprised of the following risks:
Model risk – the risk of choosing an incorrect model for pricing and/or assessing the insurance liabilities;
Parameter risk – the risk of using wrong parameters including the risk that the amount paid for settling the
Company's insurance liabilities or that the date of settlement of the insurance liabilities is different than
expected.

Catastrophe risk: the exposure to the risk that a single event with significant effect (catastrophe) such as
natural disaster, war, terrorism, natural damages or earthquake will lead to the accumulation of damages at a
high level. The material catastrophe to which the Company is exposed in Israel is earthquake.
The size of the expected maximum loss in the general insurance business due to the exposure to a single large
damage arising from a particularly large event with maximum possible loss (MPL) probability of about 1.5% in
the apartment branch and 2.5% in other property branches approximates NIS 8,060 million (gross) and NIS 61.5
million on retention.
As for data regarding the various insurance products in respect of which the insurer is exposed to insurance risk,
see the details of insurance liabilities according to insurance risks in Note 5d, Note 21a and Note 22a.

Following are details of the insurance liabilities in the general insurance business according to the
insurers' geographical regions:

                                                                                              December 31,
                                                                     Gross                    Reinsurance            On retention
                                                              2008           2007           2008         2007     2008          2007
                                                                                               NIS million

Israel                                                            7,180        7,213           1,684      1,793     5,495         5,420
Europe                                                              709          727             283        213       427           514
Unites States                                                     2,066        2,077             336        435     1,729         1,642
Total general insurance liabilities                               9,955       10,016           2,303      2,441     7,652         7,576

The insurance liabilities of insurers in Israel mainly relates to risk in Israel.
The insurance liabilities of Broadgate in Britain mainly relates to international property risk.
The insurance liabilities of Guard in the U.S. mainly relates to risk in U.S.




                                                                                                                    IDBD Notes 117
                                                                           IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008


Note 20 – Insurance risks (cont'd)

(1 )   Insurance risk in life assurance and in long-term care insurance risks:

General:

Following is a description of the various insurance products and the assumptions used to calculate their
respective liabilities based on product type. According to the commissioner's directives, the insurance liabilities
are calculated by an actuary pursuant to standard actuarial methods and consistently with the previous year. The
liabilities are calculated according to the relevant coverage data such as age and gender of the policyholder, term
of insurance, date of commencement of insurance, type of insurance, periodic premium and amount of
insurance.

(a)    The actuarial methods used to calculate the insurance liabilities:

       1.        Insurance programs type "Adif" and "investment tracks":
                  "Adif" and "investment track" insurance programs consist of an identified savings
                  component. The basic and main reserve is at the level of the accumulated savings plus the
                  yield according to the policy's terms as follows:
                  -       Principal linked to the investment portfolio yield (yield dependent contracts).
                  -       Principal linked to the CPI plus a fixed guaranteed interest or credited by a guaranteed
                           yield against adjusted assets (yield guaranteed contracts).
                  In respect of insurance components that are attached to these policies (occupational
                  disability, death, long term care, etc.), the insurance liability is calculated separately as
                  mentioned below.
       2.       For investment track policies and for immediate pension programs (third age) where the principal
                  is linked to the CPI with the addition of a fixed guaranteed interest, the group calculates an
                  additional reserve – a mismatch reserve, if any, with respect to the gap between the cash flow
                  of the liability and the cash flow of the assets backing them. In this calculation, the group
                  compares the discounted value of the liability cash flow and the discounted value of the asset
                  cash flow under different discount interest curve scenarios. The reserve is in the maximal
                  amount of the results of the various scenarios as far as the value of the liabilities is higher than
                  the value of the assets.
       3.        Traditional type insurance programs with fixed premium:
                  The traditional type insurance programs with a fixed premium such as endowment insurance
                  programs and the like combine a savings component in the event that the policyholder is still
                  alive at the end of the term of the program with an insurance component of death risk during
                  the period of the program as well as pure risk programs (mainly for occupational disability and
                  long-term care) with a fixed premium. in respect of these products, the insurance liability is
                  calculated for each covered aspect as a capitalization of the cash flows in respect of the
                  anticipated claims, including payment at the end of the period, net of future anticipated
                  premiums. this calculation is based on assumptions according to which the products were
                  priced and/or on assumption based on the claims experience, including the interest rates
                  ("tariff interest"), mortality or morbidity tables. the calculation is according to the net premium
                  reserve method, which does not include the component that was loaded on the premium tariff
                  for covering the commissions and expenses, in the anticipated flow of receipts and on the
                  other hand it does not deduct the anticipated expenses and commissions. the reserve in respect
                  of yield dependent traditional products also includes a provision in the amount of the actual
                  cumulative outstanding bonus. The bonus reflects the gap between the actual yield less
                  management fees and the tariff interest.




                                                                                                       IDBD Notes 118
                                                                          IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 20 – Insurance risks (cont'd)

(1 )   Insurance risk in life assurance and in long-term care insurance risks: (cont'd)

(a)    The actuarial methods used to calculate the insurance liabilities: (cont'd)

       4.         Liabilities for annuities in payment are calculated in accordance with the anticipated mortality
                  rate, based on updated mortality tables that were created with the assistance of data published
                  by the treasury's actuary in the commissioner's circular.
       5.         Liabilities in respect of annuities paid for life in respect of valid policies (paid and settled)
                  which have not yet reached the stage of realization of annuity or the policyholder has reached
                  retirement age and the actual payment did not yet begin, are calculated according to the
                  probability of annuity withdrawal and in accordance with the anticipated life expectancy on
                  the basis of the updated mortality tables. At the time of updating the mortality tables, there is a
                  gradual increase of the liabilities for annuity taking into consideration the anticipated profits
                  from the policies until the policyholders reach retirement age in accordance with the
                  regulator’s circular. If the guaranteed annuity coefficients of the policies are higher, the
                  required increase is also higher.
       6.         Other life assurance programs include pure risk products (occupational disability, death, long
                  term care, dread disease, disability, etc) sold as independent policies or attached to policies
                  with a basic program such as "adif", "investment track" or "traditional". An actuarial liability
                  is calculated in respect of these programs. The calculation is according to the gross premium
                  reserve method which includes all the premium components in the anticipated flow of receipts
                  and deducts the liability cost and the anticipated expenses and commissions. The reserve for
                  the other programs is calculated in the amount of the ibnr.
       7.         In respect of continuous claims in payment, in long term care and occupational disability
                  insurance, the insurance liability is calculated according to the duration of the anticipated
                  payment, and it is capitalized according to the tariff interest rate of the product.
       8.         The insurance liabilities in respect of group insurance consist of a liability in respect of
                  unearned premium, provision for participation in profits, ibnr reserve (claims incurred but not
                  yet reported), reserve for continuity and provision for future losses, if necessary.
       9.         The liabilities for outstanding claims in life assurance mainly include provisions for
                  outstanding claims for death and disability cases.
       10.        After Clal Health won a tender for choosing long-term care ("ltc") insurers for Maccabi
                  Magen members and for Maccabi healthcare services members (in this section, "the tender"),
                  on July 1, 2008 (in this section, "the record date") - healthcare services who prior to the record
                  date were not members of Maccabi Magen and were not covered by the LTC fund and
                  requested to join the policy from the record date onward. The policy consists of four
                  alternative tracks of LTC rewards to be paid over a maximum period of 60 months. in order to
                  meet its liabilities pursuant to the policy and to the agreement signed with Maccabi following
                  Clal Health winning the tender (in this section, "the agreement"), Clal Health established a
                  service and underwriting center and a center for handling claims according to the policy terms.
                  the term of the agreement signed according to the tender documents was five years with
                  possible extension, at the discretion of Maccabi, for another three years, subject to
                  deliberations between the parties regarding any required adjustments in the extension period to
                  the amount of the insurance fees and the manner of the calculation of the reserve as defined
                  below. At the end of the agreement period, Maccabi will be entitled to half of the difference
                  between the actual investment income and an annual yield of 6% provided that the difference
                  is positive.




                                                                                                      IDBD Notes 119
                                                                         IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 20 – Insurance risks (cont'd)

(1 )   Insurance risk in life assurance and in long-term care insurance risks: (cont'd)

(a)    The actuarial methods used to calculate the insurance liabilities: (cont'd)

       10.       (cont'd)

                  Under the agreement, Maccabi has undertaken to grant the company various services
                  including the sue of the maCcabi healthcare services logo, applying to
                  receive Maccabi members, possible posting of signs and distribution of leaflets in Maccabi
                  branches, collection and coordinated transfer of insurance fees, direct marketing and managing
                  the policyholders' file. In return for these services, Clal Health will pay Maccabi 6% of the
                  insurance and registration fees assigned to it every month.
                  Clal health committed to indemnify Maccabi for any damage and/or financial expense to be
                  incurred by Maccabi and/or Maccabi Magen, among others, for breach of insurance policy
                  and/or breach of an agreement by clal health and for any claim or demand to be turned against
                  Maccabi and/or Maccabi Magen in connection with the policy and/or in connection the
                  liability of Clal Health pursuant to the agreement and/or the policy. Pursuant to the agreement
                  it was determined that among other grounds for cancelling the agreement, Maccabi may cancel
                  the agreement should an adverse effect shall be caused affecting the various perimeters
                  relating to the financial position of the insurer.
                  It was further agreed in the agreement that if the agreement is cancelled, as above mentioned,
                  Maccabi shall receive an agreed compensation in the amount of 10% of the total annual
                  insurance fees of insured under the policy. To secure Clal Health liabilities by virtue of the
                  agreement, Clal provided a bank guarantee of NIS 50 million.

(b)    Major assumptions used in the calculation of insurance liabilities:

       1.         Capitalization rate
                  For endowment insurance (traditional) and pure risk products with fixed premium, the interest
                  used for capitalization is as follows:
                  In insurance policies that are mainly backed by designated debentures tariff interest of 3.5%-
                  4.8% linked; for return dependent products issued in 1991, tariff linked interest of 2.5%.
                  Under the policy terms, changes in interest shall be carried to the insured.
                  In insurance plans assuring return in funds without designated debentures (sold effective
                  2004) the capitalization interest rates are 2.5% - 4.5%.
       2.        Morbidity and mortality rates
                  a)     The mortality rates used in the calculation of insurance liabilities for mortality of
                          insured prior to attaining the age of retirement (namely excluding the mortality of
                          insured who receive retirement pensions and those receiving monthly compensation
                          for disability or long term care) are generally identical to rates used to determine the
                          tariff, approved by the commissioner of insurance.




                                                                                                   IDBD Notes 120
                                                                          IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008


Note 20 – Insurance risks (cont'd)

(1 )   Insurance risk in life assurance and in long-term care insurance risks (cont'd)

(b)    Major assumptions used in the calculation of insurance liabilities (cont'd)


       2.        (cont'd)

                  b)     The liability for annuities payable for life is calculated according to updated mortality
                          schedules. increase in the mortality rate assumption, due to increase in actual
                          mortality rate to level exceeding the existing assumption shall result in increase of
                          insurance liabilities for mortality of insured prior to attaining the age of retirement
                          and decrease in liability for annuities payable for life.
                          It shall be mentioned that in recent decades there is reverse trend of increase in the
                          life expectancy and decrease in mortality rate. the mortality assumption used in the
                          calculation of the liability for annuity takes into account assumption for future
                          increase in life expectancy.
                 c)      The morbidity rates relate to the prevalence of claims for mortality from serious
                          diseases, disability, long term care, operations and hospitalization, disability from
                          accident etc. these rates are determined based on the company’s experience or
                          researches of reinsures. in the fields of long term care and disability, the period of
                          paying annuities is determined according to the company’s experience or researches
                          of reinsurers. as long as the morbidity rate assumption increases, the insurance
                          liability for morbidity rate from serious diseases, disability, long term care, operations
                          and hospitalization and disability from accident increases.
       3.       Pension rates taking
                 Life insurance policies, including savings component, were maintained for funds deposited
                 until 2008 in 2 tracks: capital track and annuity track. in certain policies the insured may
                 elect the track upon retirement. Since the insurance liability is different in each of these
                 tracks, the company is obligated to determine the rate of policies in which the insured shall
                 elect the pension track. This rate is determined according to the supervision guidelines while
                 adjusting to the group’s experience. Effective 2008, all plans are for pension.
       4.       Cancelation rates
                 The cancelation rates affect the insurance liabilities in respect of part of the health insurances
                 and the annuities paid for life during the period before beginning the payments. The
                 cancelation of insurance contracts can be due to the cancelation of policies initiated by the
                 company due to discontinuation of the premium payments or surrenders of policies at the
                 policyholders' request. The assumptions regarding the cancelation rates are based on the
                 group's experience and they are based on the type of product, the life span of the product and
                 sales trends.
       5.       Continuity rates
                 There are health insurances and group long-term care insurances in which the policyholders
                 are entitled to continue to be insured under the same conditions, even if the collective
                 contract is not renewed. In respect of this option of the policyholders, the company has a
                 liability that is based on assumptions regarding the continuity rates of the collective
                 insurances and the continuity rates of the contracts with the policyholders after the collective
                 contract expires.
                 If there is a higher probability that the collective contract will not be renewed (a        higher
                 continuity rate) the insurance liability will also increase, since the insurance will continue
                 under the previous conditions, without adjusting the underwriting to the change in the
                 policyholders' state of health.



                                                                                                      IDBD Notes 121
                                                                             IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 20 – Insurance risks (cont'd)

(1 )   Insurance risk in life assurance and in long-term care insurance risks (cont'd)

(b)    Major assumptions used in the calculation of insurance liabilities (cont'd)

Sensitivity analysis in life and long-term care insurance:


       As of December 31, 2008

                                                                                              Mortality rate for receivers
                                                                         Morbidity rate          of old age pension
       Nis in millions                                               +10%        -10%         +10%          -10%
       Profit (loss) and comprehensive income                        (48)        48           (6 )          5
       As of December 31, 2007

                                                                                              Mortality rate for receivers
                                                                     Morbidity rate              of old age pension
       Nis in millions                                               +10%        -10%         +10%          -10%
       Profit (loss) and comprehensive income                        (39)        39           (4 )          4



(2 )   Insurance risk in general insurance, sickness and hospitalization contracts
       Summarized description of the main insurance branches in which the group operates:
       The group writes general insurance contracts mainly in the branches of motor act, motor casco, property
       insurance and worker compensation in the U.S. the group also writes health insurance contracts
       (sickness, hospitalization and etc.)
       Motor act insurance covers, pursuant to the road accident victims compensation law, 1975, the owner of
       the policy and the driver due to bodily damage caused to the driver of the vehicle, the passengers in the
       vehicle, or pedestrians injured by the vehicle, as a result of the use of the motor vehicle. The claims in
       this branch are characteristic by a long tail, namely, sometimes a long time passes from the date of the
       event to the time the claim is finally settled.
       Liability insurance is designed to cover the policyholders' liability in respect of damage that he may
       cause to any third party. The main types of insurance are: liability insurance towards a third party,
       employers' liability insurance and other liability insurance such as professional liability, product liability
       and directors' and officeholders' liability. The time of filing the claims and its settlement is effected by
       several factors such as the type of coverage, the policy terms and legislation and legal precedence. The
       claims in this branch are characteristic by a long tail, namely, sometimes a long time passes from the
       date of the event to the time the claim is finally settled.
       Car damage policy and property car damage third party policy give the insurer coverage for property
       damage. The coverage is generally limited to the value of the car that was damaged. The tariff for
       property car insurance requires an approval as the overall policy does of the supervisor of insurance
       business and it is an actuarial tariff and in part a differential tariff (that is not uniform to all insurers and
       is adjusted to the risk). The above tariff is based on several parameters with relate both to the car insured
       by the policy (such as the type of car, year of manufacture and etc.) and to the nature of the insurer (the
       age of the driver, history of claims and etc.).
       The underwriting procedure is partly done by the tariff itself and partly by a system of procedures which
       are designated to examine the history of claims of the insurers including presentation of confirmation of
       lack of claim by a former insurer in the last three years, presentation of an updated confirmation of the
       protection and etc. and they are automatically combined in the process of the issuance of policies.




                                                                                                          IDBD Notes 122
                                                                          IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 20 – Insurance risks (cont'd)

(2 )   Insurance risk in general insurance, sickness and hospitalization contracts (cont'd)
       Summarized description of the main insurance branches in which the group operates: (cont'd)
       In most cases, the car property insurance policies are issued for a period of one year. In addition, in most
       cases, the claims in respect of these policies are handled close to the time the insurance event had
       occurred.
       Property insurances are designated to grant the policyholder coverage against physical damage to his
       property and loss of profits due to the damage to the property. The main risks covered by property
       policies are fire risks, explosions, theft, earthquake and natural disasters. The property insurances
       sometimes include coverage for loss of profits due to the physical damage to the property. Property
       insurances constitute an important factor in comprehensive residential insurance, business premises
       insurances, engineering insurances, freight in transit (marine, cargo, aviation) etc.
       In most cases, the claims in respect of these policies are handled close to the time the insurance event
       had occurred.
       Health insurance comprise coverage of sickness and hospitalization, including the right to finance
       private medical services, coverage in the event of discovery of a severe disease, purchase medicines that
       are not part of the Government medical basket and others and coverage for personal accident' travel
       abroad, teeth insurance and foreign residences.

       Principles for calculating actuarial valuations in general insurance, sickness and hospitalization:
       General:
       a.           Liabilities in respect of general insurance contracts, sickness and hospitalization contracts
                    include the following main components:
                    Provision for unearned premium
                           •      premium deficiency
                           •      outstanding claims
                           •      excess of income over expenses
                    The provision for unearned premium and excess of income over expenses are computed in a
                    way that is independent of any assumptions and, therefore, they are not exposed to the
                    reserve risk. As for the manner in which these provisions are computed, see note on
                    accounting policies.
       b.           In accordance with the supervisor's directives, the outstanding claims are calculated by the
                    actuary, according to the generally accepted actuarial methods, consistently with the
                    previous year. the choice of actuarial method suitable for each insurance branch and or year
                    of underwriting/event is determined according to the compatibility of the method to the
                    branch and sometimes there is a combination of the different methods. The valuations are
                    mostly based on past experience of development of claim payments and/or development of
                    the amount of the payments and the specific estimates. The valuations include assumptions
                    regarding the average cost of claim, cost of handling the claims and frequency of the claims.
                    Additional assumptions may address changes in interest rates, exchange rates and timing of
                    payments. Payment of claims includes direct and indirect expenses of settlement less claims
                    recoveries and deductible.
       c.           The use of actuarial methods that are based on the development of the claims is mainly
                    adequate when there is a stable and sufficient information regarding the payment of the
                    claims and/or the specific valuations in order to estimate the total expected cost of claims.
                    When the available information in handling the claims is insufficient, sometimes the actuary
                    uses a computation which weighs between the known estimate (in the company and/or the
                    branch) such as LR and the actual development of the claims. A larger weight is given to the
                    valuation based on experience as time passes and additional information is accumulated for
                    the claims.




                                                                                                     IDBD Notes 123
                                                                           IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 20 – Insurance risks (cont'd)

(2 )   Insurance risk in general insurance, sickness and hospitalization contracts (cont'd)
       Principles for calculating actuarial valuations in general insurance, sickness and hospitalization: (cont'd)
       General: (cont'd)
       d.           Also quality valuations and judgments are taken into account as to the degree that past
                    trends will not continue in the future. for instance, due to a one time event, internal changes
                    such as change in the mixture of the portfolio, in the underwriting policy and in the
                    handling procedures of claims and in respect of external factors such as legal ruling,
                    legislation and etc. If the above changes were not fully reflected in past experience, the
                    actuary updates the models and/or makes specific provisions on the basis of statistical
                    and/or legal estimates, as appropriate.
       e.           In several large claims with non-statistical profile, the reserve (in gross and on retention) is
                    determined on the basis of the opinion of the company's experts and in accordance with the
                    recommendations of their legal advisors.
       f.           The reinsures share in outstanding claims is estimated with reference to the type of
                    agreement (relative/non-relative), the actual experience in the claims and the premium
                    transferred to the reinsurers.
       g.           The valuation of the outstanding claims for the company's share of the pool in incoming
                    transactions and joint insurance received from other insurance companies (leading insurers)
                    was based on the computation made by the pool or by the leasing insurers or by a separate
                    computation of Clal Insurance Enterprises Holdings.

       Details of the actuarial models in the main insurance branches:
       1.         Actuarial models for outstanding claims:
                     The following actuarial models were utilized in order to estimate the outstanding claims in
                     conjunction with various assumptions.
                     a.   Chain ladder:
                          This model is based on the development of historical claims (development of
                          payments and/or development of amount of claims, valuations of specific claims,
                          development of the number of claims, etc.), in order to valuate the anticipated
                          development of existing and future claims. The use of this model is mainly suitable
                          after a sufficient period since the event occurred or the policy is written, when there is
                          enough information from the existing claims in order to valuate the total anticipated
                          claims.
                    b.    Bornhuetter-Ferguson:
                          This model combines early estimates (a priori) known in the company or class of
                          business and additional estimates based on the claims themselves. The early estimates
                          utilize premiums and loss ratio for evaluating the total claims. The second estimate
                          utilizes actual claims experience based on other models (such as chain ladder). The
                          combined claims valuation weighs the two estimates while a larger weight is given to
                          the valuation based on the claims experience as time passes and additional information
                          is accumulated for the claims. The use of this model is mainly suitable for the recent
                          period where there is not enough information from the claims or when talking about a
                          new business or one with insufficient historical information.




                                                                                                      IDBD Notes 124
                                                                          IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 20 – Insurance risks (cont'd)
(2 )   Insurance risk in general insurance, sickness and hospitalization contracts (cont'd)
       Details of the actuarial models in the main insurance branches (cont'd)
       1.         Actuarial models for outstanding claims (cont'd)
                    c.    The average:
                          At times, as in the Bomhuetter-Ferguson model, when the claims experience in the
                          last periods is insufficient, the historical average model is utilized. In this model the
                          claims cost is determined based on the cost of the claim per policy for earlier years
                          and the number of policies in the later years. Likewise, the claims cost is calculated
                          based on the forecast of the number of claims (chain ladder model) and historical
                          average claims.
                    d.    Other:
                          Occupational disease claims are claims on the basis of continuous damage in
                          employer liability insurance and the provision is computed on the basis of expected
                          future cost. In this type of claims, there is no specific date in which the employee was
                          hurt but the damage was formed as a result of long term exposure to hazardous
                          elements. Claims of this sort are characterized over a very long period from the
                          beginning of exposure to risk elements (the insured's exposure) up until the claim
                          report (long tail claims). This behavior of continuous reporting of claims and the
                          insurer's exposure to continuous damage requires claim provision for this type for
                          each year of exposure of employer liability policy, even if claims were not reported at
                          all or the policy expired years ago.
       Details of the actuarial models in the main insurance branches:
       Property car act - a model of development of monthly payments was applied and, in the last months of
       damages which have not vested, the average model in applying the cost of claim in the policy was
       applied. The model is used in the gross level of claims. The valuation of reinsurer share of the
       outstanding claims is based on specific valuations plus IBNR on the basis of the gross IBNR. The
       reinsurer insurance in this branch is immaterial.
       In motor act insurance and liabilities - half year models of development of payments and development
       of payments and outstanding were applied. For unvested periods, the Bornhuetter-Ferguson model was
       applied. In the liability branches, the model of development of claims is based on net claims from
       facultative reinsurance. The valuation of the reinsurer share of the non-relative contract is based on the
       valuation of the specific outstanding claims in former years and last years using the loss ratio.
       In comprehensive apartment and personal accident branch - a model of development of payments
       and gross outstanding was applied and in unvested periods the average model was applied. The valuation
       of the reinsurer share was made by estimating the specific claims plus IBNR using the IBNR rate which
       was determined in the gross actuary model.
       In loss of property and engineering branch - an annual development model by payments and
       outstanding was applied.
       In branches where there was no actuary valuation - cargo insurance marine and aviation), guarantee
       and incoming business branch, the outstanding claims were included according to the estimate of the
       Company's' experts.
       In workers compensation branch - through a company in the U.S. An annual model of development
       by year of damage, development of payments and development of payments and outstanding was
       applied. Also, methods distribution methods by development factors were examined. For unvested
       periods, the Bornhuetter-Ferguson model was applied which combines the use of a priori L/R and the
       development of payments and/or development of payments and outstanding model. The model is
       separately computed on gross level and on retention level (less reinsures share of the non-relative
       contract). The share of reinsurers in outstanding claims is computed as the difference between the gross
       model and the net model.




                                                                                                     IDBD Notes 125
                                                                         IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 20 – Insurance risks (cont'd)
(2 )   Insurance risk in general insurance, sickness and hospitalization contracts (cont'd)
       Details of the actuarial models in the main insurance branches (cont'd)
       A subsidiary in Britain-
       The actuary models are principally based on development of payments, development of payments and
       outstanding and bf model of development of payments and outstanding. For new branches and later
       underwriting years, when there is insufficient experience permitting the use various development models
       or the bf model, the anticipated LR model was applied based on the experience and knowledge in the
       market.
       For several large claims, the gross specific valuations and retention were taken into account according to
       the estimate of the syndicate experts particularly with respect of large natural disasters.
       There is a separate valuation for gross and reinsurer and the estimate of the reinsurer takes the reinsurer
       specific data into account.
       In sickness and hospitalization-
       1.           Health insurance reserve in individual policies:
                    A cash flow forecast model in the actuary system was determined for this computation. the
                    computation was made on the basis of the single coverage and summarized in the policy
                    level according to its profile and by reference to the future monetary movements such as:
                    the anticipated premium receivable (including discounts on premium assured, if at all, to the
                    insurers), the commissions payable to the agent, the expected paid claims, the expected
                    expenses involved in administrating the policy and reinsurer payments (if there is any
                    reinsurer coverage). assumptions used in the computation regarding the morbidity rate,
                    demographic assumptions and economic assumptions were made on an aggravated basis
                    compared to the pricing basis, as common when computing reserves.
                    The outstanding claims are compute din the basis of reports from the claim department and
                    statistical model of payments of claims on the basis of the company's past experience.
                    The computation was made on the basis of the triangle models (chain ladder Bornhuetter-
                    Ferguson) to the amount of paid claims and the amount of claims by months of damage,
                    without capitalization and leaning range.
       2.           Health insurance reserve in group policies:
                    Provision for premium deficiency:
                    For collectives with statistical claims experience, the calculation is based on the expected
                    premium compared to anticipated claims according to the remaining insurance term and the
                    number of policyholders in the collective.
                    Provisions for profit participation:
                    The provision is specifically calculated for every collective according to the profit
                    participation rates as detailed in the contract and for the appropriate period. for health
                    collectives with LTC insurance coverage that are included in insurance liabilities in the
                    general insurance business, provisions were calculated for: provision for LTC insurability
                    and paid LTC claims. the provision is based on the seniority of the claim, the period of
                    compensation, the amount of monthly compensation and the life of the expected payment
                    period.
       Travel and dental care branches-
       The outstanding claims are computed based on the report of the company's claims department and an
       actuarial valuation based on cumulative experience.
       Foreign population branch-
       This branch did not undergo an actuarial valuation since the claims do not include random insurance risk
       but rather are based on capitation agreements with sick funds or contractual service providers.




                                                                                                    IDBD Notes 126
                                                                           IDB Development Corporation Limited

Notes to the Financial Statements as at December 31, 2008

Note 20 – Insurance risks (cont'd)
(2 )   Insurance risk in general insurance, sickness and hospitalization contracts (cont'd)

       Details of the actuarial models in the main insurance branches (cont'd)
       The main assumptions taken into consideration in the actuarial valuation-
       a.           Outstanding claims in the motor act and liability branches were capitalized at an annual
                    interest rate of 3%. The capitalization rate can change due to material changes in the risk-
                    free interest rate. If the capitalization rate taken into consideration for calculating the
                    insurance liabilities is lower, the liabilities will increase and vice versa. The amortization on
                    retention in Clal Insurance on the date of updating the actuarial model (held in June or in
                    December) approximates NIS 364 million (last year – NIS 354 million).
       b.           An increment was included for the risk margin (standard deviation) in the base of the
                    reserve in the motor act and liability branches in Israel. The increment on retention in Clal
                    Insurance on the date of updating the actuarial model (held in June or in December)
                    approximates NIS 284 million (last year – NIS 268 million).
       c.           Out of the standard deviation amounts net of the capitalization, an amount of approximately
                    NIS 33 million was accumulated (last year – NIS 32 million).
       d.           The company adds a claims tail in analyzing the run-off of payments. In the analysis of the
                    run-off of the amount of specific payments and outstanding claims, the actuarial discretion
                    basically does not allow negative IBNR at the level of each underwriting year.
(3)     Changes in the main assumptions used in calculating the insurance liabilities:

       In the general insurance segment:

       1.   In the employer liability branch in Israel, a global provision of approximately NIS 66 million (last
            year – NIS 86 million) for IBNR in professional sick claims. Professional sick claims are claims on
            the basis of lasting damage, characterized by a very long period of time elapsing from the beginning
            of the exposure to risk factors and the actual report of a claim and the development of damage. due
            to this behavior of the reporting pace and the insurer's exposure to lasting damages, the level of
            uncertainty regarding the amount of the provision is extremely high. during 2008, following a
            compromise reached in a large claim regarding professional sickness that reduced the uncertainty
            with respect to claims of this nature after having been settled for a smaller amount than anticipated,
            the assumptions of the model were updated in such a manner that reduced the provision by
            approximately NIS 20 million compared to a reduction of approximately NIS 4 million last year.
       2.   In 2008, the additional provision was reduced above the system's data and the actuarial model for
            "lost years" and retained amounts of the Israel National Insurance Institute in a total of
            approximately NIS 68.3 million on retention. The update of this estimate was performed due to
            payment of claims, the inclusion of the risk in the specific valuations and in the statistical model
            and/or limitation.




                                                                                                       IDBD Notes 127
                                                                          IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 21 – Financial Liabilities at amortized cost

A.      Non-Current Liabilities
1.      Composition:
                                                                                As at December 31
                                                                            2008                2007
                                                                                   NIS millions
     Convertible debentures                                                       47                     -
     Debentures                                                               23,839                24,013
     Bank loans                                                                7,882                 5,108
     Loans from others                                                           357                   417
                                                                              32,125               29,538
     Less current maturities                                                 (3,892)               (2,318)
                                                                              28,233               27,220
     Liabilities in respect of construction                                      167                    58
     Liabilities in respect of investment
     property                                                                   106                        95
     Other liabilities                                                          190                       330
                                                                                 463                      483
     Less current maturities                                                    (53)                     (51)
                                                                                410                       432
     Total                                                                    28,643                   27,652

2.      Balances by maturity dates:

                                                                             Other
                                                                             non-current
Repayment schedule by years                   Debentures          Loans      liabilities                 Total
                                                                      NIS millions
2010                                                  1,571           1,624              108                 3,303
2011                                                  1,530           1,126              125                 2,781
2012                                                  2,608             948               24                 3,580
2013                                                  2,609             446               14                 3,069
2014-2018                                             9,308           1,645              211                11,164
2019-2023                                             3,629              13                -                 3,642
As from 2024                                            963               -                -                   963
Without fixed date of repayment                           4              13              124                   141
                                                     22,222           5,815              606                28,643

3.      Changes in long-term liabilities of the Company and its subsidiaries
        A.  Proprietary purchases of bonds
             (1) In December 2008 a wholly owned subsidiary of the Company purchased on the stock
                 exchange NIS 46 million par value (Series I) debentures of the Company for a total
                 consideration of NIS 35 million. The said debentures will not be delisted from the stock
                 exchange. The Company recognized a gain of NIS 15 million as a result of the aforementioned
                 purchase.
             (2) In 2008 a wholly owned subsidiary of Property & Building purchased NIS 318 million par
                 value debentures of Property & Building for a consideration of NIS 221 million, following
                 which Property & Building recognized a gain in the amount of NIS 126 million (before taxes)
                 in 2008. The share of Company in the net gain amounted to NIS 54 million.




                                                                                                 IDBD Notes 128
                                                                             IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 21 – Financial Liabilities at amortized cost (cont'd)

A.   Non-Current Liabilities (cont'd)
3.   Changes in long-term liabilities of the Company and its subsidiaries (cont'd)
     A.   Proprietary purchases of bonds (cont'd)
          (3) In 2008 a wholly owned subsidiary of Koor purchased approximately NIS 217 million par
               value of Koor’s debentures for a consideration of approximately NIS 158 million.
                As a result Koor recognized a net gain of approximately NIS 78 million in 2008. The
                Company’s share in the said gain amounted to approximately NIS 42 million.
          (4) In 2008, Clal Finance and a subsidiary thereof acquired bonds of Clal Finance at a par value of
               approximately NIS 79 million, for a consideration of NIS 54 million. As a result, Clal Finance
               recorded profit of NIS 34 million in 2008. The Company's share of the aforesaid profit is
               approximately NIS 16 million.
          (5) Additional companies also acquired bonds at a total profit of NIS 32 million. The Company's
               share of the aforesaid profit is approximately NIS 19 million.
     B.   Rating of debentures
          (1) In June 2007, Standard & Poor's Maalot Ltd. ("Maalot") assigned a rating of AA to the
               Company's long-term debt repayment capability. This rating is based on a range of qualitative
               and quantitative parameters examining the business positioning and financial stability of the
               Company and of its investee companies. In light of the turmoil in the capital markets and the
               ongoing erosion of market prices, the Company's ratio of adjusted holdings plus cash to gross
               debt was also eroded. On November 30, 2008, Maalot announced that the rating of the debt
               repayment capability of several holding companies in Israel, including the Company, was on
               Negative Credit Watch. This reexamination process may also have negative implications for
               the rating of the debt repayment capability of investee companies of the Company.
          (2) In November 2008 Midroog Ltd. announced a reduction in the rating of Clal Insurance’s
               liabilities, as follows: lowering of the rating scope of an IFRS insurer’s financial stability from
               stable to negative and lowering the rating scope of subordinated deeds, rated Aa2 from stable
               to negative.
               In March 2009 S&P Ma’alot announced that it will enter Clal Insurance’s subordinated deeds,
               rated at AA, to the Negative Credit Watch list.
          (3) In January 2009, Midroog announced the lowering of the debentures (Series A) from A1- to
               A2- and lowering Clal Batucha's overall solvency rating from A1- to A2 - this after in May
               2008, Midroog announced the lowering of the rating of the debentures (Series A) issued by
               Clal Finance from stable to negative and established a negative rating for Clal Batucha's
               overall solvency.
               In September 2008, Ma'alot announced the lowering of Clal Finance's liability rating from
               stable to negative.
               In January 2009, Ma'alot announced the lowering of the debentures (Series A) issued by Clal
               Finance from (ilA+) to (ilA-).
          (4) Additional consolidated companies are in a Negative Credit Watch process. Maalot's
               announcements regarding some of the companies state that the reexamination process does not
               result from a worsening of these companies' financial or business profile.
     C.   Receipt and repayment of loans and debentures
           (1)In February 2008 Cellcom raised the amount of NIS 600 million by expanding its existing
                Series C and D of debentures.
           (2)In March 2008 Cellcom voluntarily made an early repayment of the balance of the loan it
                received from a syndicate of banks. The balance of the loan that was repaid as stated was
                $ 140 million (comprised of a dollar component of $ 85 million and a shekel component of
                NIS 253 million), and following it the financing agreement relating to the said loan and the
                restrictions it imposed on Cellcom were concluded.
           (3)In 2008 Property & Building and its subsidiaries received loans from banks in the total amount
                of NIS 1,260 million, which are linked to the CPI, bear average interest of 4.8% p.a. and are
                repayable over a period of 8 years.



                                                                                                    IDBD Notes 129
                                                                            IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 21 – Financial Liabilities at amortized cost (cont'd)

A.   Non-Current Liabilities (cont'd)
3.   Changes in long-term liabilities of the Company and its subsidiaries (cont'd)
     C.   Receipt and repayment of loans and debentures (cont'd)
           (4) In order to partially finance the purchase of Credit Suisse shares, in March and May 2008
               Koor entered into recourse and non-recourse credit agreements with Goldman Sachs. In
               November 2008 it was agreed that no further credit would be taken from the credit facilities
               (both recourse and non-recourse) that were provided to Koor other than the amount of 300
               million Swiss francs that was taken until that date from the recourse credit facility. As at
               December 31, 2008, the net balance of the loan from the Goldman Sachs credit facility
               amounts to 250 million Swiss francs. In accordance with the arrangement, as from April 15,
               2009 either one of the parties may terminate the agreement at an advance notice of one month.
               In addition, Koor has the right to make an early repayment of the loan, subject to the payment
               of a fee.
               The credit from Goldman Sachs bears monthly interest at the relevant period Libor rate (on the
               Swiss franc), plus a margin of 1.25% p.a. (and plus any grossed up withholding tax, if any is
               required). Koor pledged shares of Credit Suisse in favor of Goldman Sachs as security for the
               Goldman Sachs credit, and undertook to maintain over the period of the credit an agreed ratio
               (subject to changes under certain circumstances) between the value of the security and the net
               balance of the loan. In accordance with the credit arrangement, Goldman Sachs is permitted,
               for as long as the shares are pledged in its favor and subject to the law, to lend, pledge or make
               other dispositions of the pledged shares. In the event of Koor not complying with the
               aforementioned security to debt ratio, Koor shall be required to repay part of the Goldman
               Sachs credit, to the extent necessary in order to comply again with the said ratio. In the
               framework of the arrangement, Koor has undertaken to maintain available cash balances in an
               amount equal to the lower of 5% of the value of the security or 10% of the debt balance. The
               Goldman Sachs credit arrangement includes provisions regarding immediate forced repayment
               events, including events of change of control in Koor or in Credit Suisse, and extreme
               situations of low trading volumes in shares of Credit Suisse. Koor will be permitted to receive
               the current dividends distributed in respect of the pledged shares, subject to compliance with
               the required security to debt ratio. Special dividends distributed in respect of these shares will
               serve to partly repay the Goldman Sachs credit (no early repayment fee will be required).
               As at December 31, 2008 Koor is in compliance with the aforementioned financial covenants.
               As at the date of approval of these financial statements, the net balance of the aforementioned
               loan is 214 million Swiss francs.
               In addition to the credit from Goldman Sachs, Koor was provided a non-recourse credit facility
               by Morgan Stanley which as at December 31 has not yet been utilized. The credit from
               Morgan Stanley was received by means of a transaction in financial derivatives.
               The maximum amount that can be withdrawn from this credit facility is 165 million Swiss
               francs., which in June 2009 will be adjusted to the maximum amount actually withdrawn by
               Koor until that date (as at the date of approval of these financial statements the maximum
               amount withdrawn amounts to 64 million Swiss francs), and the withdrawal of such credit
               requires the provision of security by Koor as described hereunder. As at the date of approval of
               these financial statements, the balance of the net loan withdrawn by Koor from the Morgan
               Stanley credit facility amounts to 43 million Swiss francs.
               The credit from Morgan Stanley is repayable in December 2009 and Koor has the right to
               extend the credit period by two additional half year periods, subject to the payment of an
               extension fee. Koor is entitled to make an early repayment of the Moran Stanley credit, subject
               to the payment of a fee. The credit from Morgan Stanley bears monthly interest at the relevant
               Libor rate (on the Swiss franc), plus a margin between 2.75% p.a. and 4% p.a.,




                                                                                                   IDBD Notes 130
                                                                             IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 21 – Financial Liabilities at amortized cost (cont'd)

A.   Non-Current Liabilities (cont'd)
3.   Changes in long-term liabilities of the Company and its subsidiaries (cont'd)
     C.   Receipt and repayment of loans and debentures (cont'd)
          (4) cont'd.
               according to the security to net loan balance ratio, as it should be from time to time (and plus
               any grossed up withholding tax, if any is required). If Koor should want to reduce the margin
               by improving the security to debt ratio, it is permitted to deposit additional cash as security.
               Koor pledged shares of Credit Suisse as security for the Morgan Stanley credit, and it was
               agreed that if Koor should deviate from a certain security to debt ratio (subject to changes
               under certain circumstances), it will be required to provide additional security in the form of a
               cash deposit in an amount that results in compliance with the agreed security to debt ratio. In
               accordance with the credit arrangement, Morgan Stanley is permitted – for as long as the
               shares are pledged in its favor – to lend, pledge or make other dispositions of the pledged
               shares. In the framework of the Morgan Stanley credit arrangement, Koor has undertaken to
               maintain available cash balances in an amount equal to the lower of 5% of the initial value of
               the security or 5% of the value of the security as it is from time to time. Koor will be permitted
               to receive the current dividends distributed in respect of the pledged shares, subject to
               compliance with the required security to debt ratio. Any special dividends distributed in
               respect of the pledged shares will be held by Morgan Stanley as part of the aforementioned
               security. The Morgan Stanley credit arrangement includes provisions regarding immediate
               forced repayment events, including events of change of control in Koor or in Credit Suisse, a
               significant lowering in the credit rating of Credit Suisse, extremely low trading volumes in
               shares of Credit Suisse, or an extreme fall in the share price of Credit Suisse. See also Note
               49.A.6 regarding the subsequent to balance sheet date increase in the non-recourse credit
               facility from Morgan Stanley.
     D.   Financial covenants
          (1) In connection with loans from banks, the balance of which as at December 31, 2008 amounted
               to NIS 1,540 million, the Company undertook toward the banks, inter alia, to comply with
               financial covenants (which replaced previous financial covenants, in effect as of December 31,
               2008), to be calculated with reference to the end of the reported quarter, pursuant to which:
               (a) The net debt of the Company on a non-consolidated basis (solo) shall not exceed NIS
                      6.7 billion.
               (b) The balance of cash and tradable collateral shall not be lower than the volume of current
                      maturities expected in the following two quarters (subsequent to the reported quarter).
               (c) The Company's equity attributed to shareholders ("shareholders' equity") shall be no
                      lower than NIS 2 billion. The Company shall be considered to comply with this
                      covenant even if shareholders' equity was lower than NIS 2 billion at the end of the
                      reported quarter, until certain periods elapse and under certain conditions stipulated in
                      the agreements with the banks.
                      The agreements with the banks further establish the following directives, among other
                      matters: transfer of control from the current controlling shareholder will grant the banks
                      the right to early settlement of the loans; sale of principal holdings to third parties at a
                      cumulative volume of 20% or more of the total value of assets plus cash shall require the
                      advance consent of the banks; the cumulative rate of sales of principal holdings together
                      with liens of assets without the need for consent of the bank is limited to up to 25% of
                      the total value of all assets plus cash.
               The Company complies with the financial covenants established.




                                                                                                    IDBD Notes 131
                                                                           IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 21 – Financial Liabilities at amortized cost (cont'd)

A.   Non-Current Liabilities (cont'd)
3.   Changes in long-term liabilities of the Company and its subsidiaries (cont'd)
     D.   Financial covenants (cont'd)
          (2) As at December 31, 2008, Koor is in compliance with the financial covenants determined for it
               by one of the banks, which is the principal provider of bank credit to Koor (hereinafter – the
               bank lender). In October 2008 Koor and the bank lender agreed on adjustments to the terms of
               credit provided by the bank lender to Koor.
               Koor was granted the right, effective until December 31, 2009, to postpone to 2014-2016
               repayment of the credit that was provided to it by the bank lender and is repayable in 2009-
               2010 (in the amount of NIS 1 billion). The financial covenants were adjusted in the framework
               of the said agreement and they include, inter alia, as follows:
               a. The shareholders’ equity attributable to the equity holders of Koor shall not fall below NIS
                   1.1 billion (linked to the CPI of June 2008).
               b. If the shareholders’ equity of Koor falls below NIS 2 billion (linked to the CPI of June
                   2008), Koor shall not distribute a dividend to its shareholders, unless the bank lender has
                   consented in writing and in advance.
               c. Koor shall continue to be the controlling shareholder and the largest shareholder, directly
                   or indirectly (with a holding that at no time falls below 26% of the issued and paid-in share
                   capital) of Makhteshim Agan.
               d. The maximum amount of debt in the framework of the financing that was provided and/or
                   will be provided to Koor for the sole purpose of purchasing shares of Credit Suisse, shall
                   not exceed $ 1 billion. The recourse financing of Koor shall not exceed $ 455 million.
               e. The market value to debt ratio shall not fall below 1.4 at all times. As regards this ratio:
                   Market value is the cumulative market value of the shares of Makhteshim Agan held by
                   Koor, plus the following assets:
                   (1) Shares of Credit Suisse the investment in which derives from debt related to recourse
                        financing.
                   (2) Shares of Credit Suisse held by Koor that are free of any lien.
                   (3) Shares of Credit Suisse held by a wholly owned subsidiary of Koor that are free of any
                        lien and are not deposited with any provider of financing for the purchase of Credit
                        Suisse shares.
                   Debt is the net financial debt (as defined in the agreement) for which Koor has rights of
                   financial data of M.A.G.M Chemical Holdings Ltd. for as long as it is wholly owned by
                   Koor).
                   If the market value to debt ratio according to the aforementioned falls below 1.3, the bank
                   lender will be allowed to demand the immediate repayment of the credit or any part of it.
                   In the event of the market value to debt ratio according to the aforementioned falling
                   below 1.4 and the bank lender not demanding the immediate repayment of the credit or
                   any part of it, and for as along as the market value to debt ratio according to the
                   aforementioned has not been corrected so that Koor complies with the required ratio, the
                   margin on the credit will increase by 1% p.a.
               f. Any change in control over Koor grants to the bank lender the right to demand immediate
                   repayment of the loan.
          (3) In the framework of the credit adjustment agreement with the bank lender of Koor (see
               Paragraph (2) above), which granted to Koor the right to postpone repayment of the credit due
               in 2009-2010 the loan that was repayable in the fourth quarter of 2008 was postponed to 2014-
               2016, in accordance with the interest terms provided in the agreement.




                                                                                                  IDBD Notes 132
                                                                            IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 21 – Financial Liabilities at amortized cost (cont'd)

A.    Non-Current Liabilities (cont'd)
3.    Changes in long-term liabilities of the Company and its subsidiaries (cont'd)
      D.   Financial covenants (cont'd)
            (4) In accordance with an agreement with another bank, to which as at December 31, 2008 Koor’s
                debt amounts to NIS 71 million which is repayable in April 2009, Koor has undertaken to
                maintain certain financial covenants including, inter alia, a minimum amount of capital, a ratio
                between the value of certain assets and net foreign capital, and it is forbidden to create liens
                and provide guarantees without the advance consent of the bank and at the conditions provided
                in the agreement.
                Furthermore, Koor has undertaken to repay under certain conditions a part of the existing debt
                by using the proceeds received from the sale of certain assets, should they be sold, as well as
                other conditions, as stated in the said agreement, and has also undertaken to obtain advance
                consent in writing of the bank to any change of control in Koor. As at December 31, 2008
                Koor is in compliance with these covenants.
           (5) Against the credit lines placed in favor of subsidiaries by banks and other credit providers, the
                companies undertook to maintain certain covenants relating to minimum equity based on their
                financial statements whereby the calculation of equity will also include loans from
                shareholders as well as a reserve of certain financial ratios.
                The amounts of minimum equity required from the subsidiaries are as follows:
                Clal Finance - NIS 150 million.
                Clal Finance Batucha - NIS 70 million.
                Clal Finance Underwriting - NIS 40 million.
                As at balance sheet date the shareholders’ equity of the subsidiaries is higher than the required
                minimum.
           (6) Other subsidiaries of the Company are required to comply with financial covenants. As at
                balance sheet date, these companies are in compliance with such financial covenants.
      See Note 29.D regarding linkage and interest rates.
B.    Current liabilities

                                                                                     As at December 31
                                                                                    2008             2007
                                                                                        NIS millions
Financial liabilities not from banks
Current maturities of debentures                                                         1,669             1,093
Other current maturities                                                                   136               111
Short-term loans                                                                           272               492
                                                                                         2,077             1,696
Financial liabilities from a bank
Current maturities of secured bank loans                                                 2,140             1,166
Unsecured bank credit lines                                                                  -               402
Short-term bank loans                                                                    2,269             1,406
                                                                                         4,409             2,974
Total short-term financial liabilities                                                   6,486             4,670




                                                                                                   IDBD Notes 133
                                                            IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 22 – Financial liabilities at fair value

A. Non-current liabilities

                                                                     As at December 31
                                                                    2008          2007
                                                                        NIS millions
Convertible debentures and options                                         -            84
Derivatives                                                              74             26
Debentures                                                              199            358
                                                                        273            468

B. Current liabilities

                                                                     As at December 31
                                                                    2008          2007
                                                                        NIS millions
Derivatives not used for hedging                                        200             80
Derivatives used for hedging                                              2            195
                                                                        202            275

Note 23 – Deferred income
A.   Non-current deferred income

                                                                     As at December 31
                                                                    2008          2007
                                                                        NIS millions
Deferred income – other                                                 140             103
Less current maturities of deferred income                             (16)            (22)
Total long-term deferred income                                         124              81

B.   Current deferred income

                                                                     As at December 31
                                                                    2008          2007
                                                                        NIS millions
Deferred income – other                                                  29             -
Current maturities of deferred income                                    16            22
Total current deferred income                                            45            22




                                                                               IDBD Notes 134
                                                                                 IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 24 - Provisions

                                                           Site        Legal   Contractual
                                        Warranties     restoration     claims  obligations        Other      Total
                                                        N I S          m i l l i o n s
Balance as at January 1, 2008                     8              24         88           88           173       381
Provisions assumed in a business
combination                                        -               -         7                -         -          7
Provisions made during the period                  3               2        21                -        52         78
Provisions used during the period                (4)             (1)       (2)                -      (13)       (20)
Provisions reversed during the period              -               -      (36)             (55)     (131)      (222)
Capitalization effect                              -               1         -                -         -          1
Balance as at December 31, 2008                    7             26         78               33        81        225


Non-current                                       -              19          2               -          5        26
Current                                           7               7         76              33         76       199
Total                                             7              26         78              33         81       225
Balances as at December 31, 2007
Non-current                                       -              16          -               -          5        21
Current                                           8               8         88              88        168       360
Total                                             8              24         88              88        173       381



A.    Site restoration – The Group companies are obligated to pay the expenses relating to a liability to
      remove assets and to restore the site on which the assets were located. The said expenses are calculated on
      the basis of the identifiable costs in respect of the current year and are adjusted according to estimated
      future changes in price, in inflation, etc., and are discounted at a risk-free interest rate. The forecasts take
      into account future changes in regulations and technological requirements.
B.    Legal claims – Legal claims are filed against Group companies in the ordinary course of business. In the
      opinion of managements of the Group companies on the basis of, inter alia, legal opinions regarding the
      chances of the claims, sufficient provisions were included where such provisions were required in order to
      cover the exposure arising from such claims. See Note 30C regarding claims and Note 30.A regarding
      contingent (for details about the reversal of the provision in respect of Eli Aroch claim, see Note 30.A(1)).
C.    Other contractual liabilities – Provisions in respect of other contractual liabilities include a number of
      liabilities arising from a contractual liability or legislation that reflect a high component of uncertainty
      with respect to the timing and amounts required in order to settle the liability.




                                                                                                       IDBD Notes 135
                                                                           IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 25 - Employee Benefits
Employee benefits include post-employment benefits, other long-term benefits, termination benefits, short-term
benefits and share-based payments. The Group’s liability for employee severance benefits in respect of its
Israeli employees is calculated in accordance with the Israeli severance pay law.
As regards post-employment benefits, the Group has defined benefit plans for which it makes contributions to
central severance pay funds and insurance policies .The Group also has a defined contribution plan for some of
its employees who are subject to Section 14 of the Severance Pay Law – 1963.

                                                                                   As at December 31
                                                                                  2008             2007
                                                                                      NIS millions
A. Employee benefits
   Present value of unfunded obligations                                                  71               69
   Present value of funded obligations                                                   599              522
   Total present value of defined benefit obligations (post-employment)                  670              591
   Fair value of plan assets                                                             362              335
   Recognized liability for defined benefit obligations                                  308              256
   Liability for other long-term benefits                                                165              156
   Obligation for paid vacation of employees                                              35               28
   Total employee benefits                                                               508              440
   Presented in the following items:
   Creditors and credit balances                                                           -                6
   Long-term employee benefits                                                           508              434

                                                                                   As at December 31
                                                                                  2008           2007
                                                                                           %
   Plan assets comprise:
   Equity instruments                                                                     26               30
   Government debentures                                                                  28               26
   Corporate debentures                                                                   23               23
   Other                                                                                   8                8
                                                                                          85               87
   Executive insurance policies                                                            9                8
   Provident and pension funds                                                             6                5
                                                                                         100              100




                                                                                                IDBD Notes 136
                                                                                    IDB Development Corporation Ltd.

Notes to the Financial Statements as at December 31, 2008

Note 25 - Employee Benefits (cont'd)

                                                                                          Year ended December 31
                                                                                           2008              2007
                                                                                                NIS millions
B. Post-employment benefit plans – defined benefit plan
   Movement in the defined benefit obligations
   Defined benefit obligation as at January 1                                                        750                910
   Benefits paid                                                                                   (105)               (95)
   Current service costs and interest costs                                                          117                149
   Additions (reductions) due to initial consolidation (discontinuance of
      consolidation)                                                                                 48              (212)
   Changes in respect of foreign exchange differences                                                 1                   -
   Actuarial losses (gains)                                                                          13                 (2)
   Early retirement expenses                                                                         20                   -
   Defined benefit obligation as at December 31                                                     844                750
   Movement in plan assets
   Fair value of plan assets as at January 1                                                         334               450
   Contributions paid into the plan                                                                   48                 43
   Benefits paid by the plan                                                                        (35)               (29)
   Additions (reductions) due to initial consolidation (discontinuance of
      consolidation)                                                                                  38             (174)
   Expected return on plan assets                                                                     18                24
   Actuarial gains (losses)                                                                         (41)                21
   Fair value of plan assets as at December 31                                                       362               335
   Expense recognized in profit or loss
   Current service costs                                                                              66                 97
   Actuarial losses recognized during the period                                                      54                 23
   Interest costs