----

----

----

| o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------------|

| ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2009 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from __________ to __________ |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------|

| o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report _____________ |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Title of each class:                         | Name of each exchange on which registered: |
|----------------------------------------------|--------------------------------------------|
| ORDINARY SHARES, PAR VALUENIS 1.00 PER SHARE | NASDAQ GLOBAL SELECT MARKET                |

----

----

----

| o | U.S. GAAP |
|---|-----------|

| x | International Financial Reporting Standards as issued by the International Accounting Standards Board |
|---|-------------------------------------------------------------------------------------------------------|

| o | Other |
|---|-------|

----

| ITEM           | DESCRIPTION                                                                  |   | Page   |
|----------------|------------------------------------------------------------------------------|--------|--------|
|           | FORWARD LOOKING STATEMENTS                                                   |   | 4      |
| 1.             | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        |   | 5      |
| 2.             | OFFER STATISTICS AND EXPECTED TIMETABLE                                      |   | 5      |
| 3.             | KEY INFORMATION                                                              |   | 5      |
| 4.             | INFORMATION ON THE COMPANY                                                   |   | 31     |
| 4A.            | UNRESOLVED STAFF COMMENTS                                                    |   | 59     |
| 5.             | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 |   | 59     |
| 6.             | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   |   | 105    |
| 7.             | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            |   | 117    |
| 8.             | FINANCIAL INFORMATION                                                        |   | 121    |
| 9.             | THE OFFER AND LISTING                                                        |   | 121    |
| 10.            | ADDITIONAL INFORMATION                                                       |   | 123    |
| 11.            | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                    |   | 135    |
| 12.            | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |   | 141    |
| 13.            | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |   | 141    |
| 14.            | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |   | 141    |
| 15.            | CONTROLS AND PROCEDURES                                                      |   | 142    |
| 16A.           | AUDIT COMMITTEE FINANCIAL EXPERT                                             |   | 142    |
| 16B.           | CODE OF ETHICS                                                               |   | 142    |
| 16C.           | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       |   | 143    |
| 16D.           | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   |   | 144    |
| 16E.           | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       |   | 144    |
| 16F.           | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT                           |   | 144    |
| 16G.           | CORPORATE GOVERNANCE                                                         |   | 144    |
| 17.            | FINANCIAL STATEMENTS                                                         |   | 144    |
| 18.            | FINANCIAL STATEMENTS                                                         |   | 144    |
| 19.            | EXHIBITS                                                                     |   | 145    |
| CERTIFICATIONS |                                                                         |   |   |

----

FORWARD-LOOKING STATEMENTS

| Currency                 | $1.00 as of December 31, 2009 |
|--------------------------|-------------------------------|
| 1 NIS                    | 0.2638                        |
| 1 Euro                   | 1.4333                        |
| 1 GBP                    | 1.5928                        |
| 1 HUF                    | 0.0053                        |
| 1 CZK                    | 0.5436                        |
| 1 LEI (RON)              | 0.3395                        |
| 1 PLN                    | 0.3473                        |
| 1 INR                    | 0.02139                       |
| 1 Crore (10 million INR) | 213.900                       |

----

| MONTH                    | HIGH               | LOW    |
|--------------------------|--------------------|--------|
| 1 U.S. dollar =NIS       | 1 U.S. dollar =NIS |
| December 2009            | 3.8098             | 3.7746 |
| January 2010             | 3.795              | 3.6844 |
| February 2010            | 3.7913             | 3.7091 |
| March 2010               | 3.7935             | 3.7095 |
| April 2010               | 3.749              | 3.682  |
| May 2010 (through May 4) | 3.737              | 3.73   |

| PERIOD                              | EXCHANGE RATE |
|-------------------------------------|---------------|
| January 1, 2005 - December 31, 2005 | 4.488 NIS/$1  |
| January 1, 2006 - December 31, 2006 | 4.442 NIS/$1  |
| January 1, 2007 - December 31, 2007 | 4.0847 NIS/$1 |
| January 1, 2008 - December 31, 2008 | 3.586 NIS/$1  |
| January 1, 2009 - December 31, 2009 | 3.932 NIS/$1  |

ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

ITEM 3.  KEY INFORMATION

----

|                                                                                         |   | FOR THE YEAR ENDED DECEMBER 31 |     |
|----------------------------------------------------------------------------------------------|--------|--------------------------------|----------|
|                                                                                         |   | 2009                           |     |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                                                         |   | Convenience translation        |     |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                         |   | ($'000)                        |     |   | (NIS '000) |   |
| Revenues and gains                                                                           |   |                           |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial centers                                                                           |   |                           | 22,640   |   |   |   | 85,466 |   |   |   | 524,163 |   |   |   | 2,917,616 |   |   |   | 397,202 |   |
| Hotels operations and management                                                             |   |                           | 105,096  |   |   |   | 396,736 |   |   |   | 384,220 |   |   |   | 395,227 |   |   |   | 351,610 |   |
| Gains from sale of real estate assets                                                        |   |                           | -        |   |   |   | - |   |   |   | - |   |   |   | 62,621 |   |   |   | 81,794 |   |
| Sale of medical systems                                                                      |   |                           | 16,340   |   |   |   | 61,683 |   |   |   | 38,076 |   |   |   | 49,648 |   |   |   | 85,824 |   |
| Gains from changes of shareholding in subsidiaries                                           |   |                           | 8,240    |   |   |   | 31,106 |   |   |   | 49,122 |   |   |   | 5,310 |   |   |   | 667,014 |   |
| Sale of fashion retail                                                                       |   |                           | 31,360   |   |   |   | 118,386 |   |   |   | 102,736 |   |   |   | 68,139 |   |   |   | 58,035 |   |
|                                                                                         |   |                           | 183,676  |   |   |   | 693,377 |   |   |   | 1,098,317 |   |   |   | 3,498,561 |   |   |   | 1,641,479 |   |
|                                                                                         |   |                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses and losses                                                                          |   |                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial centers                                                                           |   |                           | 44,835   |   |   |   | 169,253 |   |   |   | 432,760 |   |   |   | 1,714,253 |   |   |   | 395,814 |   |
| Hotels operations and management                                                             |   |                           | 93,571   |   |   |   | 353,229 |   |   |   | 354,850 |   |   |   | 330,063 |   |   |   | 308,623 |   |
| Cost and expenses of medical systems operation                                               |   |                           | 17,855   |   |   |   | 67,403 |   |   |   | 55,469 |   |   |   | 69,953 |   |   |   | 71,746 |   |
| Cost of fashion merchandise                                                                  |   |                           | 35,534   |   |   |   | 134,142 |   |   |   | 118,040 |   |   |   | 80,308 |   |   |   | 67,834 |   |
| Research and development expenses                                                            |   |                           | 19,592   |   |   |   | 73,959 |   |   |   | 68,759 |   |   |   | 69,559 |   |   |   | 73,538 |   |
| General and administrative expenses                                                          |   |                           | 17,524   |   |   |   | 66,153 |   |   |   | 54,944 |   |   |   | 116,992 |   |   |   | 66,983 |   |
| Share in losses (profits) of associates, net                                                 |   |                           | 3,719    |   |   |   | 14,039 |   |   |   | 12,952 |   |   |   | 12,667 |   |   |   | (736 | ) |
| Financial expenses                                                                           |   |                           | 75,112   |   |   |   | 283,546 |   |   |   | 296,527 |   |   |   | 232,566 |   |   |   | 132,310 |   |
| Financial income                                                                             |   |                           | (24,563  | ) |   |   | (92,725 | ) |   |   | (135,278 | ) |   |   | (73,293 | ) |   |   | (19,219 | ) |
| Change in fair value of financial instruments measured at fair value through profit and loss |   |                           | 18,729   |   |   |   | 70,702 |   |   |   | (225,244 | ) |   |   | (18,347 | ) |   |   | 5,495 |   |
| Impairment, charges and other expenses, net                                                  |   |                           | 68,934   |   |   |   | 260,225 |   |   |   | 68,797 |   |   |   | 38,233 |   |   |   | 77,048 |   |
|                                                                                         |   |                           | 370,842  |   |   |   | 1,399,926 |   |   |   | 1,102,576 |   |   |   | 2,572,954 |   |   |   | 1,179,436 |   |
|                                                                                         |   |                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| PROFIT BEFORE INCOME TAXES                                                                   |   |                           | (187,166 | ) |   |   | (706,549 | ) |   |   | (4,259 | ) |   |   | 925,607 |   |   |   | 462,043 |   |
| Income taxes (tax benefits)                                                                  |   |                           | (9,423   | ) |   |   | (35,571 | ) |   |   | 24,736 |   |   |   | 16,288 |   |   |   | (1,787 | ) |
| PROFIT FROM CONTINUING OPERATIONS                                                            |   |                           | (177,743 | ) |   |   | (670,978 | ) |   |   | (28,995 | ) |   |   | 909,319 |   |   |   | 463,830 |   |
| Profit from discontinued operation, net                                                      |   |                           | 4,384    |   |   |   | 16,550 |   |   |   | 4,934 |   |   |   | 10,289 |   |   |   | 35,665 |   |
| PROFIT (LOSS) FOR THE YEAR                                                                   |   |                           | (173,359 | ) |   |   | (654,428 | ) |   |   | (24,061 | ) |   |   | 919,608 |   |   |   | 499,495 |   |
|                                                                                         |   |                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Attributable to:                                                                             |   |                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity holders of the Company                                                                |   |                           | (141,263 | ) |   |   | (533,269 | ) |   |   | (103,714 | ) |   |   | 539,749 |   |   |   | 510,803 |   |
| Minority interest                                                                            |   |                           | (32,096  | ) |   |   | (121,159 | ) |   |   | 79,653 |   |   |   | 379,859 |   |   |   | (11,308 | ) |
|                                                                                         |   |                           | (173,359 | ) |   |   | (654,428 | ) |   |   | (24,061 | ) |   |   | 919,608 |   |   |   | 499,495 |   |
|                                                                                         |   |                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share - (in NIS)                                                                |   |                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per share:                                                                    |   |                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  From continuing operations                                                             |   |                           | (5.72    | ) |   |   | (21.60 | ) |   |   | (4.27 | ) |   |   | 20.80 |   |   |   | 18.83 |   |
|  From discontinued operations                                                           |   |                           | 0.17     |   |   |   | 0.65 |   |   |   | 0.19 |   |   |   | 0.40 |   |   |   | 1.41 |   |
|                                                                                         |   |                           | (5.55    | ) |   |   | (20.95 | ) |   |   | (4.08 | ) |   |   | 21.20 |   |   |   | 20.24 |   |
| Diluted earning per share:                                                                   |   |                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  From continuing operations                                                             |   |                           | (5.73    | ) |   |   | (21.62 | ) |   |   | (4.30 | ) |   |   | 20.18 |   |   |   | 18.83 |   |
|  From discontinued operations                                                           |   |                           | 0.17     |   |   |   | 0.65 |   |   |   | 0.19 |   |   |   | 0.40 |   |   |   | 1.41 |   |
|                                                                                         |   |                           | (5.56    | ) |   |   | (20.97 | ) |   |   | (4.11 | ) |   |   | 20.58 |   |   |   | 20.24 |   |
|                                                                                         |   |                           |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividend declared per share                                                                  |   |                           | 0        |   |   |   | 0 |   |   |   | 6.6 |   |   |   | 6.30 |   |   |   | 0 |   |

----

|                                  |   | DECEMBER 31             |      |
|---------------------------------------|--------|-------------------------|-----------|
|                                  |   | 2009                    |      |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                  |   | Convenience translation |      |   |   |   |
|                                  |   | ($ '000)                |      |   | (NIS '000) |   |
|                                  |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Assets                        |   |                    | 1,795,369 |   |   |   | 6,777,519 |   |   |   | 6,076,928 |   |   |   | 5,808,346 |   |   |   | 3,671,977 |   |
| Non Current Assets                    |   |                    | 685,133   |   |   |   | 2,586,376 |   |   |   | 2,614,784 |   |   |   | 2,639,302 |   |   |   | 2,613,648 |   |
| Total                                 |   |                    | 2,480,502 |   |   |   | 9,363,895 |   |   |   | 8,691,712 |   |   |   | 8,447,648 |   |   |   | 6,285,625 |   |
|                                  |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Liabilities                   |   |                    | 730,218   |   |   |   | 2,756,575 |   |   |   | 2,018,741 |   |   |   | 935,311 |   |   |   | 1,101,684 |   |
| Non Current Liabilities               |   |                    | 1,184,645 |   |   |   | 4,472,033 |   |   |   | 4,235,188 |   |   |   | 4,283,335 |   |   |   | 2,889,710 |   |
| Shareholders' equity Attributable to: |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity holders of the company         |   |                    | 249,131   |   |   |   | 940,467 |   |   |   | 1,373,692 |   |   |   | 2,035,438 |   |   |   | 1,644,716 |   |
| Minority interest                     |   |                    | 316,508   |   |   |   | 1,194,820 |   |   |   | 1,064,091 |   |   |   | 1,193,564 |   |   |   | 649,515 |   |
| Total                                 |   |                    | 2,480,502 |   |   |   | 9,363,895 |   |   |   | 8,691,712 |   |   |   | 8,447,648 |   |   |   | 6,285,625 |   |

|                                                                |   | FOR THE YEAR ENDED DECEMBER 31, 2005 |    |
|---------------------------------------------------------------------|--------|--------------------------------------|---------|
|                                                                |   | (NIS '000)                           |    |
| REVENUES                                                            |   |                                 |    |
|                                                                |   |                                 |    |
| Sale of real estate assets and investments, net                     |   |                                 | 281,661 |   |
| Commercial centers operations                                       |   |                                 | 142,957 |   |
| Hotels operations and management                                    |   |                                 | 270,057 |   |
| Sale of medical systems                                             |   |                                 | 75,713  |   |
| Realization of investments                                          |   |                                 | 1,958   |   |
| Other operational income                                            |   |                                 | 44,409  |   |
|                                                                |   |                                 | 816,755 |   |
|                                                                |   |                                 |    |   |
| COSTS OF EXPENSES                                                   |   |                                 |    |   |
|                                                                |   |                                 |    |   |
| Commercial centers operations                                       |   |                                 | 157,640 |   |
| Hotels operations and management                                    |   |                                 | 259,293 |   |
| Cost and expenses of medical systems operation                      |   |                                 | 50,374  | (*) |
| Other operational expenses                                          |   |                                 | 46,793  |   |
| Research and development expenses, net                              |   |                                 | 59,796  | (*) |
| General and administrative expenses                                 |   |                                 | 36,939  |   |
| Share in losses of associated companies, net                        |   |                                 | 12,028  |   |
| Financial expenses , net                                            |   |                                 | 122,321 |   |
| Other expenses, net                                                 |   |                                 | 57,106  |   |
|                                                                |   |                                 | 802,290 |   |
|                                                                |   |                                 |    |   |
| PROFIT  BEFORE INCOME TAXES                               |   |                                 | 14,465  |   |
|                                                                |   |                                 |    |   |
| Income taxes (tax benefits)                                         |   |                                 | 7,798   |   |
| PROFIT  AFTER INCOME TAXES                                |   |                                 | 6,667   |   |
| Minority-interest in results of subsidiaries, net                   |   |                                 | 73,795  | (*) |
| PROFIT  FROM CONTINUING OPERATIONS                        |   |                                 | 80,462  |   |
| Profit from discontinued operations, net                            |   |                                 | 5,917   |   |
| Cumulative effect of accounting change at the beginning of the year |   |                                 | (622    | ) |
| NET INCOME                                                          |   |                                 | 85,757  |   |
|                                                                |   |                                 |    |   |
| EARNINGS PER SHARE                                                  |   |                                 |    |   |
|                                                                |   |                                 |    |   |
| From continuing operations                                          |   |                                 | 3.70    |   |
| From discontinued operations                                        |   |                                 | 0.27    |   |
| Cumulative effect of accounting change at the beginning of the year |   |                                 | (0.03   | ) |
| Basic earnings  per share                                 |   |                                 | 3.94    |   |
|                                                                |   |                                 |    |   |
| Dividend declared per share                                         |   |                                 | 12.39   |   |

| (*) | We declared distribution of dividends twice during 2005. |
|-----|----------------------------------------------------------|

----

|                                                                                   |   | FOR THE YEAR ENDEDDECEMBER 31, 2005 |    |
|----------------------------------------------------------------------------------------|--------|-------------------------------------|---------|
|                                                                                   |   | (NIS '000)                          |    |
| NET INCOME  AND COMPREHENSIVE INCOME:                                        |   |                                |    |
|                                                                                   |   |                                |    |
| Net income  according to U.S. GAAP                                           |   |                                | 100,344 |   |
| Total comprehensive income  according to U.S. GAAP                           |   |                                | 123,429 |   |
| Basic earning  per ordinary share as per U.S. GAAP (NIS)                     |   |                                | 3.98    |   |
| Diluted earning  per ordinary share as per U.S. GAAP (NIS)                   |   |                                | 4.53    |   |
| Weighted average of number of shares and share equivalents under U.S. GAAP (thousands) |   |                                | 21,743  |   |

|                                              |   | DECEMBER 31, 2005 |      |
|---------------------------------------------------|--------|-------------------|-----------|
|                                              |   | (NIS '000)        |      |
|                                              |   |              |      |
| Current Assets                                    |   |              | 1,448,733 |   |
| Long-term investments and receivables             |   |              | 118,937   |   |
| Hotels, commercial centers and other fixed assets |   |              | 2,175,364 |   |
| Other assets and deferred expenses                |   |              | 30,476    |   |
| Assets related to discontinued operations         |   |              | 12,607    |   |
| Total                                             |   |              | 3,786,117 |   |
| Current Liabilities                               |   |              | 887,415   |   |
| Long-term liabilities                             |   |              | 1,707,254 |   |
| Liabilities related to discontinued operations    |   |              | 62,430    |   |
| Convertible debentures                            |   |              | 62,159    |   |
| Minority interest                                 |   |              | 11,449    |   |
| Options Issued by Subsidiaries                    |   |              | 1,186     |   |
| Shareholders' equity                              |   |              | 1,054,224 |   |
| Total                                             |   |              | 3,786,117 |   |
|                                              |   |              |      |   |
| Total assets according to U.S. GAAP               |   |              | 3,846,427 |   |
| Total liabilities according to U.S. GAAP          |   |              | 2,801,532 |   |
| Total shareholders equity according to U.S. GAAP  |   |              | 1,044,894 |   |

----

----

|   | · | delays in obtaining zoning and other approvals; |
|--------|--------|-------------------------------------------------|

|   | · | the unavailability of materials and labor; |
|--------|--------|--------------------------------------------|

|   | · | the abilities of subcontractors to complete work competently and on schedule; |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | the surface and subsurface condition of the land underlying the project; |
|--------|--------|--------------------------------------------------------------------------|

|   | · | environmental uncertainties; |
|--------|--------|------------------------------|

|   | · | extraordinary circumstances or “acts of god”; and |
|--------|--------|---------------------------------------------------------------|

|   | · | ordinary risks of construction that may hinder or delay the successful completion of a particular project. |
|--------|--------|------------------------------------------------------------------------------------------------------------|

----

----

----

----

|   | · | changes in global and national economic conditions, including global or national recession, such as those triggered by the recent economic crisis; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a general or local slowdown in the real property market which may make it difficult to sell a property, such as the recent global slowdown; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | political events that may have a material adverse effect on the hotel industry; |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | competition from other lodging facilities, and oversupply of hotel rooms in a specific location; |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · | material changes in operating expenses, including as a result of changes in real property tax systems or rates or labor laws; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes in the availability, cost and terms of financing; |
|--------|--------|-----------------------------------------------------------|

|   | · | the effect of present or future environmental laws; |
|--------|--------|-----------------------------------------------------|

|   | · | our ongoing need for capital improvements and refurbishments; and |
|--------|--------|-------------------------------------------------------------------|

|   | · | material changes in governmental rules and policies. |
|--------|--------|------------------------------------------------------|

----

|   | · | employment levels; |
|--------|--------|--------------------|

|   | · | availability of financing for homebuyers; |
|--------|--------|-------------------------------------------|

|   | · | interest rates; |
|--------|--------|-----------------|

|   | · | consumer confidence; |
|--------|--------|----------------------|

|   | · | levels of new and existing homes for sale; |
|--------|--------|--------------------------------------------|

|   | · | demographic trends; |
|--------|--------|---------------------|

|   | · | housing demand; |
|--------|--------|-----------------|

|   | · | local laws and regulations; and |
|--------|--------|---------------------------------|

|   | · | acts of terror, floods or earthquakes. |
|--------|--------|----------------------------------------|

----

|   | · | difficulty in acquiring land suitable for residential building at affordable prices in locations where our potential customers want to live; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | shortages of qualified trades people; |
|--------|--------|---------------------------------------|

|   | · | reliance on local subcontractors, who may be inadequately capitalized; |
|--------|--------|------------------------------------------------------------------------|

|   | · | shortages of materials; and |
|--------|--------|-----------------------------|

|   | · | volatile increases in the cost of materials, particularly increases in the price of lumber, drywall and cement, which are significant components of home construction costs. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

----

----

----

|   | · | adequate service of process has been effected and the defendant has had a reasonable opportunity to be heard; |
|--------|--------|---------------------------------------------------------------------------------------------------------------|

|   | · | the judgment and its enforcement are not contrary to the law, public policy, security or sovereignty of the State of Israel; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | the judgment was rendered by a court of competent jurisdiction, in compliance with due process and the rules of private international law prevailing in Israel; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the judgment was not obtained by fraudulent means and does not conflict with any other valid judgment in the same matter between the same parties; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | no action between the same parties in the same matter is pending in any Israeli court at the time the lawsuit is instituted in a U.S. court; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the U.S. courts are not prohibited from enforcing judgments of the Israeli courts. |
|--------|--------|------------------------------------------------------------------------------------|

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----

----

----

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|   | · | we could be more vulnerable to general adverse economic and industry conditions; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | we may find it more difficult to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we will be required to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our debt, reducing the available cash flow to fund other projects; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we may have limited flexibility in planning for, or reacting to, changes in our business and in the industry; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | we may have a competitive disadvantage relative to other companies in our business segments with less debt. |
|--------|--------|-------------------------------------------------------------------------------------------------------------|

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ITEM 4.  INFORMATION ON THE COMPANY

|   | · | Commercial and Entertainment Centers - Initiation, construction, and sale of commercial and entertainment centers and other mixed-use real property projects, predominantly in the retail sector, located in CEE and in India. In certain circumstances and depending on market conditions, we may operate and manage a commercial and entertainment center prior to its sale. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Hotels - Hotels operation and management, primarily in major European cities. |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | Image Guided Treatment - Investments in the research and development, production and marketing of magnetic resonance imaging guided focused ultrasound treatment equipment. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Residential Projects - Initiation, construction and sale of residential projects and other mixed-use real property projects, predominately residential, located primarily in India and in Eastern Europe. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Fashion Apparel - distribution and marketing of fashion apparel and accessories in Israel. |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | Other Activities - (i) venture capital investments; (ii) investments in hospitals and farm and dairy plants in India, which are in preliminary stages; and (iii) wholesale trade of home applications in India. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|   Name of Project |    Location |    Title         |  PC Share %1 |  Approximate Land Area (m2) | Approximate Gross Lettable Area (m2) |   Estimated Completion |    Status                                          |
|-----------------------------|----------------------------|---------------------------------|-------------------|----------------------------------|--------------------------------------|----------------------------------|-------------------------------------------------------------------|
| Suwałki Plaza          | Suwałki, Poland       | Ownership                       | 100               | 21,000                           | 20,000                               | 2010                             | Under construction                                                |
| Lodz Plaza                  | Lodz, Poland               | Ownership / perpetual usufruct  | 100               | 50,000                           | 45,000                               | 2012-2013                        | Planning and development stage                                    |
| Csiki Plaza                 | Miercurea Ciuc, Romania    | Ownership                       | 100               | 33,000                           | 14,000                               | 2011                             | Construction commenced awaiting external financing for completion |
| Kragujevac Plaza            | Kragujevac, Serbia         | Leasing for 99 years until 2106 | 100               | 24,500                           | 22,000                               | 2012                             | Planning and development stage                                    |
| Uj Udvar 2                  | Budapest, Hungary          | Ownership                       | 35                | 8,700                            | 16,000                               | 2012                             | Planning and development stage                                    |
| Timisoara Plaza             | Timisoara, Romania         | Ownership                       | 100               | 32,000                           | 43,000                               | 2012-2013                        | Planning and development stage                                    |
| Toruń Plaza            | Toruń, Poland         | Perpetual leasehold             | 100               | 62,800                           | 39,000                               | 2012                             | Planning and development stage                                    |
| Kielce Plaza                | Kielce, Poland             | Perpetual leasehold             | 100               | 30,000                           | 33,000                               | 2013-2014                        | Planning and development stage                                    |
| Leszno Plaza                | Leszno, Poland             | Perpetual leasehold             | 100               | 17,000                           | 16,000                               | 2013-2014                        | Planning and development stage                                    |
| Sport Star Plaza            | Belgrade, Serbia           | Leasing for 99 years until 2106 | 100               | 30,000                           | 45,000                               | 2013-2014                        | Planning and development stage                                    |
| Shumen Plaza                | Shumen, Bulgaria           | Ownership                       | 100               | 17,000                           | 20,000                               | 2013-2014                        | Planning and development stage                                    |
| Slatina Plaza               | Slatina, Romania           | Ownership                       | 100               | 20,000                           | 17,000                               | 2012-2013                        | Planning and development stage                                    |
| Constanta Plaza             | Constanta, Romania         | Ownership                       | 100               | 26,000                           | 18,000                               | 2012                             | Planning and development stage                                    |
| Hunedoara Plaza             | Hunedoara, Romania         | Ownership                       | 100               | 41,000                           | 13,000                               | 2012-2013                        | Planning and development stage                                    |
| Targu Mures Plaza           | Targu Mures, Romania       | Ownership                       | 100               | 31,000                           | 30,000                               | 2012-2013                        | Planning and development stage                                    |
| Helios Plaza                | Athens, Greece             | Ownership                       | 100               | 15,000                           | 26,000                               | 2012                             | Planning and development stage                                    |

| 1 | Directly or indirectly. |
|---|-------------------------|

| 2 | Uj Udvar is currently active and has an approximate GLA of 12,000 m2 and approximately 14,000 m2 of parking areas. |
|---|--------------------------------------------------------------------------------------------------------------------|

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| Country  | Estimated cost of completion                    | Percentage Pre-leased * |
|----------|-------------------------------------------------|-------------------------|
| Poland   | €254 million (approximately $365 million) | 60%                     |
| Romania  | €187 million (approximately $269 million) | -                       |
| Hungary  | €75 million (approximately $108 million)  | -                       |
| Serbia   | €22 million (approximately $32 million)   | -                       |
| Bulgaria | €36 million (approximately $52 million)   | -                       |
| Greece   | €70 million (approximately $101 million)  | -                       |

|   Name of Project |    Location      |    Title          |  PC Share % |  Approximate Land Area (m2) | Approximate Gross LettableArea (m2) |   Estimated Completion |    Status                                                                            |
|-----------------------------|---------------------------------|----------------------------------|------------------|----------------------------------|-------------------------------------|----------------------------------|-----------------------------------------------------------------------------------------------------|
| The Dream Island            | Budapest, Hungary               | Ownership / land use rights      | 43.51            | 320,000                          | 350,0002, 3                         | 2013-2015                        | Initial excavation and archeological works commenced. An exclusive casino license has been awarded. |
| Casa Radio                  | Bucharest, Romania              | Leasing for 49 years ending 2056 | 754              | 102,000                          | 600,0002, 5                         | 2013-2015                        | Initial construction commenced.Approval of the Urban technical commission has been obtained         |
| Iasi Plaza             | Iasi, Romania                   | Ownership                        | 100              | 46,500                           | 62,000                              | 2012-2013                        | planning and development stage                                                                      |
| Belgrade Plaza              | Belgrade, Serbia                | Leasing for 99 years ending 2106 | 100              | 9,000                            | 70,000 2                            | 2013-2014                        | Planning and development stage                                                                      |
| Sofia Plaza Business Center | Sofia, Bulgaria                 | ownership                        | 51               | 75,000                           | 44,000                              | 2013-2014                        | Planning and development stage                                                                      |
| Koregaon Park               | Pune, Maharashtra State, India  | Ownership                        | 1006             | 24,000                           | 111,000 2, 7                        | 2011 (Mall)2012 (offices)        | Under construction                                                                                  |
| Kharadi                     | Kharadi, Pune, India            | Ownership                        | 506              | 56,000                           | 205,000 2, 8                        | 2014                             | Planning and development stage                                                                      |
| Trivandrum                  | Trivandrum, Kerala State, India | Ownership                        | 506              | 43,500                           | 195,000 2, 9                        | -                                | Planning stage                                                                                      |

----

| 1 | Indirectly (PC has a 50% shareholding in a company which has a 87% interest in the consortium which owns the project. The remaining interests are 10% held by a company controlled by the managing director of the consortium and a further 3% is owned by minority shareholders). |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2 | GBA. |
|---|------|

| 3 | This project is expected to include approximately 3,000 hotel rooms in several hotels of different categories as well as approximately 1,000 leisure apartments, a 3,500 seat convention center, a 1,500 seat opera house, a 3,500 seat multi-purpose theater, a marina with anchorage capacity for 300 vessels, a shopping and entertainment center including a prestigious ‘Designer avenue’, a Roman cultural museum, and parking facilities for approximately 5,500 vehicles, as well as a casino of 40,000 m2.  |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4 | Other investors in the project include the Government of Romania, which will procure that the project company is granted the necessary development and exploitation rights in relation to the site for a 49-year period in consideration for a 15% interest in the project and an additional developer which holds 10%. |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5 | The project will consist of a complex with a planned GBA of approximately 600,000 m2 (including parking), and will include a shopping and entertainment center of approximately 170,000m2, with a hypermarket of approximately 6,500m2, a hotel of 35,000m2 (320 rooms), an apartment hotel of 18,000m2, a ferris wheel, a conference center of 14,000m2 and 130,000m2 of offices. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6 | For information regarding the rights of Mr. Abraham (Rami) Goren, our Executive Vice Chairman of the board of directors, in the projects, see "Item 6.B. Directors, Senior Management and Employees - Compensation of Directors and Officers - Agreements with our Executive Vice Chairman." |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7 | This project is expected to include a shopping and entertainment center with an estimated GBA of approximately 83,500 m2 and an office building with an estimated GBA of approximately 27,500 m2 (including underground parking). |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8 | This project is expected to include a shopping and entertainment center with an estimated GBA of approximately 150,000 m2 and an office complex of approximately 55,000 m2. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9 | This project is expected to include a shopping and entertainment center of approximately 67,000 m2, office space of approximately 90,500 m2 and an apartment hotel of approximately 37,500 m2. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Country  | Estimated cost of completion                        | Percentage Pre-leased * ** |
|----------|-----------------------------------------------------|----------------------------|
| Hungary  | €1,070 million (approximately $1,541 million) | -                          |
| Romania  | €683 million (approximately $984 million)     | -                          |
| Serbia   | €100 million (approximately $144 million)     | -                          |
| Bulgaria | €72 million (approximately $104 million)      | -                          |
| India    | €333 million (approximately $480 million)     | 30%                        |

----

|   | · | Brashov - PC owns a 25% share in an office development project known as the Primavera Tower Brasov with a planned GBA of approximately 12,000 m2. It is anticipated that the project will be completed in 2013. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Ploiesti - PC owns a 25% share in an office development project known as the Primavera Tower Ploiest, with an expected GBA of approximately 10,000 m2. It is anticipated that the project will be completed in 2012. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Country | Estimated cost of completion                  | Percentage Pre-leased  * |
|---------|-----------------------------------------------|------------------------------------|
| Hungary | €48 million (approximately $69 million) | -                                  |
| Romania | €47 million (approximately $68 million) | -                                  |

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| Name and Rate of Hotel                                                      | Title                        | Our ShareAs of December 31, 2009 | Approximate Constructed Area(square feet) | Total Rooms and description                                                  | Average Occupancy Rates During 2009 (%) |   Additional information                                                                                                                         |
|-----------------------------------------------------------------------------|------------------------------|----------------------------------|-------------------------------------------|------------------------------------------------------------------------------|-----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Park Plaza Victoria Amsterdam1Amsterdam, the NetherlandsFour Star Deluxe    | Freehold                     | 50%                              | 220,000                                   | 306 including Executive rooms and Business and deluxe Suites                 | 92%                                     | a business center and a health center, 10 conference rooms, bar and a restaurant                                                                           |
| Park Plaza UtrechtUtrecht, the NetherlandsFour Star                         | Leasehold               | 50%                              | 56,000                                    | 120 superior and executive rooms                                             | 73%                                     | includes 11 conference rooms, a business center a sauna, a gym, bar and a restaurant                                                                       |
| Radisson Blu Astrid AntwerpAntwerp, BelgiumFour Star Deluxe                 | Freehold                     | 100%                             | 223,000                                   | 247 rooms including business class suites & 19 new luxury apartments     | 57%                                     | Includes an oceanarium attraction, 18 conference rooms, a bar, a restaurant and a fully equipped health club with a pool                                   |
| Radisson Blu BucharestBucharest, RomaniaFive Star                           | Freehold                     | 77%                              | 900,000                                   | 424 rooms suites, executive suites and one exclusive royal suite             | 47%                                     | The complex of both hotels includes several restaurants, a spa and a world class health academy, casino, shopping area and  supermarket services |
| Centerville ApartHotelBucharest, Romania                                    | Freehold                     | 77%                              | 292 apartments                            | 91%                                                                          |
| Park Plaza Sherlock Holmes LondonLondon, the United KingdomFour Star Deluxe | Leasehold                    | 45% equity and 50% voting        | 67,500                                    | 119 rooms and executive rooms                                                | 86%                                     | This boutique style hotel includes  executive lounge, main meeting room and 7 board rooms, a bar and a restaurant                                |
| Park Plaza Victoria LondonLondon, the United KingdomFour Star Deluxe        | Freehold                     | 50%                              | 242,000                                   | 299 including guestrooms and suites plus 12 one & two bedroom apartments | 87%                                     | includes executive lounge, health center, main conference room and 13 additional conference rooms, a bar and a restaurant                                  |
| Park Plaza Riverbank London2London, the United KingdomFour Star Deluxe      | Leasehold                    | 45% equity and 50% voting        | 337,000                              | 394 rooms including superior and executive rooms and suites                  | 83% together                       | The complex also includes full leisure center, conference and business rooms, restaurant, brasserie, bar and lounge                                        |
| Plaza on the River London2London, the United KingdomFour Star Deluxe        | 65 luxury residential suites |
| Park InnAntwerp, BelgiumThree star boutique                                 | Freehold                     | 100                              | 32,250                                    | 59 rooms going from standard to junior suite with terrace                    | 61%                                     | Includes a restaurant, a lounge and a fitness room                                                                                                         |

|   | 1 | See also “ - Hotels under Development or Renovation” below. |
|--------|---|-------------------------------------------------------------------------|

|   | 2 | Park Plaza Riverbank London Hotel and Plaza on the River London Hotel form part of the Riverbank complex. |
|--------|---|-----------------------------------------------------------------------------------------------------------|

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| Name of Project         | Location                          | Title                          | Share %   | Approximate Land Area (m2) | Approximate Gross BuiltArea (m2)                | Estimated Completion |
|-------------------------|-----------------------------------|--------------------------------|-----------|----------------------------|-------------------------------------------------|----------------------|
| Prague III *            | Prague, Czech Republic            | Ownership                      | 100       | 46,500                     | 44,300 (potential 61,600 for future apartments) | - *                  |
| Roztoky                 | Prague, Czech Republic            | Ownership                      | 100       | 39,000                     | 14,000                                          | 2013                 |
| Łódź     | Łódź, Poland  | Ownership / perpetual usufruct | 100       | 33,500                     | 80,000                                          | -                    |
| Plaza BAS Joint Venture | Fountain Park                     | Bucharest, Romania             | Ownership | 12.5                       | 14,000                                          | 18,000               | 2012-2013 |
| Acacia Park             | Ploiest, Romania                  | Ownership                      | 25        | 12,500                     | 32,000                                          | 2012-2013            |
| Green Land              | Ploiest, Romania                  | Ownership                      | 25        | 18,400                     | 37,000                                          | 2013-2014            |
| Valley View             | Brasov, Romania                   | Ownership                      | 25        | 73,000                     | 140,000                                         | 2014-2016            |
| Pine Tree Glade         | Brasov, Romania                   | Ownership                      | 25        | 28,300                     | 50,000                                          | 2013-2014            |

|   | * | Currently operates as a logistics and commercial center and an office building used by PC. Due to planning difficulties, it is not possible to develop a shopping and entertainment center on this site. Accordingly, PC is examining the possibilities of developing this site as a residential complex. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | With respect to the projects developed in Romania - €14 million (approximately $20 million); |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | With respect to the projects developed in Poland - €183 million (approximately $264 million); |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | With respect to the projects developed in the Czech Republic - €104 million (approximately $150 million); |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

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| Name of Project   | Location                          | Title                           | Share %   | Approximate Land Area (m2)                            | Approximate Gross BuiltArea (m2) | Estimated Completion                     |
|-------------------|-----------------------------------|---------------------------------|-----------|-------------------------------------------------------|----------------------------------|------------------------------------------|
| Bangalore Project | Bangalore, Karnataka State, India | Freehold and Development Rights | 501, 2, 3 | 1,780,000(of which rights to 218,500 obtained so far) | Exceeding 2 million              | Preliminary stage - cannot be estimated. |
| Chennai           | Chennai, Tamil Nadu State, India  | Freehold and Development Rights | 801,2     | 546,000(of which rights to 255,000 obtained so far)   | Exceeding 1 million              | 2012-2015                                |
| Kochi             | Kochi, Kerala State, India        | Freehold andDevelopment Rights  | 501 2     | 166,000(of which rights to 52,600 obtained so far)    | 575,000                          | Preliminary stage - cannot be estimated. |

| 1 | For information regarding the EPI Agreement, a joint venture agreement signed with PC in respect to our India operations, see “ - joint venture with PC to Develop Mixed-Use Projects in India” above. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2 | For information regarding the rights of Mr. Abraham (Rami) Goren, our Executive Vice Chairman of the board of directors, in the projects, see "Item 6.B. Directors, Senior Management and Employees - Compensation of Directors and Officers - Agreements with our Executive Vice Chairman." |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3 | As of the date of this annual report, we hold 100% in this project and we have an obligation to issue, subject to certain conditions, up to 50% holdings in the project to our joint venture partner. |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Company Name              | Areas of expertise                                                                                                                                                                                                                                                                                                                                                                                                                                    | % of investment as of March 31, 2010    |
|---------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|
| Gamida Cell Ltd.          | Expansion of hematopoietic (blood) stem cells therapeutics in clinical development for cancer and autoimmune diseases, as well as future regenerative cell-based medicines including cardiac and pancreatic repair.                                                                                                                                                                                                                                   | 31.64%27.25% (on a fully diluted basis) |
| Olive Software Inc.  | Development and marketing of products that enable a transparent link between the newspapers’ traditional printing systems and the world of e-publishing. These products enable newspapers and magazines to automatically present their printed edition on the Internet, while supporting e-commerce applications, personalization and interactive advertising. Also develops and markets digital archive services for newspapers and libraries. | 24.44%16.23% (on a fully diluted basis) |
| Varcode Ltd.              | Developing labels for improving logistical chain (“cold chain”) of manufacturers. Varcode uses the FresCode products that monitor anomalies and improve the shelf life of perishables.                                                                                                                                                                                                                                               | 52.2% (non-diluted and fully diluted)   |

----

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|   | · | MDT completed a 9.5 million Australian Dollar (approximately $8.8 million) private placement (“Placement”) to the U.S. Fund in which it issued to the U.S. Fund 141.48 million new units, representing 15% pre-placement. The units issued in the Placement will rank equally with existing MDT units; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The U.S. Fund has acquired from Macquarie Group Limited a 2.6% principal unitholding in MDT; |
|--------|--------|----------------------------------------------------------------------------------------------|

|   | · | MDT shall initiate a proposed recapitalization of MDT by way of a pro rata entitlement offer which will be sub-underwritten by the U.S. Fund (“Entitlement Offer”) to raise approximately 200 million Australian Dollars (approximately $185.5 million) (“Proposed Recapitalization”). Other substantial unitholders of MDT will be offered the opportunity to participate in the sub-underwriting of the offer. The U.S. Fund’s final ownership level in MDT will depend on the participation level of MDT’s other unitholders in the offer and the extent of other unitholders participation in the sub-underwriting of the offer. The Entitlement Offer was conditional on MDT entering into definitive underwriting agreements with professional underwriters and receiving acceptable standstill agreements from MDT’s head lenders and derivative counterparties, which have since been executed.; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Following the completion of the Entitlement Offer, the U.S. Fund shall acquire from Macquarie Group its 50% interest in the management company of MDT (“U.S. Manager”) which is responsible for the day-to-day management of MDT, including its investments and investments strategy management, financing, etc. Developers Diversified Realty Corporation, an Ohio corporation specializing in real estate investments and assets management ("DDR"), will remain as a 50% co-owner of the U.S. Manager and continue to act as property manager for MDT’s assets. Upon completion of the U.S. Fund’s acquisition of the U.S. Manager, the composition of the board of the company owning the U.S. Manager will change such that the U.S. Fund will appoint at least half the board members and Macquarie Group will have no representatives. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                       |   | 2009   |    |   | 2008   |   |      | 2007   |   |   | Convenience Translation in U.S. Dollars for2009 |   |
|----------------------------|--------|--------|---------|--------|--------|--------|-----------|--------|--------|--------|-------------------------------------------------|--------|
|                       |   |   |    |   |   |   |      |   |   |   |                                            |   |
| Israel                     |   |   | 132,021 |   |   |   | 102,736   |   |   |   | 96,875                                          |   |   |   | 34,972 |   |
| Western Europe             |   |   | 293,921 |   |   |   | 305,660   |   |   |   | 353,245                                         |   |   |   | 77,860 |   |
| Central and Eastern Europe |   |   | 238,443 |   |   |   | 669,740   |   |   |   | 3,006,192                                       |   |   |   | 63,164 |   |
| Others                     |   |   | 28,992  |   |   |   | 20,181    |   |   |   | 42,249                                          |   |   |   | 7,680 |   |
| Total Revenues             |   |   | 693,377 |   |   |   | 1,098,317 |   |   |   | 3,498,561                                       |   |   |   | 183,676 |   |

|                               |   | 2009   |    |   | 2008   |   |      | 2007   |   |   | Convenience Translation in U.S. Dollars for2009 |   |
|------------------------------------|--------|--------|---------|--------|--------|--------|-----------|--------|--------|--------|-------------------------------------------------|--------|
|                               |   |   |    |   |   |   |      |   |   |   |                                            |   |
| Shopping and Entertainment centers |   |   | 102,937 |   |   |   | 568,895   |   |   |   | 2,935,416                                       |   |   |   | 27,268 |   |
| Hotels                             |   |   | 396,736 |   |   |   | 387,776   |   |   |   | 440,048                                         |   |   |   | 105,096 |   |
| Image Guided Treatment             |   |   | 75,318  |   |   |   | 38,076    |   |   |   | 54,958                                          |   |   |   | 19,952 |   |
| Residential Projects               |   |   | -       |   |   |   | 834       |   |   |   | -                                               |   |   |   | - |   |
| Fashion Apparel                    |   |   | 118,386 |   |   |   | 102,736   |   |   |   | 68,139                                          |   |   |   | 31,360 |   |
| Total Revenues                     |   |   | 693,377 |   |   |   | 1,098,317 |   |   |   | 3,498,561                                       |   |   |   | 183,676 |   |

----

----

|   | · | shopping centers which are not in close proximity and which do not draw their clientele from the same population areas are not considered as being competitive; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we believe that large retail centers (known as "power centers"), even if they compete with our centers directly merely by virtue of their proximity to our shopping and entertainment centers, are at a disadvantage because they do not offer the entertainment facilities that are offered at our shopping and entertainment centers, and which we consider to be a significant element in the attraction of our patrons; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | in the regional cities of our targeted countries, competitive activity is more limited. In these cities, we compete with traditional shopping outlets. These outlets lack the added benefit of the entertainment activities that our centers offer and, accordingly, we believe that they have difficulty competing with us. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| NAME OF COMPANY                                | ABBREVIATED NAME | COUNTRY OF ORGANIZATION | THE COMPANY’S DIRECT/INDIRECT OWNERSHIP PERCENTAGE |
|------------------------------------------------|------------------|-------------------------|----------------------------------------------------------|
| Elscint Ltd.                                   | Elscint          | Israel                  | 100%                                                     |
| BEA Hotels NV                                  | BEA              | The Netherlands         | 100%                                                     |
| Elbit Ultrasound (Netherlands) BV              | EUBV             | The Netherlands         | 100%                                                     |
| Elbit Plaza India Real Estate Holdings Limited | EPI              | Cyprus                  | 50% (1)(2)                                               |
| InSightec Ltd.                                 | InSightec        | Israel                  | 71.2% (3)                                                |
| Plaza Centers N.V.                             | PC               | The Netherlands         | 67.5% (4)                                                |
| Elbit Trade & Retail Ltd.                  | Elbit Trade      | Israel                  | 100%                                                     |
| Elbit Plaza USA, L.P.                          | Elbit Plaza USA  | USA                     | 100% (5)                                                 |

| (1) | We hold 47.5% of the shares in EPI directly, and an additional 47.5% through PC. For additional information as to the joint venture signed between us and PC regarding EPI, see “Item 4.B Business Overview - Residential Projects.” |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | For details as to the grant of 5% of EPI’s equity to Mr. Abraham (Rami) Goren, our Executive Vice Chairman of the board of directors. See "Item 6.B. Directors, Senior Management and Employees - Compensation of Directors and Officers - Agreements with our Executive Vice Chairman." |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Approximately 60% on a fully diluted basis, including warrants granted by InSightec contingent upon certain rates of return as well as 2,000,000 options exercisable into InSightec's ordinary shares which vest upon the initial public offering of InSightec. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Approximately 63% on a fully diluted basis. |
|-----|---------------------------------------------|

| (5) | We hold 50% in Elbit Plaza USA directly, and an additional 50% through PC. |
|-----|----------------------------------------------------------------------------|

----

ITEM 4.A.  UNRESOLVED STAFF COMMENTS.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

|   | · | Commercial and Entertainment Centers - Initiation, construction, and sale of commercial and entertainment centers and other mixed-use real property projects, predominantly in the retail sector, located in CEE and in India. In certain circumstances and depending on market conditions, we may operate and manage a commercial and entertainment center prior to its sale. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Hotels - Hotels operation and management, primarily in major European cities. |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | Image Guided Treatment - Investments in the research and development, production and marketing of magnetic resonance imaging guided focused ultrasound treatment equipment. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Residential Projects - Initiation, construction and sale of residential projects and other mixed-use real property projects, predominately residential, located primarily in India and in Eastern Europe. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Fashion Apparel - distribution and marketing of fashion apparel and accessories in Israel. |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | Other Activities - (i) venture capital investments; (ii) investments in hospitals and farm and dairy plants in India, which are in preliminary stages; and (iii) wholesale trade of home applications in India. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | On April 28, 2010, our newly formed wholly-owned subsidiary, Elbit Medical Ltd., filed an initial draft prospectus with the Israel Securities Authority, in respect of its proposed initial public offering of shares on the Tel Aviv Stock Exchange. If the offering is consummated, we will hold our medical and bio-tech holdings (InSightec - approximately 62%, and Gamida Cell - approximately 27%; both on a fully diluted basis) through Elbit Medical Ltd., which was formed as part of our ongoing restructuring and streamlining of business activities. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In April 2010, we, together with Park Plaza, acquired the Holiday Inn Schiphol Hotel located near the Amsterdam Schiphol Airport, for a purchase price of €30 million (approximately $40 million). The hotel is intended to operate under the "Park Plaza" brand name. For additional information, see “Item 4.B. Business Overview – Hotels – Recently Acquired Hotels.” |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On April 22, 2010, the U.S. Fund, a real estate investment venture jointly formed by Elbit Plaza USA and Eastgate entered into a series of agreements for investment in MDT, an Australian publicly traded trust, which holds and manages two U.S. REIT portfolios. For additional information, see “Item 4.B. Business Overview – Other Activities - Shopping and entertainment centers in the United States.” |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In March 2010 we issued unsecured non-convertible Series G Notes to investors in Israel in an aggregate principal amount of approximately NIS 100 million (approximately $26 million) for gross proceeds of approximately NIS 100 million (approximately $26 million). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On February 9, 2010, Elbit Plaza USA entered into the framework and co-investment agreement with Eastgate. For additional information, see “Item 4.B. Business Overview – Other Activities - Shopping and entertainment centers in the United States.” |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Effective as of January 1, 2010, we appointed Messrs. Ran Shtarkman and Dudi Machluf as our Co-Chief Executive Officers, replacing Mr. Shimon Yitzhaki, who was promoted to Chairman of the Board of Directors. Mr. Mordechay Zisser, our Executive Chairman of the Board, was appointed our Executive President and continues to serve on our board of directors. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Between January and March 2010, PC issued additional unsecured non-convertible Series B Notes to investors in Israel in an aggregate principal amount of approximately NIS 308 million (approximately $81.6 million) for gross proceeds of approximately NIS 330 million (approximately $87.4 million). |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In February 2010 we opened one GAP store. |
|--------|--------|-------------------------------------------|

|   | · | Between January and May 2010, we invested an aggregate of $0.46 million in our venture capital companies. |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

----

|   | · | In 2009 we issued additional unsecured non-convertible Series F Notes to investors in Israel in an aggregate principal amount of approximately NIS 141.6 million (approximately $37.5 million) for gross proceeds of approximately NIS 155.1 million (approximately $41 million). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In 2009 we issued Series 1 Convertible Notes to investors in Israel in an aggregate principal amount of approximately NIS 112 million (approximately $30 million) for net proceeds of approximately NIS 118.8 million (approximately $31.5 million). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In 2009 PC issued additional unsecured non-convertible Series B Notes to investors in Israel in an aggregate principal amount of approximately NIS 144.5 million (approximately $38.3 million) for net proceeds of approximately NIS 152 million. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On October 9, 2009, we sold 4,794,292 ordinary shares of PC to a number of Polish institutional investors, for an aggregate consideration of approximately £6.7 million (approximately $10.6 million). As result of this transaction, we generated a net cash flow of approximately £3.8 million (approximately $6.0 million). In addition, PC sold 14,500,000 of its shares to such Polish institutional investors, for an aggregate consideration of approximately £20.5 million (approximately $32.5 million).  As a result of this transaction, PC generated a net cash flow of approximately £12.8 million (approximately $20.3 million). These shares were originally purchased by PC as part of its share repurchase program announced in October 2008 which was executed between October 2008 and January 2009. Following these transactions we currently own approximately 68.3% of PC's share capital. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On June 19, 2009, we completed a private placement of approximately $7.6 million principal amount of our Series A Notes. These notes mature in 2014, are linked to the Israeli consumer price index and make semi-annual payments of principal and interest at the rate of 6% per annum, linked to the Israeli consumer price index. The notes were approved for listing on the Tel Aviv Stock Exchange, but initial re-sales are restricted by applicable securities laws until June 2011. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2009, we invested an aggregate amount of $15 million in Insightec, for which we were issued Series B Preferred Shares of Insightec. In addition, all the outstanding Series A Preferred shares of InSightec were converted into Series B Preferred shares, all convertible notes of InSightec were converted into Series B Preferred shares and all contingent warrants granted by InSightec were converted into ordinary shares. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In February 2009, Elbit Trade signed a franchise agreement with GAP Inc. to open and operate GAP and Banana Republic stores in Israel. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2009 we opened one additional G-STAR store and one GAP store. Our aggregate investment in such stores totaled approximately NIS 8 million (approximately $2.1 million). |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2009 we invested an aggregate of $1.5 million in our venture capital companies. |
|--------|--------|----------------------------------------------------------------------------------------|

----

|   | · | In 2008 PC issued additional unsecured non-convertible series B notes to investors in Israel in an aggregate principal amount of approximately NIS 798.5 million. These Series B Notes were listed for trade on the TASE and bear annual interest of 5.4%. In addition, in 2008 PC executed several cross currency interest rate swap transactions with Israeli banks in the total principal amount equal to the amount of the Series B Notes. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In 2008, we opened our 424 room Radisson Blu Bucharest Hotel, in Bucharest, Romania. Our Radisson Blu Bucharest Hotel is an integrated part of our Centerville complex. The hotel is managed by the Rezidor Hotel Group under the “Radisson Blu” brand name. During 2008 and through the opening of the Radisson Blu Bucharest Hotel, we have invested in this project a total of €20 million. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2008 the Radisson Blu Astrid Antwerp Hotel renovated its third floor to include 19 brand-new luxury apartment suites. Our investment in such renovation costs, including the rebranding of the hotel under the “Radisson Blu” brand, totaled €10 million. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In November 2008, PC bought the 50% interest of its joint venture partner in its Koregaon Park development, for a total consideration of approximately $20 million, which includes all of the cost invested by such partner. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In October 2008, we and PC commenced a share repurchase scheme of PC’s shares, through a series of on market purchases. As of December 31, 2008, we purchased PC’s shares for an amount of approximately €0.12 million and PC repurchased its shares for an amount of approximately €5.5 million. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In August 2008, we signed a joint venture agreement with PC, for the development of mixed-use projects in India. Under the agreement, PC acquired from us a 47.5% stake in our subsidiary EPI. Consideration for the 47.5% acquisition was approximately $126 million, reflecting 50% of loans and financing invested by us in respect of three mixed-use projects in India. For additional information on the three mixed-use projects, see “Item 4.B. Business Overview - Residential Projects.” |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In July 2008, PC completed the handover of Plzen Plaza to Klepierre SA, a leading French property group (“Klepierre”). Plzen Plaza Shopping and Entertainment Center is located in the city of Plzen, the Czech Republic, and was pre-sold to Klepierre in 2005. The asset value of the Plzen Plaza amounted to approximately €61.4 million and the cash consideration paid to PC amounted to €54.6 million. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In May 2008, the Dream Island consortium won, via a competitive tender, the first ever major casino license to be awarded in Hungary for its planned entertainment and mixed-use Dream Island Project, intended to be developed in central Budapest. The exclusive casino license has been granted for 20 years from the date of opening of the casino, with a ten-year extension option, during which time no further major casino licenses will be granted by the Hungarian government in the area of Budapest. The grant of this license will enable the consortium to commence construction of this major mixed-use project. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In March 2008, we entered into definitive agreements with one of the leading developers in Bangalore, India, for the joint development of the Bangalore Project. During 2008 we paid an amount of INR 284.8million in consideration of a 50% share of the first 54 Acres, and an amount of INR 2,536 million as an interest bearing advance payment on account of future acquisition of 50% of the next 51.6 acres, and all in addition to amounts paid in respect of this project in 2007. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In January 2008, PC entered into a joint venture partnership with BAS to develop residential and office projects in Romania. The newly established company, Plaza-Bas B.V. acquired the shares currently held by BAS in seven residential and office development projects. Plaza Bas is 50.1% owned by PC and the remaining 49.9% is owned by BAS. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In January 2008, we acquired the Park Inn Hotel in Antwerp, Belgium, for a purchase price (including certain acquisition expenses) of €4.7 million. During 2008 we completed the renovation and refurbishing of the hotel and in December 2008 it commenced its operation under the “Park Inn” brand name. Our additional investment in the renovation and refurbishing of the Park Inn Hotel totaled €5.3 million (approximately $7.4 million). |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2008, we opened seven additional MANGO stores and one additional G-STAR store. Our aggregate investment in such stores totaled approximately NIS 22.5 million (approximately $6 million). |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2008, we invested an aggregate of $1.6 million in our venture capital companies. |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | In 2008 we acquired an airplane to serve for our Indian operations. Acquisition costs amounted to $13.7 million. |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

----

|   | · | During 2007 we issued three series of unsecured non-convertible notes (Series D, E and F) in an aggregate principal amount of approximately NIS 1,034.2 million. The notes are linked to the increase in the Israeli consumer price index (the “CPI”). The notes were listed for trade on the TASE and bear annual interest of 5% to 6.3%. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2007 PC issued unsecured non-convertible Series A notes in an aggregate principal amount of approximately NIS 305 million. The notes were listed for trade on the TASE and bear annual interest of 4.5%. In addition, in 2007 PC had executed a cross currency interest rate swap transaction with an Israeli bank in a total principal amount equal to amount of the Series A Notes. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In December 2007, we entered into an agreement for the acquisition of an 80% stake in a joint venture company which will purchase up to 135 acres (approximately 546,000 square meters of land in Chennai (formerly Madras), India. For further information about this project, see "Item 4.B - Business Overview - Mixed-Use / Residential Projects - Chennai, Tamil Nadu State, India.” |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In December 2007, PC completed the sale of its Arena Plaza shopping and entertainment center in Budapest, Hungary, to United Kingdom based active Asset Investment Management ("aAIM"), with effect from November 30, 2007. The asset value at the closing was determined to be €381 million. The net cash consideration received by PC in January 2008 was €254.8 million. In addition, during 2008 PC received an additional cash consideration amounting to €5.6 million (approximately $7.8 million) from aAIM as a result of purchase price adjustments of the transaction. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In November 2007, InSightec completed an internal round of financing of $30 million from its existing investors. The investment is in the form of Series A Preferred convertible shares, which are convertible to InSightec’s ordinary shares subject to the fulfillment of certain conditions stipulated in the agreement. We invested $19.8 million in the Series A Preferred convertible shares. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In July 2007, the Lublin Plaza shopping and entertainment center in Lublin, Poland, in which PC holds a 50% stake, was sold to Klépierre. The asset value (100%) of the Lublin Plaza shopping and entertainment center totaled approximately €78 million. The net cash consideration received by PC in respect of its 50% holding was €27.3 million. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In July 2007, Elscint completed a transaction for the sale of the "Arena" shopping and entertainment center, located at the Herzliya Marina in Israel (“Arena Center”), pursuant to which, the buyer acquired all rights in and to the Arena Center reflecting an asset value of NIS 538 million. The net consideration received by us was NIS 335.2 million. Following purchase price adjustments, to be calculated based on Arena Center’s adjusted rent revenues (as this term is defined in the agreement) an additional amount may be paid to us. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In June 2007, Elscint completed a sale of its 50% interest in a company (“Andrassy”) which owns the building known as the “Ballet Institute Building” located in Budapest, Hungary. The net cash consideration was €29.8 million of which Elscint’s share was €14.9 million. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In June 2007, PC completed the sale of the Duna Plaza offices in Budapest, Hungary, to Klepierre for €14.2 million. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | In May 2007, PC completed the delivery of two shopping and entertainment centers in Poland, the Rybnik Plaza and the Sosnowiec Plaza to Klepierre, (see also "Item 10.C. Material Contracts - Shopping and Entertainment Centers" below), reflecting a total asset value of €89.3 million. The net cash consideration received by PC was €48.2 million. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In July 2007, we entered into an agreement with the Israel Land Administration, according to which we leased a plot of approximately 44,600 m2 in Tiberius, Israel for a term of 49 years (through 2056) with an option to extend the lease term for an additional 49 years. The total consideration paid for this land, on which we intend to construct a hotel, amounted to NIS 30.6 million. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In 2007, we paid an amount of INR 2,000 million as a refundable advance payment in respect of the Bangalore Project in India. For additional information, see "Item 4.B - Business Overview – Mixed-Use / Residential Projects - Bangalore, Karnataka State, India.” |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2007 we invested an amount of €21.7 million in the construction of the Radisson Blu Bucharest Hotel in Romania. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2007 we invested in our venture capital companies a total aggregate amount of $2.5 million. |
|--------|--------|----------------------------------------------------------------------------------------------------|

----

----

----

|   | · | Derivatives (mainly PC's swap transactions): interest rate yield curves of the adjusted NIS and Euro. |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | Embedded derivatives: the fair value of the underlying assets (i.e. our hotels in London); the expected volatility of the hotels; and the probability and the term for a “Transaction” (as defined in the relevant agreement) to occur. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Share based payment arrangements:  the share price in respect of option plans adopted by our private investees which has no quoted market price; the expected stock price volatility over the term of the option plans; and actual and projected employee stock option exercise behaviors. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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|                                                                                         |   | December 31                 |      |
|----------------------------------------------------------------------------------------------|--------|-----------------------------|-----------|
|                                                                                         |   | 2009                        |      |   | 2008 |   |   | 2007 |   |   | 2009 |   |
|                                                                                         |   |                        |      |   | Convenience translation |   |
|                                                                                         |   | (in NIS thousands)          |      |   | (in $ thousands) |   |
|                                                                                         |   | (Except for per-share data) |      |   |   |   |
|                                                                                         |   |                        |      |   |   |   |   |   |   |   |   |   |
| Revenues and gains                                                                           |   |                        |      |   |   |   |   |   |   |   |   |   |
| Commercial centers operation                                                                 |   |                        | 85,466    |   |   |   | 524,163 |   |   |   | 2,917,616 |   |   |   | 22,640 |   |
| Hotels operations and management                                                             |   |                        | 396,736   |   |   |   | 384,220 |   |   |   | 395,227 |   |   |   | 105,096 |   |
| Gains from sale of real estate assets                                                        |   |                        | -         |   |   |   | - |   |   |   | 62,621 |   |   |   | - |   |
| Sale of medical systems                                                                      |   |                        | 61,683    |   |   |   | 38,076 |   |   |   | 49,648 |   |   |   | 16,340 |   |
| Gains from change of shareholding in subsidiaries                                            |   |                        | 31,106    |   |   |   | 49,122 |   |   |   | 5,310 |   |   |   | 8,240 |   |
| Sale of fashion merchandise                                                                  |   |                        | 118,386   |   |   |   | 102,736 |   |   |   | 68,139 |   |   |   | 31,360 |   |
|                                                                                         |   |                        | 693,377   |   |   |   | 1,098,317 |   |   |   | 3,498,561 |   |   |   | 183,676 |   |
|                                                                                         |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses and losses                                                                          |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial centers                                                                           |   |                        | 169,253   |   |   |   | 432,760 |   |   |   | 1,714,253 |   |   |   | 44,835 |   |
| Hotels operations and management                                                             |   |                        | 353,229   |   |   |   | 354,850 |   |   |   | 330,063 |   |   |   | 93,571 |   |
| Cost and expenses of medical systems operation                                               |   |                        | 67,403    |   |   |   | 55,469 |   |   |   | 69,953 |   |   |   | 17,855 |   |
| Cost of fashion merchandise                                                                  |   |                        | 134,142   |   |   |   | 118,040 |   |   |   | 80,308 |   |   |   | 35,534 |   |
| Research and development expenses                                                            |   |                        | 73,959    |   |   |   | 68,759 |   |   |   | 69,559 |   |   |   | 19,592 |   |
| General and administrative expenses                                                          |   |                        | 66,153    |   |   |   | 54,944 |   |   |   | 116,992 |   |   |   | 17,524 |   |
| Share in losses  of associates, net                                                |   |                        | 14,039    |   |   |   | 12,952 |   |   |   | 12,667 |   |   |   | 3,719 |   |
| Financial expenses                                                                           |   |                        | 283,546   |   |   |   | 296,527 |   |   |   | 232,566 |   |   |   | 75,112 |   |
| Financial income                                                                             |   |                        | (92,725   | ) |   |   | (135,278 | ) |   |   | (73,293 | ) |   |   | (24,563 | ) |
| Change in fair value of financial instruments measured at fair value through profit and loss |   |                        | 70,702    |   |   |   | (225,244 | ) |   |   | (18,347 | ) |   |   | 18,729 |   |
| Impairment, charges and other expenses, net                                                  |   |                        | 260,225   |   |   |   | 68,797 |   |   |   | 38,233 |   |   |   | 68,934 |   |
|                                                                                         |   |                        | 1,399,926 |   |   |   | 1,102,576 |   |   |   | 2,572,954 |   |   |   | 370,842 |   |
|                                                                                         |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Profit (loss) before income taxes                                                            |   |                        | (706,549  | ) |   |   | (4,259 | ) |   |   | 925,607 |   |   |   | (187,166 | ) |
| Income taxes (tax benefit)                                                                   |   |                        | (35,571   | ) |   |   | 24,736 |   |   |   | 16,288 |   |   |   | (9,423 | ) |
|                                                                                         |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Profit (loss) from continuing operations                                                     |   |                        | (670,978  | ) |   |   | (28,995 | ) |   |   | 909,319 |   |   |   | (177,743 | ) |
| Profit from discontinued operation, net                                                 |   |                        | 16,550    |   |   |   | 4,934 |   |   |   | 10,289 |   |   |   | 4,384 |   |
|                                                                                         |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Profit (loss) for the year                                                                   |   |                        | (654,428  | ) |   |   | (24,061 | ) |   |   | 919,608 |   |   |   | (173,359 | ) |
|                                                                                         |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Attributable to:                                                                             |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity holders of the Company                                                                |   |                        | (533,269  | ) |   |   | (103,714 | ) |   |   | 539,749 |   |   |   | (141,263 | ) |
| Minority interest                                                                            |   |                        | (121,159  | ) |   |   | 79,653 |   |   |   | 379,859 |   |   |   | (32,096 | ) |
|                                                                                         |   |                        | (654,428  | ) |   |   | (24,061 | ) |   |   | 919,608 |   |   |   | (173,359 | ) |
|                                                                                         |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share - (in NIS)                                                                |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per share:                                                                    |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| From continuing operation                                                                    |   |                        | (21.60    | ) |   |   | (4.27 | ) |   |   | 20.80 |   |   |   | (5.72 | ) |
| From discontinued operation                                                                  |   |                        | 0.65      |   |   |   | 0.19 |   |   |   | 0.40 |   |   |   | 0.17 |   |
|                                                                                         |   |                        | (20.95    | ) |   |   | (4.08 | ) |   |   | 21.20 |   |   |   | (5.55 | ) |
|                                                                                         |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per share:                                                                  |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| From continuing operation                                                                    |   |                        | (21.62    | ) |   |   | (4.30 | ) |   |   | 20.18 |   |   |   | (5.73 | ) |
| From discontinued operation                                                                  |   |                        | 0.65      |   |   |   | 0.19 |   |   |   | 0.40 |   |   |   | 0.17 |   |
|                                                                                         |   |                        | (20.97    | ) |   |   | (4.11 | ) |   |   | 20.58 |   |   |   | (5.56 | ) |

----

|   | (i) | Revenues from the sale of trading property in the amount of NIS 439 million in 2008 compared to no such revenue in 2009. The revenues generated in 2008 were attributable to the sale of the Plzen Plaza commercial center in the Czech Republic in July 2008 and a price adjustment in respect of the sale of the Arena Plaza in Hungary which was sold at the end of 2007; and |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Revenues from the operations of shopping and entertainment centers in the amount of NIS 85 million ($23 million) in 2009 compared to NIS 85 million in 2008. The revenues in 2009 are attributable mainly to the operation of the Riga Plaza commercial center in Latvia and the Liberec Plaza commercial center in the Czech Republic as compared mainly to the operations of the Plzen Plaza commercial center in the Czech Republic in the first half of 2008. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | in the end of 2008 and the beginning of 2009, we and PC purchased PC's shares from PC’s minority shareholders. As result of these transactions, we recorded in 2008 and 2009 gains from the increase in shareholding of PC in the amount of NIS 49.1 million and NIS 63.6 million, respectively. In the fourth quarter of 2009, we and PC sold the shares and as a result we recorded a loss of NIS 44 million, which offset part of the gain we recorded in the beginning of 2009.  The total overall gain we generated from the purchase and sale of the PC shares in 2008 and 2009 amounted to NIS 69 million; and |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | in March 2009, we and the minority shareholders of Insightec converted Insightec's convertible notes into InSightec's preferred shares. As a result of the conversion, we recorded a gain of NIS 14.6 million, reflecting the change in our shareholding in InSightec. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (i) | the opening of the first GAP store in Israel; |
|--------|-----|-----------------------------------------------|

|   | (ii) | the full operation in 2009 of eight Mango stores which opened during 2008 as compared to only partial operation in 2008; |
|--------|------|--------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | (i) and (ii) above were offset by the decrease in sales of Mango’s existing stores during 2009, as compared to 2008. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------|

|   | (i) | In 2009 there was a decrease of NIS 2 million ($0.5 million) in cost of trading property sold compared to NIS 233 million in 2008. Such costs in 2008 are attributable to the sale of one commercial center (Plzen Plaza in the Czech Republic) as compared to no sales of commercial centers in 2009; and |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | a decrease in other operating expenses in respect of our commercial centers to NIS 167 million ($44 million) in 2009 from NIS 200 million in 2008. This decrease is mainly attributable to: (i) a decrease of NIS 20 million in share-based payment expenses in respect of PC's options plan adopted at the end of October 2006 mainly due to the cost recorded in 2008 as a result of re-pricing of options in PC; (ii) a decrease in employee and management salaries in the amount of NIS 8 million; (iii) a decrease in other expenses in the amount of NIS 16 million, of which NIS 15 million is attributable to the write off of deferred initiation expenses accrued in real estate projects in previous years for which PC has decided to cease its investment at the end of 2008.  The decrease is offset by an increase of NIS 12 million in the direct costs related to the operation of two commercial centers in 2009 as compared to one in 2008. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (i) | Total interest expenses in respect of our bank loans and notes issued (including linkage differences in respect of bonds which are linked to the Israeli consumer price index) amounted to NIS 430 million in 2009 compared to NIS 445 million in 2008. From these amounts we have capitalized financial costs to our real estate under construction and development in the amount of NIS 155 million and NIS 192 million in 2009 and 2008, respectively. Accordingly, the net financial expenses in respect of our borrowings which were recorded in our consolidated income statements amounted to NIS 275 million in 2009 compared to NIS 253 million in 2008. Such increase is attributable to (i) a decrease in capitalized financial costs in the amount of NIS 37 million; offset by; (ii) a 3.8% increase in the Israeli CPI, to which our notes are linked, in 2009 compared to a 4.51% increase in 2008, which resulted in a decrease of NIS 8 million; and (iii) a decrease of NIS 7 million in interest expenses as a result of a decrease in the interest rates on our loans. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | We recorded a loss from exchange rate differences in respect of our borrowings in the amount of NIS 2 million in 2009 compared to NIS 26 million in 2008. Such decrease is attributable mainly to a decrease in the devaluation of the Romanian Lei (the functional currency of our hotel in Romania) against the Euro and the U.S. dollar (the linkage currency of the bank loans provided to our subsidiaries in Romania); and |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Other financial expenses decreased to NIS 7 million in 2009 compared to NIS 15 million in 2008. |
|--------|-------|-------------------------------------------------------------------------------------------------|

|   | (i) | A decrease of NIS 59 million related to interest income from bank deposits from NIS 145 million in 2008 to NIS 86 million in 2009. Such decrease is attributable mainly to a decrease in our cash balances and to the decrease in the interest rate on such cash balances; and |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | We recorded a gain from exchange rate differences of NIS 7 million in 2009 compared to a loss from exchange rate differences of NIS 9 million in 2008. The gain in 2009 is mainly attributable to exchange differences from PC's deposits in different currencies than the EURO, the functional currency of PC (such as the Polish Zloty, Czech Koruna and U.S. dollar). The losses from exchange rate differences in 2008 are attributable mainly to a decrease in our cash and deposits linked to the U.S. dollar as a result of a devaluation of the NIS against the U.S. dollar. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Loss from change in fair value of financial instruments (measured at fair value through profit and loss (mainly PC's notes)) amounted to NIS 240 million ($63.6 million) in 2009 compared to a gain of NIS 170 million in 2008; |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (ii) | Profit from change in fair value of swap transactions executed by PC in respect of its notes amounted to NIS 73 million ($19.3 million) in 2009 compared to NIS 96 million in 2008; |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Profit from change in fair value of embedded derivatives related to our hotel segment was NIS 17 million ($4.5 million) in 2009 compared to NIS 3 million in 2008; and |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Profit from marketable securities amounted to NIS 79 million ($21 million) in 2009 compared to a loss of NIS 43 million in 2008. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Impairment of PC trading property in the amount of NIS 216 million ($57.2 million) which was affected by the real estate market conditions in Eastern Europe which was expressed by an increase in the sales yields and the expectations for decreases in rental income; |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Impairment loss in the amount of NIS 16 million ($4.2 million) attributable to property, plant and equipment (mainly hotels and other property); and |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Initiation expenses related to our activities in India in the amount of NIS 30 million ($8 million). |
|--------|-------|------------------------------------------------------------------------------------------------------|

|   | (i) | Revenues from the sale of trading property in the amount of NIS 439.3 million in 2008 compared to NIS 2,819.8 million in 2007. This decrease is attributable to the sale of one commercial center in 2008 (Plzen Plaza in the Czech Republic) compared to sale of four commercial centers in 2007 (Arena Plaza in Hungary, and Rybnik Plaza, Sosnowiec Plaza and Lublin Plaza in Poland); and |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (ii) | Revenues from the operations of shopping and entertainment centers in the amount of NIS 84.8 million in 2008 compared to NIS 97.8 million in 2007. This decrease is mainly attributable to the sale of the Arena Herzliya shopping and entertainment center in Israel in mid 2007, offset in part by an increase in entertainment operations within the commercial centers, and from the operations of the Plzen Plaza commercial center in the first half of 2008. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | A decrease in cost of trading property sold in 2008 in the amount of NIS 232.7 million in 2008 compared to NIS 1,492 million in 2007. Such costs in 2008 are attributable to the sale of one commercial center (Plzen Plaza in the Czech Republic) as compared to the sale of four commercial centers during 2007 (Arena Plaza in Hungary, and Rybnik Plaza, Sosnowiec Plaza and Lublin Plaza in Poland); and |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | A decrease in other operating expenses to NIS 200 million in 2008 from NIS 222.2 million in 2007. This decrease is mainly attributable to: (i) a decrease of NIS 9.1 million in direct costs related to the operations of the commercial centers, mainly attributable to the sale of the Arena Herzliya shopping and entertainment center in Israel in mid 2007; (ii) a decrease of NIS 7.8 million in share-based payment expenses in respect of PC's options plan adopted at the end of October 2006; (iii) a decrease in employees and management salaries of NIS 2.6 million; (iv) a decrease of NIS 14.6 million in depreciation expenses mainly attributable to the sale of the Arena Herzliya shopping and entertainment center in Israel in mid 2007. The decrease was offset by increases in other general and administrative expenses of NIS 17.2 million, of which NIS 15.6 million are attributable to write off of deferred initiation expenses accrued in real estate projects in previous years for which PC has decided to cease its investment at the end of 2008. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (i) | Total interest expenses in respect of our bank loans and notes issued (including linkage differences in respect of bonds which are linked to the Israeli CPI) amounted to NIS 444.8 million in 2008 compared to NIS 325.3 million in 2007. From these amounts we have capitalized financial costs attributed to our real estate under construction amounts of NIS 191.6 million and NIS 104.8 million in 2008 and 2007, respectively. Accordingly, the net financial expenses in respect of our borrowings which were recorded in our consolidated income statements, amounted to NIS 253.2 million in 2008 compared to NIS 220.5 million in 2007. Such Increase is attributable to (i) an increase in the notes raised by us and PC during 2008; (ii) a 4.51% increase in the Israeli CPI, to which our notes are linked, in 2008 compared to a 2.79% increase in 2007; and (iii) an increase in the scope of loans provided to our investees in the hotel segment. The increase was offset by an increase in capitalized financial costs as a result of an increase in our assets qualified for capitalization; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | We suffered a loss from exchange rate differences in respect of our borrowings of NIS 25.8 million in 2008 compared to NIS 1.3 million in 2007. The losses from exchange rate differences in 2008 and 2007 are attributable mainly to devaluation of the Romanian Lei (the functional currency of our hotel in Romania) against the Euro and the U.S. dollar (the linkage currency of the bank loans provided to our subsidiaries in Romania); and |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (iii) | Other financial expenses increased to NIS 15.0 million in 2008 compared to NIS 1.4 million in 2007. |
|--------|-------|-----------------------------------------------------------------------------------------------------|

|   | (i) | We incurred an increase of NIS 42.7 million from interest income from bank deposits of NIS 144.5 million in 2008 compared to NIS 101.8 million in 2007. Such increase is attributable mainly to the increase in our cash balances as a result of the sale of four commercial centers in 2007 (mainly from the sale of Arena Plaza in Hungary in the end of 2007) and an issuance of notes by us and PC in the beginning of 2008; and |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | We suffered a loss from exchange rate differences of NIS 9.2 million in 2008 compared to NIS 28.5 million in 2007. The losses from exchange rate differences in 2008 and 2007 are attributable mainly to decrease in our cash and deposits linked to the U.S. dollar as a result of a revaluation of the NIS against the U.S. dollar. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Income from change in fair value of financial instruments (measured at fair value through profit and loss) amounted to NIS 170 million in 2008 compared to a loss of NIS 17.3 million in 2007; and |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Income from change in fair value of swap transaction executed by PC in respect of its notes was NIS 95.6 million in 2008 compared to 12.5 million in 2007. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Impairment loss in the amount of NIS 50.6 million which is attributed to (i) impairment of property, plant and equipment (mainly hotels and other property) as well as our trading property and investment property in the amount of NIS 36.8 million; and (ii) provision for doubtful debts in the amount of NIS 13.8 million in respect of long term loans provided to third parties; |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Initiation expenses related to our activities in India in the amount of NIS 21.3 million; and |
|--------|------|-----------------------------------------------------------------------------------------------|

|   | (iii) | Income in the amount of NIS 7.0 million which is attributable to collection of doubtful debt from third parties. |
|--------|-------|------------------------------------------------------------------------------------------------------------------|

----

|   | (i) | Equity investments in our shopping and entertainment centers, our hotels and our residential projects, are constructed by our wholly owned and jointly, controlled subsidiaries (special purpose entities that are formed for the construction of our real estate projects (a “Project Company”)). We generally finance approximately 25%-30% of such projects through equity investments in the Project Companies, while the remaining 70%-75% is generally financed through a credit facility secured by a mortgage on the project constructed by the respective Project Company, registered in favor of the financial institution that provides such financing. The equity investments in the Project Companies are typically provided by us through shareholder loans that are subordinated to the credit facilities provided to the Project Company; |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Additional investments in InSightec, if necessary. InSightec’s capital resources are obtained primarily from additional investments in equity or in convertible notes by its shareholders and from its revenues from sales of medical systems. Such amounts are used for research and development activities aimed at obtaining FDA approvals for further treatments and other general corporate expenses such as cost of revenues, marketing and selling and general and administrative expenses; |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Additional investments in order to expand Elbit Trade’s operations by opening new Mango stores in Israel as well as to expand its activities in other brands, such as G-Star, GAP and Banana Republic; |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Additional investment in our associates (mainly venture capital investments); |
|--------|------|-------------------------------------------------------------------------------|

|   | (v) | Interest and principal payments on our notes and loans; and |
|--------|-----|-------------------------------------------------------------|

|   | (vi) | Payment of general and administrative expenses. |
|--------|------|-------------------------------------------------|

----

|   | · | During 2009 we issued unsecured non-convertible Series A Notes and Series F Notes to investors in Israel in an aggregate principal amount of approximately NIS 187 million. For interest rates and rating of our notes, see “ - Other Loans” below. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2009 we issued unsecured Series 1 Convertible Notes to investors in Israel in an aggregate principal amount of approximately NIS 112 million. For interest rates and rating of our notes, see “ - Other Loans” below. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In 2009 PC issued unsecured non-convertible Series B Notes to investors in Israel in an aggregate principal amount of approximately NIS 152 million. For interest rates and rating of PC's notes, see “ - Other Loans” below. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2009 PC signed several credit facility agreements with financial institutions in the total aggregate amount of €106 million. As of December 31, 2009, PC executed drawdowns from credit facilities in the amount of €44 million (of which €16 million was from the 2007 credit facility). |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In 2009 we and PC received proceeds from sales of derivatives in the amount of NIS 154 million. |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | In 2009 we and PC received proceeds from the sale of PC shares in the amount of NIS 162 million. |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · | During 2008 we raised a total of NIS 31 million aggregate principal amount of unsecured non-convertible Series F notes. For interest rates and rating our notes see “Other Loans” below. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In 2008 PC issued unsecured non-convertible series B notes to investors in Israel in an aggregate principal amount of approximately NIS 798.5 million. For interest rates, the rating of PC notes and other terms, see “Other Loans” below. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During 2008 PC signed several credit facility agreements with financial institutions in the total aggregate amount of €181 million. As of December 31, 2008, PC executed draw downs from such credit facilities in the amount of €80.6 million. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In July 2008, PC completed the handover of Plzen Plaza to Klepierre. The total consideration received from this sale by PC amounted to €54.6 million. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | During 2007 we raised a total of NIS 1,034.2 million aggregate principal amounts of unsecured non-convertible Series D through F Notes. For interest rates and rating of our notes see “ - Other Loans” below. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In 2007 PC issued unsecured non-convertible Series A Notes to investors in Israel in an aggregate principal amount of approximately NIS 305 million. For interest rates, the rating of PC notes and other terms, see “ - Other Loans” below. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In December 2007 PC completed the sale of the Arena Plaza shopping and entertainment center in Budapest to aAIM. The net cash consideration received by PC in January 2008 was €254.8 million. In addition, during 2008 PC received an additional cash consideration amounting to €5.6 million from aAIM as a result of purchase price adjustments of the transaction. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In November 2007, InSightec completed an internal round of financing of $30 million from its existing investors. The investment is in the form of Series A Preferred Shares. We invested $19.8 million in the Series A Preferred Shares. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In July 2007, PC sold its 50% stake in the Lublin Plaza project to Klepierre, The asset value (100%) of the Lublin Plaza at closing amounted to €78 million and the net cash consideration paid to PC amounted to €27.3 million. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In July 2007, Elscint completed the sale of the Arena Center located in the Herzliya Marina in Israel, pursuant to which, the buyer acquired all rights in and to the Arena Center reflecting an asset value of NIS 538 million. The net consideration received by us was NIS 335.2 million. Following purchase price adjustments, to be calculated based on Arena Center’s adjusted rent revenues (as this term is defined in the agreement), additional amounts may be paid to us. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In June 2007, Elscint completed a sale of its 50% interest in a company (“Andrassy”) which owns the building known as the “Ballet Institute Building” located in Budapest, Hungary. The net cash consideration was €29.8 million of which Elscint’s share was €14.9 million. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In May 2007, PC executed a transaction for the sale of the Duna Plaza offices ("DPO") in Budapest, Hungary, to Klepierre for a cash consideration of €14.2 million. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In May 2007, PC completed the delivery of two shopping and entertainment centers in Poland, the Rybnik Plaza and the Sosnowiec Plaza to Klepierre, reflecting a total asset value of €89.3 million. The net cash consideration received by PC was €48.2 million. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | At the end of 2008 and the beginning of 2009 we and PC purchased PC's shares from PC’s minority shareholders for a total consideration of NIS €12 million. Such shares were sold in October 2009 as described below. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In May 2008, PC distributed to its shareholders a dividend of €57 million ($83.8 million) out of which approximately €38.7 million was distributed to us and €18.2 million was distributed to PC's minority shareholders. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In June 2008, we distributed to our shareholders a dividend of NIS 168.0 million. |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | In April 2007, we distributed to our shareholders dividend of NIS 160.4 million. |
|--------|--------|----------------------------------------------------------------------------------|

----

|                                                |   | Year ended December 31,               |     |
|-----------------------------------------------------|--------|---------------------------------------|----------|
|                                                |   | 2009                                  |     |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                                                |   | Conveniencetranslation in $ thousands |     |   | NISThousands |   |   | NISThousands |   |   | NISThousands |   |
| Net cash provided by (used in) operating activities |   |                                  | (199,823 | ) |   |   | (754,331 | ) |   |   | 220,656 |   |   |   | (853,463 | ) |
| Net cash provided by (used in) investing activities |   |                                  | 57,043   |   |   |   | 215,335 |   |   |   | (825,046 | ) |   |   | (534,923 | ) |
| Net cash provided by financing activities           |   |                                  | 81,829   |   |   |   | 308,907 |   |   |   | 964,912 |   |   |   | 699,542 |   |
| Increase (decrease) in cash and cash equivalents    |   |                                  | (60,951  | ) |   |   | (230,089 | ) |   |   | 360,522 |   |   |   | (688,844 | ) |

|   | (i) | Cash flow from operating activities in 2009 included negative cash flow resulting from the cost of purchase of trading properties and payments on the account of trading properties of NIS 673.6 million. Most of the acquisitions and investments in trading properties in 2009 were: (i) Romania (the Casa Radio), Bulgaria (Sophia project), Poland, Czech Republic (Liberec project), Latvia (Riga project) and India (Bangalore, Koragon Park and Chennai projects); and (ii) the first time consolidation of the Obuda project in Hungary in mid 2009. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Cash flow from operating activities in 2008 included negative cash flow resulting from the cost of purchase of trading properties net of trading properties disposed of in the amount of NIS 826.4 million and payments on the account of purchase of trading properties of NIS 141.9 million in 2008. Most of the acquisitions and investments in trading properties in 2008 were in Romania (the Casa Radio and Plaza BAS projects), Serbia (Belgrade project), the Czech Republic (Liberec project), and India (Bangalore and Chennai projects). |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | During 2007 we completed several transaction for the sale of trading properties which generated revenues of NIS 2,820 million, however a significant part of the proceeds from such sales were collected by us in the beginning of 2008 (mainly the proceeds from the sale of the Arena Plaza shopping and entertainment center to aAIM which was collected in January 2008). Accordingly, our cash flow from operating activities in 2007 includes a significant increase in trade accounts receivable to NIS 1,442 million which caused negative cash flow from operations in 2007, however, in 2008 it positively contribute to cash flow from operations when the proceeds were actually collected. |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (iv) | Operating activities in 2009, 2008 and 2007 also included the proceeds from operations of our hotel, retail and image guided segments less operating expenses of those segments (including research and development expenses, sales and marketing and general and administrative expenses attributable directly to those segments) as well as general and administrative expenses of our headquarters. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Purchase of property, plant and equipment, investment property and other assets in the amount of NIS 107 million ($28 million) mainly attributable to the renovation of the Radisson Blu Bucharest Hotel in Romania, the  lease hold improvements of Elbit Trade’s new stores and our hospital and agriculture activities in India. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Proceeds from realization of property, plant and equipment, investments and loans in the amount of NIS 3 million. |
|--------|------|-------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Proceeds from long-term deposits and long-term loans in the amount of NIS 111 million mainly due to: (a) proceeds from realization of financial instrument by us in the amount of NIS 82 million; and (b) proceeds from realization of long term deposits by PC in the amount of NIS 28 million. |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Investments in long-term deposits and long term loans in the amount of NIS 11 million. |
|--------|------|----------------------------------------------------------------------------------------|

|   | (v) | Proceeds from interest received from deposits in the amount of NIS 91 million. |
|--------|-----|--------------------------------------------------------------------------------|

|   | (vi) | Sales of a subsidiary’s shares to such subsidiary’s minority shareholders in the amount of NIS 160 million which is attributable to the resale of PC shares by PC and us. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vii) | Purchase of minority shares in subsidiaries in the amount of NIS 44 million, mainly related to repurchase of PC shares by PC and us. |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | (viii) | Purchase of available for sale marketable securities net of proceeds from available for sale marketable securities amounted to NIS 24 million. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ix) | Proceeds from the sale of deposits and marketable securities in the amount of NIS 42 million executed by us. |
|--------|------|--------------------------------------------------------------------------------------------------------------|

|   | (i) | Investment in long-term deposits and long-term loans  in the amount of NIS 588 million mainly due to: (a) investments in financial notes by us and by PC in the amount of NIS 386 million; (b) Investment in long term deposits of NIS 181 million. Such deposits are used as a security for swap transactions executed by PC and for loans granted to us. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Purchase of property, plant and equipment, investment property and other assets in the amount of NIS 534.8 million mainly attributable to the renovation of the Radisson Blu Bucharest Hotel in Romania and acquisition of the land in the Bangalore project in India. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Proceeds from interest received from deposits in the amount of NIS 133.7 million. |
|--------|-------|-----------------------------------------------------------------------------------|

----

|   | (iv) | Purchase of minority shares in subsidiaries in the amount of NIS 51.3 million, mainly related to repurchase of PC shares in the market by PC. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | (v) | Proceeds from the sale of deposits and marketable securities in the amount of NIS 183.5 million executed by us. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------|

|   | (i) | Investment in a company that was initially consolidated in the amount of NIS 135.1 million in 2007 attributable to our investments in the Chennai Project in India. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Purchase of property, plants and equipment, investment property and other assets in 2007 in the amount of NIS 339 million mainly attributable to the renovation of the Radisson Blu Bucharest Hotel in Romania and the acquisition of the Kochi project in India.   |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Payment on account of land in 2007 in the amount of NIS 203 million related to an advance payment on account of the acquisition of land in the Bangalore project in India. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Purchase of deposits and marketable securities in 2007 in the amount of NIS 422.8 million executed by us in 2007. |
|--------|------|-------------------------------------------------------------------------------------------------------------------|

|   | (v) | Proceeds from realization of investments in subsidiaries of NIS 483.7 million in 2007 attributable mainly from the sale of the “Ballet Institute Building” located in Budapest, Hungary and the sale of the Arena Herzliya shopping and entertainment center located in Israel. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Interest paid in cash by us in the amount of NIS 320 million (approximately $85 million) on our borrowings (mainly notes issued by us and PC and loans provided to our hotels). |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Proceeds from borrowings, net, of repayment of loans in the amount of NIS 368 million (approximately $98 million), mainly attributable to the funds raised by PC and us from unsecured non-convertible and convertible notes issued during 2009. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Proceeds from short-term credit in the amount of NIS 272 million (approximately $72 million), mainly attributable to new loans raised by PC during 2009 in order to finance the construction of its trading property. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Repayment by us of short-term credit in the amount of NIS 83 million (approximately $22 million) related to financial instrument. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | (v) | Proceeds from selling derivatives in the amount of NIS 72 million (approximately $19 million). |
|--------|-----|------------------------------------------------------------------------------------------------|

----

|   | (i) | Proceeds from borrowings, net, of repayment of loans in the amount of NIS 1,034 million, mainly attributable to the funds raised by PC and us from unsecured non-convertible notes issued during 2008. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | A dividend payment by us to our shareholders in the amount of NIS 168 million. |
|--------|------|--------------------------------------------------------------------------------|

|   | (iii) | A dividend payment to minority shareholders of PC in the amount of NIS 97.8 million. |
|--------|-------|--------------------------------------------------------------------------------------|

|   | (iv) | Proceeds from short-term credit in the amount of NIS 526.7 million, mainly attributable to new loans raised by PC during 2008 in order to finance the construction of its trading property. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (v) | Interest paid in cash by us in the amount of NIS 333.3 million on our borrowings (mainly notes issued by us and PC and loans provided to our investees in the hotel segment). |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Proceeds from borrowings net of repayment of loans were NIS 1432.7 which are mainly attributable to the funds raised by us and PC from unsecured non-convertible notes issued during 2007. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | A dividend payment in 2007 of NIS 160.4 million. |
|--------|------|--------------------------------------------------|

|   | (iii) | Repayment of short-term credit in the amount of NIS 323.7 million mainly related to repayment of short-term credit as a result of disposal of PC's project companies during 2007. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                          |   | 2009        |   |   | 2008   |   |   | 2007        |   |
|-----------------------------------------------|--------|-------------|--------|--------|--------|--------|--------|-------------|--------|
|                                          |   | NIS million |   |   | %      |   |   | NIS million |   |   | % |   |   | NIS million |   |   | % |   |
| Current assets                                |   |        | 6,778  |   |   |   | 72.4   | %           |   |   | 6,077 | (*) |   |   | 70 | % |   |   | 5,808 | (*) |   |   | 68.6 | % |
| Current liabilities                           |   |        | 2,757  |   |   |   | 29.4   | %           |   |   | 2,019 | (*) |   |   | 23 | % |   |   | 935.3 |   |   |   | 11 | % |
| Non-current assets                            |   |        | 2,586  |   |   |   | 27.6   | %           |   |   | 2,615 | (*) |   |   | 30 | % |   |   | 2,639.3 | (*) |   |   | 31.2 | % |
| Non-current liabilities                       |   |        | 4,472  |   |   |   | 47.8   | %           |   |   | 4,235 | (*) |   |   | 48.7 | % |   |   | 4,283.3 |   |   |   | 50.7 | % |
| Shareholders’ equity:                   |   |        |   |   |   |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Attributable to equity holders of the Company |   |        | 940    |   |   |   | 10     | %           |   |   | 1,373.7 |   |   |   | 15.8 | % |   |   | 2,035.4 |   |   |   | 24 | % |
| Minority interest                             |   |        | 1,195  |   |   |   | 12.8   | %           |   |   | 1,064 |   |   |   | 12.2 | % |   |   | 1,193.6 |   |   |   | 14.1 | % |

----

----

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Original Amount                    | Amount Outstanding on Dec. 31, 2009 | Interest                                 | Payment Terms                                                                                                                            |
|----------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|-------------------------------------|------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------|
| EI                               | Series A Notes issued to the public                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | NIS 567.6 million + NIS 30 million | NIS 600 million                     | 6% per annum, linked to the Israeli CPI. | 10 semi-annual installments commencing August 2009 through 2014Interest payable by semi-annual installments commencing 2006 through 2014 |
| Principal Security and Covenants | Unsecured                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Other Information           | The notes are registered for trade on the TASE.The notes are not registered under the Securities Act.The notes were rated, as of December 31, 2009, by Midroog Ltd. an affiliate of Moody's Investors Services ("Midroog") at an A2/Stable rating and by Maalot, the Israel Securities Rating Company Ltd. an affiliate of Standard and Poors ("Maalot") at A/Stable rating, on a local scale.Events of default include, among others, the cross default with other series of notes and delisting from both the TASE and NASDAQ Global Select Market.In October 2008, our board of directors approved the repurchase of up to NIS 50 million of our series A through F Notes, to be made from time to time in the open market, privately negotiated transactions or a combination of the two. As at December 31, 2009,  no such repurchases were made. |

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Original Amount | Amount Outstanding on Dec. 31, 2009 | Interest      | Payment Terms                                                                                                                            |
|----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|-------------------------------------|---------------|------------------------------------------------------------------------------------------------------------------------------------------|
| EI                               | Series B Notes issued to the public                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $14.8 million   | $ 13.2 million                      | Libor + 2.65% | 10 semi-annual installments commencing August 2009 through 2014Interest payable by semi-annual installments commencing 2006 through 2014 |
| Principal Security and Covenants | Unsecured                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Other Information           | The Notes are registered for trade on the TASE.The notes are not registered under the Securities Act.The notes were rated, as of December 31, 2009, by Midroog at an A2/Stable rating and by Maalot, at A/Stable rating, on a local scale.Events of default include, among others, the cross default with other series of notes and delisting from both the TASE and NASDAQ Global Select Market. In October 2008, our board of directors approved the repurchase of up to NIS 50 million of our series A through F Notes, to be made from time to time in the open market, privately negotiated transactions or a combination of the two. As at December 31, 2009, no such repurchases were made. |

----

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Original Amount   | Amount Outstanding on Dec. 31, 2009 | Interest                                   | Payment Terms                                                                                                                          |
|----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|-------------------------------------|--------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|
| EI                               | Series C Notes issued to the public                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | NIS 458.6 million | NIS 447.2 million                   | 5.3% per annum, linked to the Israeli CPI. | 10 annual installments commencing September 2009 through 2018Interest payable by semi-annual installments commencing 2007 through 2014 |
| Principal Security and Covenants | Unsecured                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Other Information           | The Notes are registered for trade on the TASE.The notes are not registered under the Securities Act.The notes were rated, as of December 31, 2009, by Midroog at an A2/Stable rating and by Maalot, at A/Stable rating, on a local scale.Events of default include, among others, the cross default with other series of notes and delisting from both the TASE and NASDAQ Global Select Market. In October 2008, our board of directors approved the repurchase of up to NIS 50 million of our series A through F Notes, to be made from time to time in the open market, privately negotiated transactions or a combination of the two. As at December 31, 2009, no such repurchases were made. |

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Original Amount | Amount Outstanding on Dec. 31, 2009 | Interest                                       | Payment Terms                                                                                                                     |
|----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|-------------------------------------|------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|
| EI                          | Series D Notes issued to the public                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | NIS 620 million | NIS 698.8 million                   |  5% per annum, linked to the Israeli CPI. | 8 annual installments commencing April 2013 through 2020Interest payable by semi-annual installments commencing 2007 through 2020 |
| Principal Security and Covenants | Unsecured                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Other Information           | The Notes are registered for trade on the TASE.The notes are not registered under the Securities Act.The notes were rated, as of December 31, 2009, by Midroog at an A2/Stable rating and by Maalot, at A/Stable rating, on a local scale. Events of default include, among others, the cross default with other series of notes and delisting from both the TASE and NASDAQ Global Select Market.In October 2008, our board of directors approved the repurchase of up to NIS 50 million of our series A through F Notes, to be made from time to time in the open market, privately negotiated transactions or a combination of the two. As at December 31, 2009, no such repurchases were made. |

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| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Original Amount  | Amount Outstanding on Dec. 31, 2009 | Interest                                   | Payment Terms                                                                                                                     |
|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|-------------------------------------|--------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|
| EI                          | Series E Notes issued to the public                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | NIS 66.3 million | NIS 71.7 million                    | 6.3% per annum, linked to the Israeli CPI. | 10 annual installments commencing July 2012 through 2021Interest payable by semi-annual installments commencing 2007 through 2021 |
| Principal Security and Covenants | Unsecured                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Other Information           | The Notes are registered for trade on the TASE.The notes are not registered under the Securities Act.The notes were rated, as of December 31, 2009, by Midroog at an A2/Stable rating and by Maalot, at A/Stable rating, on a local scale.In October 2008, our board of directors approved the repurchase of up to NIS 50 million of our series A through F Notes, to be made from time to time in the open market, privately negotiated transactions or a combination of the two. As at December 31, 2009, no such repurchases were made. |

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Original Amount                                          | Amount Outstanding on Dec. 31, 2009 | Interest                                   | Payment Terms                                                                                                                       |
|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------|-------------------------------------|--------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|
| EI                          | Series F Notes issued to the public                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | NIS 336.2 million and NIS 30 million + NIS 141.6 million | NIS 549.5 million                   | 5.7% per annum, linked to the Israeli CPI. | 6 annual installments commencing October 2010 through 2015Interest payable by semi-annual installments commencing 2008 through 2015 |
| Principal Security and Covenants | Unsecured                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Other Information           | The Notes are registered for trade on the TASE.The notes are not registered under the Securities Act.The notes were rated, as of December 31, 2009, by Midroog at an A2/Stable rating and by Maalot, at A/Stable rating, on a local scale.In October 2008, our board of directors approved the repurchase of up to NIS 50 million of our series A through F Notes, to be made from time to time in the open market, privately negotiated transactions or a combination of the two. As at December 31, 2009, no such repurchases were made. |

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| Borrower                         | Lender                                                                                                                                                                       | Original Amount | Amount Outstanding on Dec. 31, 2009 | Interest         | Payment Terms                                                                    |
|----------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|-------------------------------------|------------------|----------------------------------------------------------------------------------|
| EI                          | Series 1 Convertible Notes issued to the public                                                                                                                              | NIS 112 million | NIS 99 million                      | 6.25% per annum. | First half to be paid on December 31, 2013, and second half on December 31, 2014 |
| Principal Security and Covenants | Unsecured.                                                                                                                                                                   |
| Other Information                |  The Series 1 Convertible Notes are convertible into our shares at the price of NIS 128 per share until July 31, 2013 and at the price of NIS 200 per share thereafter. |

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Original Amount                | Amount Outstanding on Dec. 31, 2009 | Interest      | Payment Terms                                                                                                                 |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|-------------------------------------|---------------|-------------------------------------------------------------------------------------------------------------------------------|
| EI                               | Bank Hapoalim B.M.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | €33.4 million$20 million | €33.4 million$20 million      | Libor + 1.75% | Loan for 10 years to be repaid by December 2012. Repayment is affected by semi-annual installments of principal and interest. |
| Principal Security and Covenants | Proceeds received from (i) public or private offerings of our securities (and/or of our subsidiaries financed by this loan); (ii) a business merger; (iii) realization of assets and/or investments; (iv) refinancing or any other receipt of capital by us (and/or our subsidiaries, as detailed above); - such proceeds, if in respect  will be used first to repay the loan;Net amounts received from realization of the shares of PC or its subsidiaries, by means of sale or issuance to a third party or the sale of a project owned thereby (in full or in part), will serve to repay those parts of the loan which were utilized to finance same investment;Part of the net amounts to be received from refinancing will be used initially for repayment of this loan, as long as the total balance of the loans exceeds $40 million.Maintain a minimum rate of Adjusted Shareholder’s Equity to Adjusted Balance Sheet Value.Net Operating Profit (before deductions for depreciation and amortization relating to net operating profit) shall be at each June 30 of every year no less than a prescribed amount.The above covenants do not apply in circumstances where (i) the net loan amount is less than $30 million; and (ii) the total amount outstanding under a loan granted by Bank Hapoalim to our parent company -Europe Israel - is less than $30 million; and (iii) no event of default has occurred under the loan agreement. |
| Other Information                | We are conducting negotiations with Bank Hapoalim with the view of mutually reschedule the rate and scope of repayments and the other terms of credit, and all following the transactions for the sale of shopping and entertainment centers, our issuance of Notes, and PC’s initial public offering of shares.Under our negotiations with the bank, we have agreed that, neither accelerated repayment nor compliance with financial covenants shall be required until January 1, 2011, save for the covenant in respect of the Adjusted Shareholder’s Equity over Adjusted Balance Sheet Value with which we comply. Also in accordance with the understanding with the bank, the latter will not demand payment of principal amounts under the loan agreement until January 1, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

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| Borrower                         | Lender                                                                 | Original Amount          | Amount Outstanding on Dec. 31, 2009 | Interest   | Payment Terms                        |
|----------------------------------|------------------------------------------------------------------------|--------------------------|-------------------------------------|------------|--------------------------------------|
| EI                               | Bank Leumi Le-Israel B.M.                                              | $19.1 million$11 million | $24.2 million (aggregate)           | Libor + 2% | Short term revolving credit facility |
| Principal Security and Covenants |                                                                   |
| Other Information                | Negative pledge provided in respect of the majority shares in Elscint. |

| Borrower                         | Lender                                               | Original Amount   | Amount Outstanding on Dec. 31, 2009 | Interest    | Payment Terms                             |
|----------------------------------|------------------------------------------------------|-------------------|-------------------------------------|-------------|-------------------------------------------|
| EUBV                             | BHF-Bank                                             | €15 million | €15 million                   |  1.76% | This loan was fully repaid in early 2010. |
| Principal Security and Covenants |                                                 |
| Other Information                | Loan was used for purchase of financial notes.  |

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                              | Original Amount | Amount Outstanding on Dec. 31, 2009 | Interest                                   | Payment Terms                                                                                                                                                                           |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|-------------------------------------|--------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| PC                          | Series A Notes issued to the public                                                                                                                                                                                                                                                                                                                                                                                                                 | NIS 305 million | NIS 323.1 million *                 | 4.5% per annum, linked to the Israeli CPI. | 8 equal annual installments commencing December 31, 2010 through December 31, 2017.Interest payable by semi-annual installments commencing 31 December, 2007 through 31 December, 2017. |
| Principal Security and Covenants | Unsecured                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Other Information                | The Notes have been registered for trade on the TASE.The Notes are not registered under the Securities Act.The notes were rated, as of December 31, 2009, at A2/Stable  by Midroog on a local scale, and ilA/Stable by Maalot on a local scale.* presented at fair value through profit and loss.PC has executed forward transactions with Israeli banks in order to hedge the currency risk associated with these NIS denominated notes. |

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| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Original Amount | Amount Outstanding on Dec. 31, 2009 | Interest                                  | Payment Terms                                                                                                                                          |
|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|-------------------------------------|-------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| PC                               | Series B Notes issued to the public                                                                                                                                                                                                                                                                                                                                                                                                                                      | NIS 943 million | NIS 1,021.8 million *               | 5.4% per annum, linked to the Israeli CPI | 5 equal annual installments commencing July 2011 through July 2015.Interest payable by semi-annual installments commencing July 2008 through July 2015 |
| Principal Security and Covenants | Unsecured                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Other Information                | The Notes have been registered for trade on the TASE.The Notes are not registered under the Securities Act.The notes were rated, as of December 31, 2009 at A2/Stable by Midroog on a local scale.* NIS 870.6 million are presented at fair value through profit and loss and NIS 151.2 million are presented at amortized cost.PC has executed forward transactions with Israeli banks in order to hedge the currency risk associated with these NIS denominated notes. |

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                  | Original Amount   | Amount Outstanding on Dec. 31, 2009 | Interest       | Payment Terms                                                           |
|----------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|-------------------------------------|----------------|-------------------------------------------------------------------------|
| PC                               | Merrill Lynch                                                                                                                                                                                                                                                                                                                                                           | €37 million | €36.2 million                 | Euribor + 0.4% | €26.2 million to be repaid in 2023 and €10 million in 2018. |
| Principal Security and Covenants | a pledge on financial notes and deposits.Comply with certain covenants stipulated in the loan agreement including a minimum value of collateral. Failing to comply with the said covenants shall oblige the borrower to provide an additional cash collateral. As of December 31, 2009, PC has provided the bank with additional cash collateral of €9.5 million. |
| Other Information                | Loan was used for purchase of financial notes.                                                                                                                                                                                                                                                                                                                          |

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| Borrower                         | Lender                                                                      | Original Amount  | Amount Outstanding on Dec. 31, 2009 | Interest       | Payment Terms              |
|----------------------------------|-----------------------------------------------------------------------------|------------------|-------------------------------------|----------------|----------------------------|
| PC                               | FIBI Bank                                                                   | €7 million | €7 million                    | Euribor + 0.5% | Revolving credit facility. |
| Principal Security and Covenants | Floating charge over PC’s assets with the bank, including securities. |
| Other Information                |                                                                        |

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Facility Amount     | Amount Outstanding on Dec. 31, 2009 | Interest       | Payment Terms                                                                                                            |
|----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------|----------------|--------------------------------------------------------------------------------------------------------------------------|
| Riga Plaza                       | MKB BANK ZRT, SEB UNIBANKA, AS “UNICREDIT BANK”                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | €36.4 million | €36.4 million                 | Euribor + 2.5% | Expires on 2014 June 30. Quarterly annuity payments calculated according to 25 years amortization, with balloon payment. |
| Principal Security and Covenants | registered first ranking mortgage on the real estate;assignment of all rights under relevant valid insurance policies;charges over each quota owned by PC in the borrower or share pledge agreement;assignment of all rights and claims under the construction agreements and construction warranties;first ranking pledges on the borrowers’ accounts;prompt collection right to debit any of the bank accounts of the borrower;corporate guarantee of PC to invest equity up to a prescribed debt service cover ratio, in the event Riga Plaza is not sold 6 months following opening or the proceeds of such sale do not cover the repayment of the loan balance; |
| Other Information                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

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| Borrower                         | Lender                                                                                                       | Original Amount *  | Amount Outstanding on Dec. 31, 2009 | Interest              | Payment Terms                                                   |
|----------------------------------|--------------------------------------------------------------------------------------------------------------|--------------------|-------------------------------------|-----------------------|-----------------------------------------------------------------|
| Sofia Plaza                      | Investec Bank                                                                                           | €8.2 million | €8.2 million                  | Euribor + 2.25%  | Only interest payments. Maturity of the loan is 26 April, 2011. |
| Principal Security and Covenants | registered first ranking mortgage on the real estate.first ranking pledges on the borrowers’ accounts. |
| Other Information                | * amounts represent our share in such loans.                                                                 |

| Borrower                         | Lender                                                                                                                               | Original Amount     | Amount Outstanding on Dec. 31, 2009 | Interest                          | Payment Terms                                                                                       |
|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------|-----------------------------------|-----------------------------------------------------------------------------------------------------|
| Airplane loan                    | GEFA Germany                                                                                                                    | €3.35 million | €3.0 million                  | USD Libor + 1.65% per annum  | Maturity of the loan is 5 March 2014, with a 75% balloon. Quarterly principle payments are $60,500. |
| Principal Security and Covenants | first priority aircraft mortgage entered onto the Hungarian Aircraft Register at the CAA, Budapest.assignment of insurance proceeds. |
| Other Information                | Loan serves to finance the purchase of a company airplane.                                                                           |

| Borrower                         | Lender                                                         | Original Amount     | Amount Outstanding on Dec. 31, 2009 | Interest          | Payment Terms                                                                     |
|----------------------------------|----------------------------------------------------------------|---------------------|-------------------------------------|-------------------|-----------------------------------------------------------------------------------|
| Koregaon Park                    | SBM, SBI, SBH (India)                                     | €32.8 million | €5.1 million                  | 12.25% p.a.  | Part of the loan is to be repaid by October 2010 with the rest due in March 2021. |
| Principal Security and Covenants |  assignment of insurance proceeds.                        |
| Other Information                | Corporate guarantee of owners.Pledge on assets of the company. |

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| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Facility amount     | Amount Outstanding on Dec. 31, 2009 | Interest                | Payment Terms                                                                                                            |
|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------|-------------------------|--------------------------------------------------------------------------------------------------------------------------|
| Liberec Plaza                    | MKB BANK Zrt., ERSTE Bank AG                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | €39.2 million | €38.0 million                 | Euribor+ 3.5% per annum | Expires on December 31, 2014. Quarterly repayments according to 20 years fully pay out amortisation, with bullet payment |
| Principal Security and Covenants | registered first ranking mortgage and purchase option right on the real estate;assignment of all rights under relevant valid insurance policies;share pledge agreement;assignment of all rights and claims under the construction agreements and construction warranties;first ranking pledges on the borrowers’ accounts;prompt collection right to debit any of the bank accounts of the borrower;completion guarantee of PC for the term of the constructionDebt service cover ratio as prescribed in the agreement.Corporate guarantee of PC for Debt Service. |
| Other Information                | On March 19, 2010, the project company entered into an amended agreement with the two banks and reduced the amount of the loan to below €25 million with an increased interest margin.                                                                                                                                                                                                                                                                                                                                                                             |

| Borrower                         | Lender                                                                  | Original Amount *                                                 | Amount Outstanding on Dec. 31, 2009                               | Interest                                                                 | Payment Terms                                                                                                                                                                                    |
|----------------------------------|-------------------------------------------------------------------------|-------------------------------------------------------------------|-------------------------------------------------------------------|--------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Plaza BAS                        | MKB Bank Zrt                                                       | A: €3.63 millionB: €0.7 millionC: €0.75 million | A: €3.63 millionB: €0.7 millionC: €0.75 million | A: Euribor + 4.5% per annumB: Euribor + 4.75% per annumC: Euribor + 2.5% | A:  October 2009;B: Repayment of 50% over a ten year period commencing June 30, 2010 and the remaining 50% at the end of such term.C: 24 months after the first drawdown of Facility B |
| Principal Security and Covenants | First ranking mortgage on the properties.Corporate guarantee of Owners. |
| Other Information                | * amounts represent PC’s share in such loans.                |

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| Borrower                         | Lender                                                | Original Amount                            | Amount Outstanding on Dec. 31, 2009       | Interest                            | Payment Terms                                                                 |
|----------------------------------|-------------------------------------------------------|--------------------------------------------|-------------------------------------------|-------------------------------------|-------------------------------------------------------------------------------|
| ProOne Kft (Buszesz Project)     | MKB Bank Zrt                                          | CHF 21 million (approximately $19 million) | CHF 21 million(approximately $19 million) | 3M CHF Libor + 1.9% per annum  | Expires May 31, 2010. Quarterly interest payments balloon payment at the end. |
| Principal Security and Covenants | Pledge on shares of borrower.Loan to value ratio 70%. |
| Other Information                | Currently being renegotiated.                         |

| Borrower                         | Lender                                                                                                                                                                                                                                                      | Original Amount                                | Amount Outstanding on Dec. 31, 2009            | Interest                                              | Payment Terms                                                                                                                                                           |
|----------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------|------------------------------------------------|-------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Dream Island 2004 Kft            | MKB Bank Zrt                                                                                                                                                                                                                                                | €54.1 million€5 millionFrame loans | I - €39.5 millionII - €3.2 million | 3M Euribor + 3 % per annum3M Euribor + 3.2% per annum | Expires December 31, 2010. Quarterly interest payments balloon payment at the end.II- Expires December 31, 2010. Quarterly interest payments balloon payment at the end |
| Principal Security and Covenants | First ranking mortgage on the property;Pledge on shares of borrower;Assignment of income;Recourse of  €10 million (PCNV owners guarantee);Floating charge over the assets;Assignment of insurance;Loan to value ratio 80%.                  |
| Other Information                | PC has committed to repay 43.5% of the outstanding part of the Alom Sziget bank loan in the amount of €21 million in case Alom Sziget fails to do so. See note 8C (i) to our annual consolidated financial statements included in this annual report. |

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| Borrower                         | Lender                                                                                                                                                                        | Original Amount                               | Amount Outstanding on Dec. 31, 2009        | Interest                                                 | Payment Terms                                                                                                                                    |
|----------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------|--------------------------------------------|----------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|
| Suwalki Plaza                    | ING Bank Hipoteczny S.A,ING Bank Slaski S.A                                                                                                                                   | I - €42.2 millionII - PLN 8.125 million | I - €6.4 millionII - PLN 3.9 million | Euribor + 1.8% per annumWIBOR (for PLN) + 1.5% per annum | Expires December 31, 2020. Quarterly payments with fixed principle amounts and €33.3 million balloon payment at the end.II- September 2010 |
| Principal Security and Covenants | First ranking mortgage on the property;Pledge on shares of borrower;Assignment of insurance;Cost overrun guarantee of PC up to 10% of construction costs;Loan to value ratio; |
| Other Information                |                                                                                                                                                                          |

| Borrower                         | Lender                                                                                                                                                                                                                             | Original Amount                              | Amount Outstanding on Dec. 31, 2009        | Interest                                                                                                                 | Payment Terms                                           |
|----------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------|--------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------|
| Zgorzelec Plaza                  | Bank Zachodni WBK S.A.                                                                                                                                                                                                             | I - €35.1 millionII - PLN 24.3 million | I - €7.9 millionII - PLN 2.6 million | I - Euribor + 2.75% per annum for construction period and Euribor + 2.5% per annum thereafterII - WIBOR (for PLN) + 1.6% | I - Expires December 31, 2016.II - End of construction. |
| Principal Security and Covenants | A first ranking mortgage on the property;Pledge on shares of borrower;Assignment of insurance;Completion and cost overrun guarantee of PC;Maintain a debt service cover ratio;Loan to construction cost ratio;Loan to value ratio. |
| Other Information                |                                                                                                                                                                                                                               |

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| Borrower                         | Lender                                                                                                                                                                                                      | Original Amount    | Amount Outstanding on Dec. 31, 2009 | Interest        | Payment Terms                                                                                                                                                                              |
|----------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|-------------------------------------|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Praha Plaza s.r.o                | Erste Bank AG                                                                                                                                                                                               | €7.5 million | €5.04 million                 | Euribor + 1.75% | Quarterly payments of €117,200, beginning on December 31, 2004. The remaining amount will be paid in one installment on December 31, 2016. Quarterly payment of interest until 2016. |
| Principal Security and Covenants | First ranking pre-emption right regarding the property.Pledge on shares of Borrower, on accounts, on receivables from the lease agreements.Assignment of insurance.Maintenance of Debt Service Cover Ratio. |
| Other Information                |                                                                                                                                                                                                        |

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Original Amount    | Amount Outstanding on Dec. 31, 2009 | Interest      | Payment Terms                                                                                                                                                                                                                                                                |
|----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|-------------------------------------|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Elscint Ltd.                     | Bank Hapoalim B.M.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | €9.6 million | €9.6 million                  | Libor + 1.75% | 50% to be paid on December 31, 2010 and 50% on December 31, 2015. The agreement also provides accelerated prepayment of the loan in the event that the subsidiaries financed by such loan were disposed of, merged, executed a refinancing agreement or an IPO and the like. |
| Principal Security and Covenants | Principal Security:First and second ranking pledges over certain shares of some of Elscint’s subsidiaries, within its hotel operations and Mango.Maintain a ratio of Adjusted Shareholder’s Equity to Adjusted Balance Sheet Value;Proceeds received from (i) public or private offerings of Elscint’s securities (and/or of its subsidiaries financed by this loan); (ii) a business merger; (iii) realization of assets and/or investments; (iv) refinancing or any other receipt of capital by Elscint (and/or its subsidiaries, as detailed above); - such proceeds will be used first to repay the loans; |
| Other Information           | Under negotiations with Bank Hapoalim regarding re-examination of certain terms of the loan, the bank has furnished Elscint, on December 31, 2009, with a waiver, valid through January 1, 2011, in respect of repayment of a principal amount of € 9.6 million subject to repayment of all interest payment, and compliance of financial covenants, save for the Adjusted Shareholder’s Equity over Adjusted Balance Sheet Value which Elscint maintains.                                                                                                                                                           |

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| Borrower                                                                                    | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Original Amount *  | Amount Outstanding on Dec. 31, 2009 * | Interest                                                                                 | Payment Terms                                                                                                                                                                                                                                       |
|---------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|---------------------------------------|------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Riverbank Hotel Holding BV; Victoria Hotel holding BV;  Grandis Hotel Holding BV; | Goldman Sachs International                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | ₤195 million | ₤185.4 million                  | Libor + 3%. The interest was fixed under a swap transaction at a rate of 7.72% per annum | 0.375% of the principal is payable in quarterly installments throughout a period of 4 years commencing May 2007 and the remaining principal is due in 2011. The borrowers have an option to extend the term by two years, subject to certain terms. |
| Principal Security and Covenants                                                            | First ranking mortgage over the properties; First ranking pledges over the entire share capital of the borrowers;First ranking pledges over any companies owned by the borrowers;An assignment of rent, insurance proceeds and the hedging agreements, as well as a fixed charge over specified bank accounts.Undertaking to maintain net operating income to debt service.Prohibition of dividend distribution.                                                                                                                                                                                                                                    |
| Other Information                                                                           | In the event of any cash distribution deriving from the sale, disposal or refinancing of the hotels, or upon repayment of the loan at the end of term, (transactions), the borrowers shall pay to the financing bank an amount equivalent to 15% of the difference between the market value of the hotels as determined in such transaction and the value of the hotels as agreed upon, as at the grant of the current loan;* our respective share in the such amount is 50%.For information regarding our compliance with financial covenants, see note 23E.(3)(ii) to our annual consolidated financial statements included in this annual report |

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| Borrower                                                             | Lender                                                                                                                                                                                                                                                                                                                                                               | Original Amount **                                          | Amount Outstanding on Dec. 31, 2009 **                       | Interest                                | Payment Terms                                                                                                                      |
|----------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------|--------------------------------------------------------------|-----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------|
| Victoria Hotel C.V., Utrecht Victoria Hotel B.V.Mandarin Hotel BV(*) | Aareal Bank                                                                                                                                                                                                                                                                                                                                                          | Victoria: €56.35 millionUtrecht: €13.7 million* | Victoria: €54.9.8 millionUtrecht: €13.3 million* | fixed interest rate of 5.266% per annum | Quarterly repayments of a gradually increasing amount, commencing March 2010 ending with a Bullet repayment on September 30, 2014. |
| Principal Security and Covenants                                     | Mortgage on both hotels.First ranking pledge on moveable assets, bank accounts, rights of the borrowers under their operating agreements and insurance receivables.First ranking pledge on shares of borrowers.                                                                                                                                                      |
| Other Information                                                    | * Mandarin Hotel is wholly owned by Park Plaza. Total amount of the loan granted to all three parties was €78 million. The parties have executed an internal reimbursement agreement for liabilities borne by the joint hotels in respect of that part of the loans attributed to Mandarin, and vice versa; ** our respective share in the such amounts is 50% |

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Original Amount   | Amount Outstanding on Dec. 31, 2009 * | Interest        | Payment Terms                                                        |
|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|---------------------------------------|-----------------|----------------------------------------------------------------------|
| Victoria Monument BV             | Bank Hapoalim B.M.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | €14 million | €14 million                     | Euribor + 2.25% | Revolving credit facility. Interest is payable on a quarterly basis. |
| Principal Security and Covenants | Fixed charge over account; Charge over the property; Charge over Purchase Agreement of the property; Charge over the shares held in the borrower; owners guarantee provided by us (in respect of our share in the property) and the partner;Each of the guarantors must beneficially own 50% of the share capital of the borrower.Prohibition on the distribution of dividends by the borrowers, in cash or in kind or making any other distribution without lender's prior consent. |
| Other Information                | * our respective share in the such amounts is 50%                                                                                                                                                                                                                                                                                                                                                                                                                                    |

| Borrower                         | Lender                                                                                                                                                                                                                                                                                                                                                                                                                      | Original Amount   | Amount Outstanding on Dec. 31, 2009 | Interest       | Payment Terms                                                                                                                                                                                         |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|-------------------------------------|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Bucuresti Turism SA              | Piraeus Bank                                                                                                                                                                                                                                                                                                                                                                                                                | €46 million | €44.7 million                 | Euribor + 3.5% | The loan is being repaid in 30 quarterly installments of €1.3 million each, commencing December 2009 and the last installment of €6.9 million.. Interest is payable on a quarterly basis. |
| Principal Security and Covenants | First rank mortgage on the Radisson Blu Bucharest Hotel and the Centerville Hotel;Future and existing cash flow through the bank accounts opened at Piraeus Bank;pledge of receivables arising from lease agreements and insurance policies concluded by the borrower;Cash deposit of approximately €0.5 million was deposited on March 31, 2009. Maintain a debt service cover ratio as prescribed in the agreement. |
| Other Information                | A guarantee from Elscint in maximum value of the total commitments plus any interest accruing and any other present and/or future debts relating the credit agreement.                                                                                                                                                                                                                                                      |

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|   Borrower                  | Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Original Amount     | Amount Outstanding on Dec. 31, 2009 | Interest        | Payment Terms                                                                                                                                                                                                                                                                   |
|----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|-------------------------------------|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Astrid Plaza Hotel NV            | Bank Hapoalim                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | €24.4 million | €21.25 million                | Euribor + 1.75% | Semi-annual principal repayment of €625,000 to be paid at the end of each 6 months commencing December 31, 2007 and ending on December 31, 2016;€12,500,000 to be paid at the end of the term (December 31, 2016);Interest is payable on a semi-annual basis.  |
| Principal Security and Covenants | First ranking share pledge on Astrid Plaza shares;First ranking mortgage over Astrid Plaza's real estate;A mortgage mandate over Astrid Plaza's real estate;First ranking pledge on a reserve fund of €1 million which is blocked on a deposit account;Debt Service Cover Ratio;The Revenue per Total Available Rooms at the hotel shall not be less than prescribed rates for 2008 and 2009. As of December 31, 2009, the borrower is not in compliance with this covenant and therefore the loan is presented as a short term loan. |
| Other Information                | We guaranty Astrid Plaza undertaking under the loan agreement. The guaranty is unlimited in amount.                                                                                                                                                                                                                                                                                                                                                                                                                                         |

| Borrower                                       | Lender                                                                                                                                                                                                                                                                                                                                                                        | Original Amount                          | Amount Outstanding on Dec. 31, 2009        | Interest         | Payment Terms                    |
|------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------|--------------------------------------------|------------------|----------------------------------|
| Astrid Plaza Hotel NV - for the Park Inn Hotel | Fortis Bank                                                                                                                                                                                                                                                                                                                                                                   | A: €4 millionB: €3.5 million | A: €3.9 millionB: €3.4 million | A: 5.56%B: 4.66% | Repayment over a 15 year period. |
| Principal Security and Covenants               | A first ranking mortgage on the Park Inn hotel and its assets;subordination of loan granted by us to the borrower and undertaking not to reduce such loan below a given amount;compliance with certain financial and operational covenants;undertaking to maintain an equity/asset ratio.We have furnished the bank with a guarantee up to the amount of €1.37 million. |
| Other Information                              |                                                                                                                                                                                                                                                                                                                                                                          |

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| Borrower                         | Lender                                                                                                                                                                       | Original Amount      | Amount Outstanding on Dec. 31, 2009 | Interest       | Payment Terms                        |
|----------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------|-------------------------------------|----------------|--------------------------------------|
| Elbit Trade & Retail Ltd.    | Bank Hapoalim                                                                                                                                                                |  NIS 33 million | NIS 31.6 million                    | Prime + 1.25 % | Revolving short-term credit facility |
| Principal Security and Covenants | Fixed mortgage on all Elbit Trade assets and a guaranty for the full amount from Elscint.                                                                                    |
| Other Information                | An additional Stand By Letter of Credit has been provided by the Bank to Elbit Trade in the amount of €3.7 million in order to secure payment to third party suppliers |

| Borrower                         | Lender                                                                                                                                                        | Original Amount | Amount Outstanding on Dec. 31, 2009 | Interest      | Payment Terms                        |
|----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|-------------------------------------|---------------|--------------------------------------|
| GB Brand Limited Partnership     | Bank Leumi                                                                                                                                                    | NIS 7.7 million | NIS 7.7 million                     | Prime + 0.3 % | Revolving short-term credit facility |
| Principal Security and Covenants | Fixed mortgage on all Elbit Trade assets and a guaranty for the full amount provided by us.                                                                   |
| Other Information                | An additional Stand By Letter of Credit has been provided by the Bank to GB in the amount of $3.8 million in order to secure payment to third party suppliers |

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|   | · | We furnished a local municipality a bank guarantee in an amount of approximately NIS 4.5 million to secure payment of certain land betterment tax by Marina Herzliya Limited Partnership Ltd. (a company controlled by Control Centers). Arbitration is currently being held as to such liability. We estimate that no significant costs will be incurred by us in respect of this guarantee. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | As part of the franchise and support agreements executed by our subsidiary, Elbit Trade with third parties, Elbit Trade has furnished such third parties with letters of credit in the aggregate amount of €6.4 million (approximately $9.2 million) in order to secure payments under the agreements. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | As part of a lease agreement executed in July 2007 between us and the Israel Land Administration for a long-term lease of land in Tiberius, Israel, we have provided the Israel Land Administration with two bank guarantees in the aggregate amount of NIS 10 million linked to the increase in the Israeli consumer price index in order to secure our undertakings included in the lease agreement. As a security for the guarantees, we pledged deposits in the same amount. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | As part of the transactions for the sale of our real estate assets, we have undertaken to indemnify the respective purchasers for any losses and costs incurred in connection with the sale transactions. The indemnification provisions usually include: (i) indemnifications in respect of integrity of title on the assets and/or the shares sold (i.e.: that the assets and/or the shares are wholly owned and are free and clear from any encumbrances and/or mortgage and the like). Such indemnification generally survives indefinitely and is capped at the purchase price in each respective transaction; and (ii) indemnifications in respect of other representations and warranties included in such sale agreements (e.g.: development of the project, responsibility for defects in the development project, tax matters and others). Such indemnifications are limited in time (generally three years from closing) and is generally capped at 25% to 50% of the purchase price. Our management estimates, based, inter alia, on a professional opinion and past experience, that no significant costs will be borne in respect of these indemnification provisions. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A former subsidiary of PC incorporated in Prague ("Bestes"), which was sold in June 2006 is a party to an agreement with a third party ("Lessee"), for the lease of commercial areas in a center constructed on property owned by it, for a period of 30 years, with an option to extend the lease period by an additional 30 years, in consideration for €6.9 million (approximately $9.6 million), which has been fully paid. According to the lease agreement, the Lessee has the right to terminate the lease, subject to fulfillment of certain conditions set forth in the agreement. As part of the agreement for the sale of Bestes to Klepierre in June 2006, it was agreed that PC will remain liable to Klepierre in case the Lessee terminates its contract. PC’s management believes that this commitment will not result in any material amount due to be paid by it. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                       |   | Payments due by Period(in NIS millions) |      |
|------------------------------------------------------------|--------|-----------------------------------------|-----------|
| Contractual Obligations as of December 31, 2009            |   | Total                                   |      |   | Less than 1 Year |   |   | 2-3 Years |   |   | 4-5 Years |   |   | After 5 Years |   |
| Long-Term Debt (1)                                         |   |                                    | 7,433,661 |   |   |   | 1,591,781 |   |   |   | 1,862,961 |   |   |   | 2,152,442 |   |   |   | 1,826,477 |   |
| Capital (Finance) Leases                                   |   |                                    | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Operating Leases (2)                                       |   |                                    | 794,560   |   |   |   | 39,740 |   |   |   | 78,383 |   |   |   | 70,411 |   |   |   | 606,025 |   |
| Purchase Obligations and Commitments (3)                   |   |                                    | 1,308,366 |   |   |   | 553,529 |   |   |   | 310,740 |   |   |   | 224,691 |   |   |   | 219,406 |   |
| Other Long-term Liabilities Reflected on Balance Sheet (4) |   |                                    | 96,686    |   |   |   | - |   |   |   | 74,863 |   |   |   | 12,429 |   |   |   | 9,393 |   |
| Total                                                      |   |                                    | 9,633,272 |   |   |   | 2,185,049 |   |   |   | 2,326,947 |   |   |   | 2,459,974 |   |   |   | 2,661,302 |   |

| (1) | Long term debt includes interest that we will pay from January 1, 2010 through the loan maturity dates. Part of our loans bear variable interest rates and the interest presented in this table is based on the LIBOR rates known as of December 31, 2009. Actual payments of such interest (as presented in our financial statements) are significantly dependent upon the LIBOR rate prevailing as of the date of payment of such interest. For additional information in respect of the long term debt, see “Item 5.B. Liquidity and Capital Resources - Other Loans." |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Our operating lease obligations are subject to periodic adjustment of the lease payments as stipulated in the agreements. In this table we included the lease obligation based on the most recent available information. For additional information in respect of our operating lease obligations see note 14B to our annual consolidated financial statements included in this annual report. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Includes mainly commitments for construction suppliers and subcontractors and amount payable to third parties in respect of land acquisitions. Such obligation were not recorded as liabilities in the balance sheet, since, as of the balance sheet date, the construction services were not yet provided and/or certain conditions precedent for the plot acquisitions have not yet been fulfilled. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Includes (i) fair value of royalty payments that InSightec may have to pay to the OCS. InSightec partially finances its research and development expenditures under programs sponsored by the OCS for the support of research and development activities conducted in Israel. In exchange for OCS participation in the programs, InSightec is obligated to pay 3.5% of total sales of products developed within the framework of these programs. At the time the OCS grants were received, successful development of the related projects was not assured. The obligation to pay these royalties is contingent on actual sales of the products; (ii) fair value of hedging transactions in respect of interest rates on long term loans; and (iii) fair value of the exit fee payable in certain events to a financial institution within the framework of long term credit facilities provided to our jointly controlled companies in the United Kingdom (see also “Item 5.B. Liquidity and Capital Resources - Other Loans"). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

| NAME                        | AGE | POSITION                                                       |
|-----------------------------|-----|----------------------------------------------------------------|
| Mordechay Zisser (1) (3)    | 55  | Executive President and Director                               |
| Shimon Yitzhaki (1) (3)     | 55  | Executive Chairman of the board of directors and Director      |
| Abraham (Rami) Goren        | 50  | Executive Vice Chairman of the board of directors and Director |
| David Rubner (2)            | 70  | Director                                                       |
| Zvi Tropp (1) (2) (3)       | 70  | External Director                                              |
| Moshe Lion                  | 49  | Director                                                       |
| Shmuel Peretz               | 70  | Director                                                       |
| Elina Frenkel Ronen (1) (2) | 36  | External Director                                              |
| Dudi Machluf                | 38  | co-CEO                                                         |
| Ran Shtarkman               | 42  | co-CEO and CEO of PC                                           |
| Doron Moshe                 | 39  | Chief Financial Officer                                        |
| Zvi Maayan                  | 42  | General Counsel                                                |

| (1) | Member of the donation committee |
|-----|----------------------------------|

| (2) | Member of the audit committee |
|-----|-------------------------------|

| (3) | Member of the investment committee |
|-----|------------------------------------|

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|   | · | For options granted prior to, or within 90 days of, EML’s public offering – the exercise price will be determined by the price resulting from the tender conducted as part of EML's public offering; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | For options granted thereafter – the exercise price will be the average of the closing price of EML’s shares in the Tel Aviv Stock Exchange during the 30 trading days preceding the date of grant. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

| Name and Address                                                             |   | Number of Shares |       |   | Percent of Shares Beneficially Owned (1) |   |
|------------------------------------------------------------------------------|--------|------------------|------------|--------|------------------------------------------|--------|
| Mordechay Zisser (2)                                                         |   |             | 12,623,832 | (3)    |                                     |   | 49.55 | % |
| Europe-Israel (M.M.S.) Ltd. (4)                                              |   |             | 12,154,392 |   |                                     |   | 47.71 | % |
| The Phoenix Holding Ltd. and Excellence Investments Ltd.                     |   |             | 2,109,997  | (5)    |                                     |   | 8.29 | % |
| All officers and directors of the Company as a group (10  persons) |   |             | 12,938,429 | (6)    |                                     |   | 50.79 | % |

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| (1) | The number of shares and percentages of ownership are based on our shares outstanding as of March 31, 2010. Such number excludes 2,800,000 treasury shares. Beneficial ownership is determined in accordance with the rules of the SEC based on voting and investment power with respect to such ordinary shares. Shares subject to options that are currently exercisable or exercisable within 60 days of March 31, 2010 are deemed to be outstanding and to be beneficially owned by the person holding such options for the purpose of computing the percentage ownership of such person, but are not deemed to be outstanding and to be beneficially owned for the purpose of computing the percentage ownership of any other person. All information with respect to the beneficial ownership of any principal shareholder has been furnished by such shareholder or is based on the most recent Schedule 13D or 13G filed with the SEC and, unless otherwise indicated below, we believe that persons named in the table have sole voting and sole investment power with respect to all the shares shown as beneficially owned, subject to community property laws, where applicable. The shares beneficially owned by our directors include shares owned by their family members, as to which such directors disclaim beneficial ownership.  The information regarding the beneficial ownership of Europe-Israel and of Mr. Zisser is based on a Schedule 13D filed by them on January 10, 2008 and on information furnished by them to the Company. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Mr. Zisser is considered our indirect controlling shareholder by virtue of his control of Europe-Israel and serves as our Executive President and as a director. See footnote 4 below. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Includes (i) 12,154,392 of our shares held by Europe-Israel, which may be deemed to be beneficially owned by Mr. Mordechay Zisser, our Executive President and a director, by virtue of his control of Europe-Israel; (ii) 24,837 of our Shares held by Marina Herzelia (Limited Partnership) 1988, which may be deemed to be beneficially owned by Mr. Mordechay Zisser, by virtue of his control of Control Centers Ltd., which wholly owns Marina Herzliya (Limited Partnership) 1988; and (iii) 444,603 shares held by Mr. Zisser. See footnote 4 below. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Europe-Israel is an Israeli corporation wholly-owned by Control Centers, a private company controlled by Mr. Mordechay Zisser. |
|-----|--------------------------------------------------------------------------------------------------------------------------------|

| (5) | Includes shares held for members of the public through, among others, provident funds, pension funds and mutual funds, which are managed by subsidiaries of Excellence Investments Ltd. ("Excellence") or The Phoenix Holdings Ltd. ("Phoenix"), according to the following segmentation: (i) 160,330 shares held by provident funds and pension funds of Excellence; (ii) 251,530 shares held by mutual funds of Excellence; (iii) 461,324 shares held by other investment vehicles of Excellence; (iv) 44,702 shares held by provident funds and pension funds of Phoenix; and (v) 1,192,110 shares held by profit participating life assurance accounts of Phoenix. The information regarding the holdings of Phoenix and Excellence is based on a form of ownership report dated March 23, 2010, provided to us by Phoenix and Excellence, that it uses to report holdings under Israeli law.  The method used to compute holdings under Israeli law does not necessarily bear the same result as the method used to compute beneficial ownership under SEC rules and regulations. Phoenix and Excellence are controlled by the Delek Group and Mr. Yitzhak Tshuva. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Includes: (i) 12,154,392 shares held by Europe-Israel, which may be deemed to be beneficially owned by Mr. Mordechay Zisser, (see footnote 4 above); (ii) 24,837 shares held by Marina Herzelia (Limited Partnership) 1988; (iii) 444,603 shares held by Mr. Zisser; (iv) 47,700 shares underlying options granted to our other directors and officers pursuant to our 2001 Employees, Directors and Officers Incentive Plan; and (v) 685,000 options exercisable into 266,897 shares as of March 31, 2010 and vesting within 60 days thereafter granted to our other directors and officers pursuant to our 2006 Employees, Directors and Officers Incentive Plan. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM 8.  FINANCIAL INFORMATION

ITEM 9.  THE OFFER AND LISTING

|                    |   | NASDAQ   |   |   | TASE    |   |
|-------------------------|--------|----------|--------|--------|---------|--------|
| Year Ended December 31, |   | High ($) |   |   | Low ($) |   |   | High ($) |   |   | Low ($) |   |
| 2009                    |   |     | 28.09  |   |    |   | 9.3 |   |   |   | 28.75 |   |   |   | 10.03 |   |
| 2008                    |   |     | 56.09  |   |    |   | 7.58 |   |   |   | 56.55 |   |   |   | 7.1 |   |
| 2007                    |   |     | 57.43  |   |    |   | 31.30 |   |   |   | 58.51 |   |   |   | 33.16 |   |
| 2006                    |   |     | 34.54  |   |    |   | 15.28 |   |   |   | 34.82 |   |   |   | 15.37 |   |
| 2005                    |   |     | 19.54  |   |    |   | 8.9 |   |   |   | 19.18 |   |   |   | 9.01 |   |

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|              |   | NASDAQ   |   |   | TASE    |   |
|-------------------|--------|----------|--------|--------|---------|--------|
| Financial Quarter |   | High ($) |   |   | Low ($) |   |   | High ($) |   |   | Low ($) |   |
|              |   |     |   |   |    |   |   |   |   |   |   |   |
| 2010              |   |     |   |   |    |   |   |   |   |   |   |   |
| Q1                |   |     | 24.76  |   |    |   | 21.91 |   |   |   | 22.21 |   |   |   | 19.32 |   |
|              |   |     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| 2009              |   |     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Q1                |   |     | 15.02  |   |    |   | 9.3 |   |   |   | 14.9 |   |   |   | 9.77 |   |
| Q2                |   |     | 22.43  |   |    |   | 15.24 |   |   |   | 22.24 |   |   |   | 16.21 |   |
| Q3                |   |     | 28.09  |   |    |   | 18.87 |   |   |   | 28.95 |   |   |   | 20.04 |   |
| Q4                |   |     | 26.68  |   |    |   | 20.05 |   |   |   | 25.94 |   |   |   | 20.54 |   |
|              |   |     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| 2008              |   |     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Q1                |   |     | 52.54  |   |    |   | 36.63 |   |   |   | 56.55 |   |   |   | 37.87 |   |
| Q2                |   |     | 56.09  |   |    |   | 40.01 |   |   |   | 56.1 |   |   |   | 41.83 |   |
| Q3                |   |     | 42.94  |   |    |   | 16.38 |   |   |   | 39.74 |   |   |   | 16.19 |   |
| Q4                |   |     | 19     |   |    |   | 7.58 |   |   |   | 15.64 |   |   |   | 7.1 |   |

|          |   | NASDAQ   |   |   | TASE    |   |
|---------------|--------|----------|--------|--------|---------|--------|
| Month         |   | High ($) |   |   | Low ($) |   |   | High ($) |   |   | Low ($) |   |
|          |   |     |   |   |    |   |   |   |   |   |   |   |
| April 2010    |   |     | 22.88  |   |    |   | 20.89 |   |   |   | 22.34 |   |   |   | 21.33 |   |
| March 2010    |   |     | 24.25  |   |    |   | 22.53 |   |   |   | 22.21 |   |   |   | 19.32 |   |
| February 2010 |   |     | 24.76  |   |    |   | 22.71 |   |   |   | 24.82 |   |   |   | 22.37 |   |
| January 2010  |   |     | 23.77  |   |    |   | 21.91 |   |   |   | 23.75 |   |   |   | 21.88 |   |
| December 2009 |   |     | 23.9   |   |    |   | 20.05 |   |   |   | 23.19 |   |   |   | 20.54 |   |
| November 2009 |   |     | 25.25  |   |    |   | 22.71 |   |   |   | 25.03 |   |   |   | 22.46 |   |

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ITEM 10.  ADDITIONAL INFORMATION

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|   | · | the securities issued amount to 20% or more of the company’s outstanding voting rights before the issuance; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|

|   | · | the transaction will increase the relative holdings of a shareholder that holds 5% or more of the company’s outstanding share capital or voting rights or that will cause any person to become, as a result of the issuance, a holder of more than 5% of the company’s outstanding share capital or voting rights. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | refrain from any conflict of interest between the performance of his duties for the company and the performance of his other duties or his personal affairs |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | refrain from any activity that is competitive with the company; |
|--------|--------|-----------------------------------------------------------------|

|   | · | refrain from exploiting any business opportunity of the company to receive a personal gain for himself or others; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | · | disclose to the company any information or documents relating to a company’s affairs which the director or officer has received due to his position as such. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (ii) | A breach of the duty of loyalty via-a-vis us, provided that the director or officer acted in good faith and had reasonable basis to believe that the act would not harm us; |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | Any other matter in respect of which it is permitted or will be permitted under applicable law to insure the liability of our directors or officers. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Any financial liability he incurs or imposed on him in favor of another person in accordance with a judgment, including a judgment given in a settlement or a judgment of an arbitrator, approved by a court, provided that any undertaking to indemnify be restricted to events that, in the opinion of the board of directors, are anticipated in light of our actual activity at the time of granting the undertaking to indemnify and be limited to a sum or measurement determined by the board of directors to be reasonable under the circumstances; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Reasonable litigation expenses, including legal fees, incurred by the director or officer or which he was ordered to pay by a court, within the framework of proceedings filed against him by or on behalf of us, or by a third party, or in a criminal proceeding in which he was acquitted, or in a criminal proceeding in which he was convicted of a felony which does not require a criminal intent; and |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Reasonable litigation expenses, including legal fees he incurs due to an investigation or proceeding conducted against him by an authority authorized to conduct such an investigation or proceeding, and which was ended without filing an indictment against him and without being subject to a financial obligation as a substitute for a criminal proceeding, or that was ended without filing an indictment against him, but with the imposition of a financial obligation, as a substitute for a criminal proceeding relating to an offense which does not require criminal intent. |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (i) | a breach of the duty of loyalty to the company, unless, with respect to insurance coverage or indemnification, the the director or officer acted in good faith and had a reasonable basis to believe that the act would not harm us; |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | an intentional or reckless breach of the duty of care; |
|--------|------|--------------------------------------------------------|

|   | (iii) | an act done with the intention of unduly deriving a personal profit; or |
|--------|-------|-------------------------------------------------------------------------|

|   | (iv) | a fine imposed on the officer or director. |
|--------|------|--------------------------------------------|

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|   | · | an individual citizen or resident of the U.S. for U.S. federal income tax purposes; |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | a corporation (or another entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any political subdivision thereof or the District of Columbia; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an estate, the income of which may be included in the gross income for U.S. federal income tax purposes regardless of its source; or |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a trust if, in general, (i) a U.S. court is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or (ii) that has in effect a valid election under applicable U.S. Treasury Regulations to be treated as a U.S. person. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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|                         | Functional currency |   | Linkage currency |   | Change in the exchange rate (%) |   |   | Profit (loss) |   |
|------------------------------|---------------------|--------|------------------|--------|---------------------------------|--------|--------|---------------|--------|
|                         | (in NIS thousands)  |   |
|                         |                |   |             |   |                            |   |   |          |   |
| Financial assets             |                |   |             |   |                            |   |   |          |   |
| Cash and deposits            | NIS                 |   | U.S. dollar      |   |                            | +10    | %      |          |   | 9,807 |   |
| Cash and deposits            | Euro                |   | PLN              |   |                            | +10    | %      |          |   | 4,757 |   |
| Cash and deposits            | NIS                 |   | Euro             |   |                            | +10    | %      |          |   | 22,320 |   |
|                         |                |   |             |   |                            |   |   |          |   | 36,884 |   |
|                         |                |   |             |   |                            |   |   |          |   |   |   |
| Financial Liablities         |                |   |             |   |                            |   |   |          |   |   |   |
| Loans at amortized cost      | NIS                 |   | U.S. dollar      |   |                            | +10    | %      |          |   | (16,702 | ) |
| Loans at amortized cost      | NIS                 |   | Euro             |   |                            | +10    | %      |          |   | (23,367 | )(*) |
| Debentures at amortized cost | NIS                 |   | U.S. dollar      |   |                            | +10    | %      |          |   | (4,984 | ) |
| Debentures at amortized cost | Euro                |   | NIS              |   |                            | +10    | %      |          |   | (15,123 | )(**) |
| Loans at amortized cost      | RON                 |   | Euro             |   |                            | +10    | %      |          |   | (24,323 | ) |
| Loans at amortized cost      | Euro                |   | CHF              |   |                            | +10    | %      |          |   | (1,929 | ) |
|                         |                |   |             |   |                            |   |   |          |   | (86,428 | ) |

|   | (*) | The effect of the exchange rates result in respect of these financial liabilities will be offset against the exchange rate resulting from investments in foreign operations which have the same functional currency. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (**) | In respect of PC’s Series B Notes which are represented as amortized cost. |
|--------|------|----------------------------------------------------------------------------------|

----

----

|                                      |   | Scope ofPrice change |   |   | Profit (loss) |   |
|-------------------------------------------|--------|----------------------|--------|--------|---------------|--------|
|                                      |   | %                    |   |   | NIS thousands |   |
| Exchange rate of the Euro against the NIS |   |                 | +12.27 | %      |          |   | 39,224 |   |
| Change in the Israeli CPI                 |   |                 | +2     | %      |          |   | (4,196 | ) |
| Change in the interest rate of the notes  |   |                 | +1     | %      |          |   | 6,759 |   |

----

|                                                         |   | Profit (loss) |    |
|--------------------------------------------------------------|--------|---------------|---------|
|                                                         |   | NIS thousands |    |
| Loans, notes and convertible notes linked to the U.S. dollar |   |          | (4,342  | ) |
| Loans and notes linked to the Euro *                         |   |          | (48,984 | ) |
| Loans linked to the NIS                                      |   |          | (811    | ) |
|                                                         |   |          | (54,138 | ) |

|   | * | In respect of PC's notes which are linked to the Israeli consumer price index and for which PC has executed swap transactions in order to exchange the interest to variable interest rate. See note 9A.(iv) to our annual consolidated financial statements included in this annual report. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Functional  Currency | Linkage Currency    | Interest Rate %    | Average Interest Rate % | Repayment Years |
|--------------------------------|---------------------|--------------------|-------------------------|-----------------|
| 1                              | 2                   | 3                  | 4                       | 5               | 6 and thereafter | Total |
|                           |                |               |                    | NIS million     |
| €                        | €             | 4.7-5.6 (i)        | 4.7-5.6                 | 4.8             | 5.9 | 6.9 | 6.9 | 178 | 28.1 | 230.6 |
|                           |                |               |                    |            |   |   |   |   |   |   |
| €                        |                | Libor+4            | 4.8                     |            | 0.5 |   | 0.5 | 15.6 |   | 16.6 |
|                           |                |               |                    |            |   |   |   |   |   |   |
| €                        | €             | Euribor + 0.4-3.66 | 4.9                     | 2.5             | 158.6 | 158.6 | 158.6 | 158.6 | 170.7 | 807.6 |
|                           |                |               |                    |            |   |   |   |   |   |   |
| €                        | NIS (linked to CPI) | 4.5-5.5            | 4.5-5.5                 | 42.4            | 73.6 | 73.6 | 73.6 | 73.6 | 158.5 | 495.3 |
|                           |                |               |                    |            |   |   |   |   |   |   |
| GBP                            | GBP                 | 7.3 (i)            | 7.7                     | 552.3           | - | - | - | - | - | 552.3 |
|                           |                |               |                    |            |   |   |   |   |   |   |
| NIS                            | U.S. dollar         | Libor + 1.75       | 2                       | -               | 75.8(ii) | - | - | - | - | 75.8 |
|                           |                |               |                    |            |   |   |   |   |   |   |
| NIS                            | €             | Euribor + 1.75     | 2.25                    | -               | 233.8(ii) | - | - | - | - | 233.8 |
|                           |                |               |                    |            |   |   |   |   |   |   |
| NIS                            | U.S. dollar         | Libor + 2.65       | 4.4                     | 11.1            | 11.1 | 11.1 | 11.1 | 5.6 | - | 50 |
|                           |                |               |                    |            |   |   |   |   |   |   |
| NIS                            | NIS (linked to CPI) | 5-6.3              | 6.0                     | 275.6           | 275.7 | 282.9 | 369.7 | 302.9 | 860.4 | 2,367.2 |
|                           |                |               |                    |            |   |   |   |   |   |   |
| RON                            | €             | Euribor + 3.5      | 4.5                     | 28.3            | 28.3 | 28.4 | 28.4 | 28.4 | 98.4 | 240.2 |
|                           |                |               |                    |            |   |   |   |   |   |   |
| NIS                            | NIS                 | 6.25               | 6.25                    | -               | - | - | 49.5 | 49.5 | - | 99 |
|                           |                |               |                    |            |   |   |   |   |   |   |
| NIS                            | NIS                 | Prime +0.5         | 4.5                     | -               | 1.2 | - | - | - | - | 1.2 |
|                           |                |               |                    | 917             | 864.5 | 561.5 | 698.3 | 812.2 | 1,316.1 | 5,169.6 |

| (i) | The interest rates on these loans were fixed by swap transactions. |
|-----|--------------------------------------------------------------------|

| (ii) | See note 17D and 17E to our annual consolidated financial statements included in this annual report. |
|------|------------------------------------------------------------------------------------------------------|

----

|   | a) | Financial instruments included in current assets - (cash and cash equivalents, deposits and marketable securities, trade receivables, other current assets and assets related to discontinue operation) - due to their nature, their fair values approximate to those presented in the balance sheet. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | Financial instruments included in non-current assets - the fair value of loans and deposits which bear variable interest rate is approximate to those presented in the balance sheet. The fair value of long term financial notes is determined using a price quotations provided to us by the issuer of the notes as of the balance sheet date. Such quotation is generally based on discounted expected cash flow from the notes, taking into consideration factors such as the credit rating of the issuer and the prevailing and the expected relevant interest rates. The fair value of derivatives (mainly swap transactions) is done by relying on third party professional advice, which takes into account the expected future cash flow based on the terms and maturity of each contract using market interest rates for a similar instrument prevailing at the measurement date. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | c) | Financial instruments included in current liabilities - (short-term credit, suppliers, other current liabilities and liabilities related to discontinued operation) - due to their nature, their fair values approximate to those presented in the balance sheet. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d) | Financial instruments included in long- term liabilities - The fair value of the traded liabilities (debentures) is generally determined according to closing prices as of the balance sheet date quoted on the TASE, multiplied by the quantity of the marketable financial instrument issued as of that date, except for PC’s traded notes for which it was determined that the trade in such notes as of the end of 2008 indicating the existence of an inefficient and inactive market and accordingly their fair value was determined using an alternative valuation technique (see “Item 5. critical accounting policies - valuation of notes measured at fair value through profit and loss”). The fair value of non-traded liabilities at a fixed rate interest is determined according to the present value of future cash flows, discounted at a rate which reflects, in our estimation, the level of risk embedded in the financial instrument. The fair value of liabilities which carried variable interest rate is approximately the amounts presented in the balance sheet. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                    |   | As of December 31, 2009 |       |
|-----------------------------------------|--------|-------------------------|------------|
|                                    |   | Book Value              |       |   | FairValue |   |
|                                    |   |                    |       |   |   |   |
| Financial Notes held to maturity        |   |                    | 315,101    |   |   |   | 244,436 |   |
| Long- term loans at fixed interest rate |   |                    | (779,278   | ) |   |   | (861,695 | ) |
| Series A, B, C, D, E and F Notes        |   |                    | (2,568,276 | ) |   |   | (2,625,528 | ) |
|                                    |   |                    | (3,032,455 | ) |   |   | (3,197,787 | ) |

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

----

ITEM 15. CONTROLS AND PROCEDURES

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

ITEM 16B. CODE OF ETHICS

----

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

| Services Rendered  |   | 2008 Fees |    |   | 2009 Fees |   |
|--------------------|--------|-----------|---------|--------|-----------|--------|
| Audit (a)          |   | $         | 868,000 |   |      | $      | 888,980 |   |
| Audit-related (b)  |   | $         | 46,000  |   |      | $      | 30,864 |   |
| Tax (c)            |   | $         | 48,000  |   |      | $      | 85,615 |   |
| All other fees (d) |   | $         | 35,000  |   |      |   | - |   |
| Total              |   | $         | 978,000 |   |      | $      | 1,005,459 |   |

----

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE COMPANY AND AFFILIATED PURCHASERS

| Period        | (a) Total number of shares purchased | (b) Average price paid per share | (c) Total number of shares purchased as part of publicly announced plans or programs | (d) Maximum number (or approximately dollar value) of shares that may yet be purchased under the plans or programs |
|---------------|--------------------------------------|----------------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|
| November 2009 | 1,950                                | $15.96                           | -                                                                                    | -                                                                                                                  |

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

ITEM 16G. CORPORATE GOVERNANCE

ITEM 17. FINANCIAL STATEMENTS

ITEM 18. FINANCIAL STATEMENTS

----

----

----

|                                                     | Page         |
|----------------------------------------------------------|--------------|
|                                                     |         |
| Reports of independent registered public accounting firm | F-2 - F-5    |
|                                                     |         |
| Consolidated Financial Statements:                       |         |
|                                                     |         |
| Balance sheets                                           | F-6 - F-7    |
|                                                     |         |
| Statements of Income                                     | F-8          |
|                                                     |         |
| Statements of Comprehensive income                       | F-9          |
|                                                     |         |
| Statements of changes in shareholders' equity            | F-10 - F-11  |
|                                                     |         |
| Statements of cash flows                                 | F-12 - F-14  |
|                                                     |         |
| Notes to the consolidated financial statements           | F-15 - F-135 |
|                                                     |         |
| Appendix                                                 | F-136        |

----

|  | Brightman Almagor Zohar1 Azrieli CenterTel Aviv 67021P.O.B. 16593, Tel Aviv 61164Israel Tel:   +972 (3) 608 5555Fax:   +972 (3) 609 4022info@deloitte.co.ilwww.deloitte.com |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | Brightman Almagor Zohar1 Azrieli CenterTel Aviv 67021P.O.B. 16593, Tel Aviv 61164Israel Tel:   +972 (3) 608 5555Fax:   +972 (3) 609 4022info@deloitte.co.ilwww.deloitte.com |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | Brightman Almagor Zohar1 Azrieli CenterTel Aviv 67021P.O.B. 16593, Tel Aviv 61164Israel Tel:   +972 (3) 608 5555Fax:   +972 (3) 609 4022info@deloitte.co.ilwww.deloitte.com |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | Brightman Almagor Zohar1 Azrieli CenterTel Aviv 67021P.O.B. 16593, Tel Aviv 61164Israel Tel:   +972 (3) 608 5555Fax:   +972 (3) 609 4022info@deloitte.co.ilwww.deloitte.com |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

ELBIT IMAGING LTD.

----

|                                         |   |   |   |   | December 31       |   |
|----------------------------------------------|--------|--------|--------|--------|-------------------|--------|
|                                         |   |   |   |   | 2009              |   |   | 2008 |   |   | 2009 |   |
|                                         |   |   |   |   |              |   |   | Convenience |   |
|                                         |   |   |   |   |              |   |   | translation (note 2D) |   |
|                                         |   | Note   |   |   | (in thousand NIS) |   |   | US$'000 |   |
|                                         |   |   |   |   |              |   |   |   |   |   |   |   |
| Current Assets                               |   |   |   |   |              |   |   |   |   |   |   |   |
|                                         |   |   |   |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents                    |   |   | (3)    |   |              |   | 1,508,301 |   |   |   | 1,690,433 |   |   |   | 399,550 |   |
| Short-term deposits and investments          |   |   | (4)    |   |              |   | 563,719 |   |   |   | (*) 485,954 |   |   |   | 149,330 |   |
| Trade accounts receivables                   |   |   | (5)    |   |              |   | 45,049 |   |   |   | 34,740 |   |   |   | 11,933 |   |
| Other receivables                            |   |   | (6)    |   |              |   | 119,890 |   |   |   | 134,194 |   |   |   | 31,759 |   |
| Prepayments and other assets                 |   |   | (7)    |   |              |   | 335,206 |   |   |   | 404,613 |   |   |   | 88,796 |   |
| Inventories                                  |   |   |   |   |              |   | 45,494 |   |   |   | 38,176 |   |   |   | 12,052 |   |
| Trading property                             |   |   | (8)    |   |              |   | 4,157,610 |   |   |   | 3,279,775 |   |   |   | 1,101,353 |   |
|                                         |   |   |   |   |              |   | 6,775,269 |   |   |   | 6,067,885 |   |   |   | 1,794,773 |   |
| Assets related to discontinued operation     |   |   | (29)   |   |              |   | 2,250 |   |   |   | 9,043 |   |   |   | 596 |   |
|                                         |   |   |   |   |              |   | 6,777,519 |   |   |   | 6,076,928 |   |   |   | 1,795,369 |   |
|                                         |   |   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Non-Current Assets                           |   |   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits, loans and other long-term balances |   |   | (9)    |   |              |   | 625,695 |   |   |   | (*)706,333 |   |   |   | 165,746 |   |
| Investments in associates                    |   |   | (10)   |   |              |   | 41,597 |   |   |   | 46,655 |   |   |   | 11,019 |   |
| Property, plant and equipment                |   |   | (12)   |   |              |   | 1,648,620 |   |   |   | 1,618,253 |   |   |   | 436,721 |   |
| Investment property                          |   |   | (13)   |   |              |   | 80,487 |   |   |   | 78,897 |   |   |   | 21,321 |   |
| Other assets and deferred expenses           |   |   | (14)   |   |              |   | 136,491 |   |   |   | 118,064 |   |   |   | 36,157 |   |
| Intangible assets                            |   |   | (15)   |   |              |   | 53,486 |   |   |   | 46,582 |   |   |   | 14,169 |   |
|                                         |   |   |   |   |              |   | 2,586,376 |   |   |   | 2,614,784 |   |   |   | 685,133 |   |
|                                         |   |   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |              |   | 9,363,895 |   |   |   | 8,691,712 |   |   |   | 2,480,502 |   |

----

----

|                                                     |   |   |   |   | December 31       |   |
|----------------------------------------------------------|--------|--------|--------|--------|-------------------|--------|
|                                                     |   |   |   |   | 2009              |   |   | 2008 |   |   | 2009 |   |
|                                                     |   |   |   |   |              |   |   | Convenience |   |
|                                                     |   |   |   |   |              |   |   | translation (note 2D) |   |
|                                                     |   | Note   |   |   | (in thousand NIS) |   |   | US$'000 |   |
|                                                     |   |   |   |   |              |   |   |   |   |   |   |   |
| Current Liabilities                                      |   |   |   |   |              |   |   |   |   |   |   |   |
| Short-term credits                                       |   |   | (16)   |   |              |   | 2,218,964 |   |   |   | (*)1,452,144 |   |   |   | 587,805 |   |
| Suppliers and service providers                          |   |   |   |   |              |   | 199,566 |   |   |   | 214,461 |   |   |   | 52,865 |   |
| Payables and other credit balances                       |   |   | (17)   |   |              |   | 201,450 |   |   |   | 217,704 |   |   |   | 53,364 |   |
| Other liabilities                                        |   |   | (18)   |   |              |   | 117,965 |   |   |   | 105,246 |   |   |   | 31,249 |   |
|                                                     |   |   |   |   |              |   | 2,737,945 |   |   |   | 1,989,555 |   |   |   | 725,283 |   |
| Liabilities  related to discontinued operation |   |   | (29)   |   |              |   | 18,630 |   |   |   | 29,186 |   |   |   | 4,935 |   |
|                                                     |   |   |   |   |              |   | 2,756,575 |   |   |   | 2,018,741 |   |   |   | 730,218 |   |
|                                                     |   |   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Non-Current Liabilities                                  |   |   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Borrowings                                               |   |   | (19)   |   |              |   | 4,318,633 |   |   |   | (*)4,061,513 |   |   |   | 1,144,009 |   |
| Other long-term financial liabilities                    |   |   | (20)   |   |              |   | 96,686 |   |   |   | 93,121 |   |   |   | 25,612 |   |
| Other long-term liabilities                              |   |   | (21)   |   |              |   | 17,450 |   |   |   | 15,440 |   |   |   | 4,623 |   |
| Deferred taxes                                           |   |   | (22)   |   |              |   | 39,264 |   |   |   | 65,114 |   |   |   | 10,401 |   |
|                                                     |   |   |   |   |              |   | 4,472,033 |   |   |   | 4,235,188 |   |   |   | 1,184,645 |   |
|                                                     |   |   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Commitments, Contingencies, Liens and Collaterals        |   |   | (23)   |   |              |   |   |   |   |   |   |   |   |   |   |   |
|                                                     |   |   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders' Equity                                     |   |   | (24)   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Share capital and share premium                          |   |   |   |   |              |   | 873,307 |   |   |   | 853,323 |   |   |   | 231,340 |   |
| Reserves                                                 |   |   |   |   |              |   | (221,672 | ) |   |   | (301,733 | ) |   |   | (58,721 | ) |
| Retained earnings                                        |   |   |   |   |              |   | 427,351 |   |   |   | 960,621 |   |   |   | 113,205 |   |
| Treasury stock                                           |   |   |   |   |              |   | (138,519 | ) |   |   | (138,519 | ) |   |   | (36,693 | ) |
| Attributable to equity holders of the Company            |   |   |   |   |              |   | 940,467 |   |   |   | 1,373,692 |   |   |   | 249,131 |   |
| Minority interest                                        |   |   |   |   |              |   | 1,194,820 |   |   |   | 1,064,091 |   |   |   | 316,508 |   |
|                                                     |   |   |   |   |              |   | 2,135,287 |   |   |   | 2,437,783 |   |   |   | 565,639 |   |
|                                                     |   |   |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
|                                                     |   |   |   |   |              |   | 9,363,895 |   |   |   | 8,691,712 |   |   |   | 2,480,502 |   |

|                               |   |               |   |               |
|------------------------------------|--------|--------------------|--------|--------------------|
| Doron MosheChief Financial Officer |   | Dudi MachlufCo-CEO |   | Ran StarkmanCo-CEO |

----

ELBIT IMAGING LTD.

----

|                                                                                         |   |                |   | December 31                 |   |
|----------------------------------------------------------------------------------------------|--------|---------------------|--------|-----------------------------|--------|
|                                                                                         |   |                |   | 2009                        |   |   | 2008 |   |   | 2007 |   |   | 2009 |   |
|                                                                                         |   |                |   |                        |   |   | Convenience |   |
|                                                                                         |   |                |   |                        |   |   | translation (note 2D) |   |
|                                                                                         |   | Note                |   | (in thousand NIS)           |   |   | US$'000 |   |
|                                                                                         |   |                |   | (Except for per-share data) |   |   |   |   |
| Revenues and gains                                                                           |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |
| Commercial centers operation                                                                 |   |                | (26A)  |                        |   | 85,466 |   |   |   | 524,163 |   |   |   | 2,917,616 |   |   |   | 22,640 |   |
| Hotels operations and management                                                             |   |                | (26B)  |                        |   | 396,736 |   |   |   | 384,220 |   |   |   | 395,227 |   |   |   | 105,096 |   |
| Gains from sale of real estate assets                                                        |   |                | (26C)  |                        |   | - |   |   |   | - |   |   |   | 62,621 |   |   |   | - |   |
| Sale of medical systems                                                                      |   |                |   |                        |   | 61,683 |   |   |   | 38,076 |   |   |   | 49,648 |   |   |   | 16,340 |   |
| Gains from change of shareholding in subsidiaries                                            |   |                | (26D)  |                        |   | 31,106 |   |   |   | 49,122 |   |   |   | 5,310 |   |   |   | 8,240 |   |
| Sale of fashion merchandise                                                                  |   |                |   |                        |   | 118,386 |   |   |   | 102,736 |   |   |   | 68,139 |   |   |   | 31,360 |   |
|                                                                                         |   |                |   |                        |   | 693,377 |   |   |   | 1,098,317 |   |   |   | 3,498,561 |   |   |   | 183,676 |   |
|                                                                                         |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses and losses                                                                          |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial centers                                                                           |   |                | (26E)  |                        |   | 169,253 |   |   |   | 432,760 |   |   |   | 1,714,253 |   |   |   | 44,835 |   |
| Hotels operations and management                                                             |   |                | (26F)  |                        |   | 353,229 |   |   |   | 354,850 |   |   |   | 330,063 |   |   |   | 93,571 |   |
| Cost and expenses of medical systems operation                                               |   |                | (26G)  |                        |   | 67,403 |   |   |   | 55,469 |   |   |   | 69,953 |   |   |   | 17,855 |   |
| Cost of fashion merchandise                                                                  |   |                | (26H)  |                        |   | 134,142 |   |   |   | 118,040 |   |   |   | 80,308 |   |   |   | 35,534 |   |
| Research and development expenses                                                            |   |                | (26I)  |                        |   | 73,959 |   |   |   | 68,759 |   |   |   | 69,559 |   |   |   | 19,592 |   |
| General and administrative expenses                                                          |   |                | (26J)  |                        |   | 66,153 |   |   |   | 54,944 |   |   |   | 116,992 |   |   |   | 17,524 |   |
| Share in losses of associates, net                                                           |   |                |   |                        |   | 14,039 |   |   |   | 12,952 |   |   |   | 12,667 |   |   |   | 3,719 |   |
| Financial expenses                                                                           |   |                | (26K)  |                        |   | 283,546 |   |   |   | 296,527 |   |   |   | 232,566 |   |   |   | 75,112 |   |
| Financial income                                                                             |   |                | (26L)  |                        |   | (92,725 | ) |   |   | (135,278 | ) |   |   | (73,293 | ) |   |   | (24,563 | ) |
| Change in fair value of financial instruments measured at fair value through profit and loss |   | (26M & 2AG(1)e) |   |                        | 70,702 |   |   |   | (225,244 | ) |   |   | (18,347 | ) |   |   | 18,729 |   |
| Impairments, charges and other expenses, net                                                 |   |                | (26N)  |                        |   | 260,225 |   |   |   | 68,797 |   |   |   | 38,233 |   |   |   | 68,934 |   |
|                                                                                         |   |                |   |                        |   | 1,399,926 |   |   |   | 1,102,576 |   |   |   | 2,572,954 |   |   |   | 370,842 |   |
|                                                                                         |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Profit (loss) before income taxes                                                            |   |                |   |                        |   | (706,549 | ) |   |   | (4,259 | ) |   |   | 925,607 |   |   |   | (187,166 | ) |
| Income taxes (tax benefit)                                                                   |   |                | (22)   |                        |   | (35,571 | ) |   |   | 24,736 |   |   |   | 16,288 |   |   |   | (9,423 | ) |
|                                                                                         |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Profit (loss) from continuing operations                                                     |   |                |   |                        |   | (670,978 | ) |   |   | (28,995 | ) |   |   | 909,319 |   |   |   | (177,743 | ) |
| Profit from discontinued operation, net                                                 |   |                | (29)   |                        |   | 16,550 |   |   |   | 4,934 |   |   |   | 10,289 |   |   |   | 4,384 |   |
|                                                                                         |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Profit (loss) for the year                                                                   |   |                |   |                        |   | (654,428 | ) |   |   | (24,061 | ) |   |   | 919,608 |   |   |   | (173,359 | ) |
|                                                                                         |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Attributable to:                                                                             |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity holders of the Company                                                                |   |                |   |                        |   | (533,269 | ) |   |   | (103,714 | ) |   |   | 539,749 |   |   |   | (141,263 | ) |
| Minority interest                                                                            |   |                |   |                        |   | (121,159 | ) |   |   | 79,653 |   |   |   | 379,859 |   |   |   | (32,096 | ) |
|                                                                                         |   |                |   |                        |   | (654,428 | ) |   |   | (24,061 | ) |   |   | 919,608 |   |   |   | (173,359 | ) |
|                                                                                         |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share - (in NIS)                                                                |   |                | (26O)  |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per share:                                                                    |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| From continuing operation                                                                    |   |                |   |                        |   | (21.60 | ) |   |   | (4.27 | ) |   |   | 20.80 |   |   |   | (5.72 | ) |
| From discontinued operation                                                                  |   |                |   |                        |   | 0.65 |   |   |   | 0.19 |   |   |   | 0.40 |   |   |   | 0.17 |   |
|                                                                                         |   |                |   |                        |   | (20.95 | ) |   |   | (4.08 | ) |   |   | 21.20 |   |   |   | (5.55 | ) |
|                                                                                         |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per share:                                                                  |   |                |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| From continuing operation                                                                    |   |                |   |                        |   | (21.62 | ) |   |   | (4.30 | ) |   |   | 20.18 |   |   |   | (5.73 | ) |
| From discontinued operation                                                                  |   |                |   |                        |   | 0.65 |   |   |   | 0.19 |   |   |   | 0.40 |   |   |   | 0.17 |   |
|                                                                                         |   |                |   |                        |   | (20.97 | ) |   |   | (4.11 | ) |   |   | 20.58 |   |   |   | (5.56 | ) |

----

ELBIT IMAGING LTD.

----

|                                                                |   | December 31       |     |
|---------------------------------------------------------------------|--------|-------------------|----------|
|                                                                |   | 2009              |     |   | 2008 |   |   | 2007 |   |   | 2009 |   |
|                                                                |   |              |     |   | Convenience |   |
|                                                                |   |              |     |   | translation (note 2D) |   |
|                                                                |   | (in thousand NIS) |     |   | US$'000 |   |
|                                                                |   |              |     |   |   |   |   |   |   |   |   |   |
| Profit (loss) for the period                                        |   |              | (654,428 | ) |   |   | (24,061 | ) |   |   | 919,608 |   |   |   | (173,359 | ) |
|                                                                |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exchange differences arising from translation of foreign operations |   |              | 92,319   |   |   |   | (458,217 | ) |   |   | 11,092 |   |   |   | 24,455 |   |
| Gain(loss) from cash flow hedge                                     |   |              | (1,752   | ) |   |   | (53,703 | ) |   |   | (8,897 | ) |   |   | (464 | ) |
| Gain(loss) from available for sale investments                      |   |              | 9,383    |   |   |   | (5,929 | ) |   |   | - |   |   |   | 2,486 |   |
| Income taxes (tax benefit)(see note 22)                             |   |              | (3,028   | ) |   |   | 8,645 |   |   |   | (1,288 | ) |   |   | (802 | ) |
|                                                                |   |              | 96,922   |   |   |   | (509,204 | ) |   |   | 907 |   |   |   | 25,675 |   |
|                                                                |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income( loss)                                         |   |              | (557,506 | ) |   |   | (533,265 | ) |   |   | 920,515 |   |   |   | (147,684 | ) |
|                                                                |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Attributable to:                                                    |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity holders of the Company                                       |   |              | (466,459 | ) |   |   | (508,007 | ) |   |   | 530,422 |   |   |   | (123,566 | ) |
| Minority interest                                                   |   |              | (91,047  | ) |   |   | (25,258 | ) |   |   | 390,093 |   |   |   | (24,118 | ) |
|                                                                |   |              | (557,506 | ) |   |   | (533,265 | ) |   |   | 920,515 |   |   |   | (147,684 | ) |

----

ELBIT IMAGING LTD.

----

|                                                                               |   | Attributable to the shareholders of the Company |   |   |          |   |    |                                    |   |
|------------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|--------|---------------|--------|---------|-----------------------------------------|--------|
|                                                                               |   | Share capital                                   |   |   | Share premium |   |    | Hedging and available for sale reserves |   |   | Stock-based compensation reserve |   |   | Foreign currency translation reserve |   |   | Retained earnings |   |   | Gross amount |   |   | Treasury stock |   |   | Loans to employees to acquire Company shares |   |   | Attributable to share-holdersof the company |   |   | Minority interest |   |   | Total shareholders' equity |   |
|                                                                               |   | (In thousand NIS)                               |   |
|                                                                               |   |                                            |   |
| Balance - January 1, 2007                                                          |   |                                            | 38,032 |   |          |   | 815,112 |                                    |   |   | 20,080 |   |   |   | 13,482 |   |   |   | 47,966 |   |   |   | 852,416 |   |   |   | 1,787,088 |   |   |   | (138,519 | ) |   |   | (3,853 | ) |   |   | 1,644,716 |   |   |   | 649,514 |   |   |   | 2,294,230 |   |
|                                                                               |   |                                            |   |   |          |   |    |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income(loss)                                                         |   |                                            | -      |   |          |   | -       |                                    |   |   | (7,232 | ) |   |   | - |   |   |   | (2,094 | ) |   |   | 539,749 |   |   |   | 530,423 |   |   |   | - |   |   |   | - |   |   |   | 530,423 |   |   |   | 390,092 |   |   |   | 920,515 |   |
| Initially consolidated company                                                     |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 32,416 |   |   |   | 32,416 |   |
| Issuance of shares to the Group by a subsidiary                                    |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 12,035 |   |   |   | 12,035 |   |
| Issuance of shares to the minority by a subsidiary                                 |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 33,424 |   |   |   | 33,424 |   |
| Purchase of minority interest                                                      |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (367 | ) |   |   | (367 | ) |
| Dividend paid                                                                      |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (159,766 | ) |   |   | (159,766 | ) |   |   | - |   |   |   | - |   |   |   | (159,766 | ) |   |   | - |   |   |   | (159,766 | ) |
| Repayment of loans as a result of the realization by employees of rights to shares |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 638 |   |   |   | 638 |   |   |   | - |   |   |   | 638 |   |
| Employees share premium                                                            |   |                                            | -      |   |          |   | 163     |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 163 |   |   |   | - |   |   |   | (163 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Stock-based compensation expenses                                                  |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | 19,427 |   |   |   | - |   |   |   | - |   |   |   | 19,427 |   |   |   | - |   |   |   | - |   |   |   | 19,427 |   |   |   | 76,450 |   |   |   | 95,877 |   |
|                                                                               |   |                                            |   |   |          |   |    |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance - December 31, 2007                                                        |   |                                            | 38,032 |   |          |   | 815,275 |                                    |   |   | 12,848 |   |   |   | 32,909 |   |   |   | 45,872 |   |   |   | 1,232,399 |   |   |   | 2,177,335 |   |   |   | (138,519 | ) |   |   | (3,378 | ) |   |   | 2,035,438 |   |   |   | 1,193,564 |   |   |   | 3,229,002 |   |
|                                                                               |   |                                            |   |   |          |   |    |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income(loss)                                                         |   |                                            | -      |   |          |   | -       |                                    |   |   | (54,051 | ) |   |   | - |   |   |   | (350,242 | ) |   |   | (103,714 | ) |   |   | (508,007 | ) |   |   | - |   |   |   | - |   |   |   | ( 508,007 | ) |   |   | ( 25,258 | ) |   |   | ( 533,265 | ) |
| Investments of the minority in a subsidiary                                        |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,860 |   |   |   | 5,860 |   |
| Purchase of minority interest                                                      |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (68,468 | ) |   |   | (68,468 | ) |
| Dividend paid                                                                      |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (168,064 | ) |   |   | (168,064 | ) |   |   | - |   |   |   | - |   |   |   | (168,064 | ) |   |   | - |   |   |   | (168,064 | ) |
| Dividend paid to the minority by a subsidiary                                      |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (97,775 | ) |   |   | (97,775 | ) |
| Repayment of loans as a result of the realization by employees of rights to shares |   |                                            | -      |   |          |   |    |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,394 |   |   |   | 3,394 |   |   |   |   |   |   |   | 3,394 |   |
| Employees share premium                                                            |   |                                            | -      |   |          |   | 16      |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 16 |   |   |   | - |   |   |   | (16 | ) |   |   | - |   |   |   |   |   |   |   | - |   |
| Stock-based compensation expenses                                                  |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | 10,931 |   |   |   | - |   |   |   | - |   |   |   | 10,931 |   |   |   | - |   |   |   | - |   |   |   | 10,931 |   |   |   | 56,168 |   |   |   | 67,099 |   |
| Balance - December 31, 2008                                                        |   |                                            | 38,032 |   |          |   | 815,291 |                                    |   |   | (41,203 | ) |   |   | 43,840 |   |   |   | (304,370 | ) |   |   | 960,621 |   |   |   | 1,512,211 |   |   |   | (138,519 | ) |   |   | - |   |   |   | 1,373,692 |   |   |   | 1,064,091 |   |   |   | 2,437,783 |   |

----

----

|                                               |   | Attributable to the shareholders of the Company |   |   |          |   |    |                                    |   |
|----------------------------------------------------|--------|-------------------------------------------------|--------|--------|---------------|--------|---------|-----------------------------------------|--------|
|                                               |   | Share capital                                   |   |   | Share premium |   |    | Hedging and available for sale reserves |   |   | Stock-based compensation reserve |   |   | Foreign currency translation reserve |   |   | Retained earnings |   |   | Gross amount |   |   | Treasury stock |   |   | Loans to employees to acquire Company shares |   |   | Attributable to share-holdersof the company |   |   | Minority interest |   |   | Total shareholders' equity |   |
|                                               |   | (In thousand NIS)                               |   |
|                                               |   |                                            |   |
| Balance – January 1, 2009                    |   |                                            | 38,032 |   |          |   | 815,291 |                                    |   |   | (41,203 | ) |   |   | 43,840 |   |   |   | (304,370 | )  |   |   | 960,621 |   |   |   | 1,512,211 |   |   |   | (138,519 | )  |   |   | - |   |   |   | 1,373,692 |   |   |   | 1,064,091 |   |   |   | 2,437,783 |   |
|                                               |   |                                            |   |   |          |   |    |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income(loss)                         |   |                                            | -      |   |          |   | -       |                                    |   |   | 4,745 |   |   |   | - |   |   |   | 62,065 |   |   |   | (533,269 | )  |   |   | (466,459 | ) |   |   | - |   |   |   | - |   |   |   | (466,459 | ) |   |   | (91,047 | ) |   |   | (557,506 | ) |
| Issuance of shares to the minority by a subsidiary |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 71,940 |   |   |   | 71,940 |   |
| Purchase of the minority interest                  |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 107,221 |   |   |   | 107,221 |   |
| Initially consolidated subsidiary                  |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,993 |   |   |   | 5,993 |   |
| Exercise of shares by employees                    |   |                                            | 6      |   |          |   | 701     |                                    |   |   | - |   |   |   | (707 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Equity component of convertible debentures         |   |                                            | -      |   |          |   | 19,277  |                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 19,277 |   |   |   | - |   |   |   | - |   |   |   | 19,277 |   |   |   | - |   |   |   | 19,277 |   |
| Stock-based compensation expenses                  |   |                                            | -      |   |          |   | -       |                                    |   |   | - |   |   |   | 13,957 |   |   |   | - |   |   |   | - |   |   |   | 13,957 |   |   |   | - |   |   |   | - |   |   |   | 13,957 |   |   |   | 36,622 |   |   |   | 50,579 |   |
|                                               |   |                                            |   |   |          |   |    |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance – December 31, 2009                  |   |                                            | 38,038 |   |          |   | 835,269 |                                    |   |   | (36,458 | ) |   |   | 57,090 |   |   |   | (242,305 | )  |   |   | 427,352 |   |   |   | 1,078,986 |   |   |   | (138,519 | )  |   |   | - |   |   |   | 940,467 |   |   |   | 1,194,820 |   |   |   | 2,135,287 |   |

|                                               |   | Convenience translation into US$'000(note 2D) |   |
|----------------------------------------------------|--------|-----------------------------------------------|--------|
|                                               |   |                                          |   |   |   |   |
| Balance - January 1, 2009                          |   |                                          | 10,075 |   |   |   | 215,971 |   |   |   | (10,914 | ) |   |   | 11,613 |   |   |   | (80,627 | ) |   |   | 254,469 |   |   |   | 400,587 |   |   |   | (36,694 | ) |   |   | - |   |   |   | 363,893 |   |   |   | 281,878 |   |   |   | 645,771 |   |
|                                               |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss)                        |   |                                          | -      |   |   |   | - |   |   |   | 1,257 |   |   |   | - |   |   |   | 16,440 |   |   |   | (141,264 | ) |   |   | (123,566 | ) |   |   | - |   |   |   | - |   |   |   | (123,566 | ) |   |   | (24,118 | ) |   |   | (147,684 | ) |
| Issuance of shares to the minority by a subsidiary |   |                                          | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 19,057 |   |   |   | 19,057 |   |
| Purchase of the minority interest                  |   |                                          | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 28,402 |   |   |   | 28,402 |   |
| Initially consolidated subsidiary                  |   |                                          | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,588 |   |   |   | 1,588 |   |
| Exercise of shares by employees                    |   |                                          | 1      |   |   |   | 186 |   |   |   | - |   |   |   | (187 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Equity component of convertible debentures         |   |                                          | -      |   |   |   | 5,107 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,107 |   |   |   | - |   |   |   | - |   |   |   | 5,107 |   |   |   | - |   |   |   | 5,107 |   |
| Stock-based compensation expenses                  |   |                                          | -      |   |   |   | - |   |   |   | - |   |   |   | 3,697 |   |   |   | - |   |   |   | - |   |   |   | 3,697 |   |   |   | - |   |   |   | - |   |   |   | 3,697 |   |   |   | 9,701 |   |   |   | 13,398 |   |
|                                               |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance - December 31, 2009                        |   |                                          | 10,076 |   |   |   | 221,264 |   |   |   | (9,657 | ) |   |   | 15,123 |   |   |   | (64,187 | ) |   |   | 113,205 |   |   |   | 285,825 |   |   |   | (36,694 | ) |   |   | - |   |   |   | 249,131 |   |   |   | 316,508 |   |   |   | 565,639 |   |

----

ELBIT IMAGING LTD.

----

|                                                                   |   | December 31       |     |
|------------------------------------------------------------------------|--------|-------------------|----------|
|                                                                   |   | 2009              |     |   | 2008 |   |   | 2007 |   |   | 2009 |   |
|                                                                   |   |              |     |   | Convenience |   |
|                                                                   |   |              |     |   | translation (note 2D) |   |
|                                                                   |   | (in thousand NIS) |     |   | US$'000 |   |
|                                                                   |   |              |     |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                   |   |              |     |   |   |   |   |   |   |   |   |   |
| Profit(loss) for the year                                              |   |              | (654,428 | ) |   |   | (24,061 | ) |   |   | 919,608 |   |   |   | (173,359 | ) |
| Income tax expenses (tax benefit) recognized in profit and loss        |   |              | (35,572  | ) |   |   | 24,736 |   |   |   | 16,288 |   |   |   | (9,423 | ) |
| Finance expenses (income) recognized in profit and loss                |   |              | 261,524  |   |   |   | (63,995 | ) |   |   | 140,926 |   |   |   | 69,278 |   |
| Income tax paid in cash                                                |   |              | (3,698   | ) |   |   | (2,433 | ) |   |   | (2,531 | ) |   |   | (980 | ) |
| Discontinued operation                                                 |   |              | (16,551  | ) |   |   | (4,935 | ) |   |   | (10,289 | ) |   |   | (4,384 | ) |
| Depreciation and amortization (including impairment)                   |   |              | 317,871  |   |   |   | 128,073 |   |   |   | 111,520 |   |   |   | 84,204 |   |
| Investment in initially – consolidates subsidiaries (Appendix B) |   |              | (23,127  | ) |   |   | - |   |   |   | - |   |   |   | (6,126 | ) |
| Loss from realization of investments in subsidiaries (Appendix C)      |   |              | 150      |   |   |   | - |   |   |   | - |   |   |   | 40 |   |
| Share in losses of associates, net                                     |   |              | 14,039   |   |   |   | 12,952 |   |   |   | 12,667 |   |   |   | 3,719 |   |
| Loss from realization of assets and liabilities                        |   |              | (681     | ) |   |   | 3,335 |   |   |   | 2,790 |   |   |   | (180 | ) |
| Stock based compensation expenses                                      |   |              | 36,719   |   |   |   | 52,566 |   |   |   | 72,226 |   |   |   | 9,727 |   |
| Profit from realization of investments                                 |   |              |     |   |   |   | - |   |   |   | (60,736 | ) |   |   |   |   |
| Profit from change  of shareholding in subsidiaries          |   |              | (31,106  | ) |   |   | (49,122 | ) |   |   | (4,870 | ) |   |   | (8,240 | ) |
| Others                                                                 |   |              | (413     | ) |   |   | 1,526 |   |   |   | 184 |   |   |   | (109 | ) |
| Trade accounts receivables                                             |   |              | (9,123   | ) |   |   | 1,383,334 |   |   |   | (1,442,203 | ) |   |   | (2,417 | ) |
| Receivables and other debit balances                                   |   |              | 66,721   |   |   |   | (124,985 | ) |   |   | (15,528 | ) |   |   | 17,674 |   |
| Long-term receivables                                                  |   |              | (672     | ) |   |   | (3,403 | ) |   |   | 234 |   |   |   | (178 | ) |
| Inventories                                                            |   |              | (7,298   | ) |   |   | (9,608 | ) |   |   | (2,082 | ) |   |   | (1,933 | ) |
| Trading property and payment on account of trading property            |   |              | (612,088 | ) |   |   | (968,256 | )  |   |   | (926,405 | ) |   |   | (162,142 | ) |
| Suppliers and service providers                                        |   |              | (16,608  | ) |   |   | 52,754 |   |   |   | 26,092 |   |   |   | (4,399 | ) |
| Payables and other credit balances                                     |   |              | (53,315  | ) |   |   | (193,896 | ) |   |   | 307,337 |   |   |   | (14,124 | ) |
| Net cash provided by (used in) continuing operations                   |   |              | (767,656 | ) |   |   | 214,581 |   |   |   | (854,772 | ) |   |   | (203,352 | ) |
| Net cash provided by discontinued operating activities                 |   |              | 13,325   |   |   |   | 6,075 |   |   |   | 1,309 |   |   |   | 3,529 |   |
| Net cash provided by (used in) operating activities                    |   |              | (754,331 | ) |   |   | 220,656 |   |   |   | (853,463 | ) |   |   | (199,823 | ) |

----

----

|                                                                                          |   | December 31       |      |
|-----------------------------------------------------------------------------------------------|--------|-------------------|-----------|
|                                                                                          |   | 2009              |      |   | 2008 |   |   | 2007 |   |   | 2009 |   |
|                                                                                          |   |              |      |   | Convenience |   |
|                                                                                          |   |              |      |   | translation (note 2D) |   |
|                                                                                          |   | (in thousand NIS) |      |   | US$'000 |   |
|                                                                                          |   |              |      |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                          |   |              |      |   |   |   |   |   |   |   |   |   |
| Investment in initially-consolidated subsidiaries (Appendix D)                                |   |              | (1,252    | ) |   |   | - |   |   |   | (135,083 | ) |   |   | (332 | ) |
| Purchase of property plant and equipment, investment property and other assets                |   |              | (106,533  | ) |   |   | (534,805 | ) |   |   | (339,337 | ) |   |   | (28,221 | ) |
| Payment on account of investment property                                                     |   |              | -         |   |   |   | - |   |   |   | (203,099 | ) |   |   | - |   |
| Proceeds from realization of property plant and equipment, investments and loans              |   |              | 2,785     |   |   |   | 25,126 |   |   |   | 914 |   |   |   | 738 |   |
| Proceeds from realization of investments in subsidiaries (Appendix C)                         |   |              | 1,260     |   |   |   | - |   |   |   | 483,722 |   |   |   | 334 |   |
| Investments in associates and other companies                                                 |   |              | (5,600    | ) |   |   | (3,033 | ) |   |   | (18,445 | ) |   |   | (1,483 | ) |
| Proceed from  realization of long-term deposits and long-term loans                 |   |              | 110,766   |   |   |   | - |   |   |   | - |   |   |   | 29,342 |   |
| Investment in long-term deposits and long-term loans                                          |   |              | (11,214   | ) |   |   | (588,083 | ) |   |   | (6,337 | ) |   |   | (2,971 | ) |
| Interest received in cash                                                                     |   |              | 91,223    |   |   |   | 133,748 |   |   |   | 84,123 |   |   |   | 24,165 |   |
| Sale of subsidiary shares  to its minority shareholders                             |   |              | 159,746   |   |   |   | 9,788 |   |   |   | 38,286 |   |   |   | 42,317 |   |
| Purchase of minority shares in subsidiaries                                                   |   |              | (43,598   | ) |   |   | (51,256 | ) |   |   | (16,845 | ) |   |   | (11,549 | ) |
| Proceed from sell of available for sale marketable securities                                 |   |              | 20,822    |   |   |   | - |   |   |   | - |   |   |   | 5,516 |   |
| Purchase of available for sale marketable secuirities                                         |   |              | (45,351   | ) |   |   | (52,958 | ) |   |   | - |   |   |   | (12,013 | ) |
| Short-term deposits and marketable securities, net                                            |   |              | 42,281    |   |   |   | 236,427 |   |   |   | (422,822 | ) |   |   | 11,200 |   |
| Net cash provided by (used in) investing activities                                           |   |              | 215,335   |   |   |   | (825,046 | ) |   |   | (534,923 | ) |   |   | 57,043 |   |
|                                                                                          |   |              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                          |   |              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividend paid                                                                                 |   |              | -         |   |   |   | (168,064 | ) |   |   | (159,767 | ) |   |   | - |   |
| Dividend paid to minority by a subsidiary                                                     |   |              | -         |   |   |   | (97,770 | ) |   |   | - |   |   |   |   |   |
| Interest paid in cash                                                                         |   |              | (319,919  | ) |   |   | (333,277 | ) |   |   | (250,301 | ) |   |   | (84,747 | ) |
| Proceeds from long-term borrowings                                                            |   |              | 709,286   |   |   |   | 1,063,991 |   |   |   | 1,570,963 |   |   |   | 187,890 |   |
| Repayment of long-term borrowings                                                             |   |              | (341,672  | ) |   |   | (29,073 | ) |   |   | (138,251 | ) |   |   | (90,509 | ) |
| Proceeds from repayments of loans as a result of realization by employees of rights to shares |   |              | -         |   |   |   | 3,394 |   |   |   | 638 |   |   |   | - |   |
| Proceeds from selling derivatives                                                             |   |              | 71,706    |   |   |   | - |   |   |   | - |   |   |   | 18,995 |   |
| Proceed from short-term credit                                                                |   |              | 272,045   |   |   |   | 526,739 |   |   |   | 281,622 |   |   |   | 72,065 |   |
| Repayment of short-term credit                                                                |   |              | (82,539   | ) |   |   | (1,028 | ) |   |   | (605,362 | ) |   |   | (21,865 | ) |
| Net cash provided by financing activities                                                     |   |              | 308,907   |   |   |   | 964,912 |   |   |   | 699,542 |   |   |   | 81,829 |   |
|                                                                                          |   |              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in cash and cash equivalents                                              |   |              | (230,089  | ) |   |   | 360,522 |   |   |   | (688,844 | ) |   |   | (60,951 | ) |
| Cash and cash equivalents at the beginning of the year                                        |   |              | 1,690,433 |   |   |   | 1,416,710 |   |   |   | 2,150,871 |   |   |   | 447,797 |   |
| Net effect on cash due to currency exchange rates changes                                     |   |              | 47,957    |   |   |   | (86,799 | ) |   |   | (45,317 | ) |   |   | 12,704 |   |
|                                                                                          |   |              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at the end of the year                                              |   |              | 1,508,301 |   |   |   | 1,690,433 |   |   |   | 1,416,710 |   |   |   | 399,550 |   |

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|                                                                                        |   | December 31       |     |
|---------------------------------------------------------------------------------------------|--------|-------------------|----------|
|                                                                                        |   | 2009              |     |   | 2008 |   |   | 2007 |   |   | 2009 |   |
|                                                                                        |   |              |     |   |   |   |   |   |   |   | Convenience translation (note 2D) |   |
|                                                                                        |   | (in thousand NIS) |     |   | US$'000 |   |
| Appendix A -                                                                                |   |              |     |   |   |   |   |   |   |   |   |   |
| Non-cash transactions                                                                       |   |              |     |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |              |     |   |   |   |   |   |   |   |   |   |
| Acquisition of property plant and equipment, investment property and other assets by credit |   |              | 7,334    |   |   |   | 2,814 |   |   |   | 13,311 |   |   |   | 1,943 |   |
|                                                                                        |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Acquisition of minority interest by credit                                                  |   |              | -        |   |   |   | - |   |   |   | 16,977 |   |   |   | - |   |
|                                                                                        |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Settlement of convertible debentures in a subsidiary into share capital, by the minority    |   |              | 76,052   |   |   |   | - |   |   |   | - |   |   |   | 20,146 |   |
|                                                                                        |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Appendix B -                                                                                |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Initially consolidated subsidiaries                                                         |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Trading property                                                                            |   |              | 150,764  |   |   |   |   |   |   |   |   |   |   |   | 39,937 |   |
| Working capital (excluding cash), net                                                       |   |              | 19,010   |   |   |   | - |   |   |   | (62 | ) |   |   | 5,036 |   |
| Investment in associate                                                                     |   |              | 2,453    |   |   |   | - |   |   |   | - |   |   |   | 650 |   |
| Investment property                                                                         |   |              | -        |   |   |   | - |   |   |   | (168,827 | ) |   |   | - |   |
| Shoret term loan                                                                            |   |              | (132,337 | ) |   |   |   |   |   |   |   |   |   |   | (35,056 | ) |
| Long term liabilities                                                                       |   |              | (10,770  | ) |   |   | - |   |   |   | - |   |   |   | (2,852 | ) |
| Minority interest                                                                           |   |              | (5,993   | ) |   |   | - |   |   |   | 33,806 |   |   |   | (1,589 | ) |
|                                                                                        |   |              | 23,127   |   |   |   | - |   |   |   | (135,083 | ) |   |   | (6,126 | ) |
|                                                                                        |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Appendix C -                                                                                |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from realization of investments in subsidiaries                                    |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Working capital (excluding cash), net                                                       |   |              | 204      |   |   |   | - |   |   |   | (9,935 | ) |   |   | 54 |   |
| Long-term receivables, investments and deposits                                             |   |              | -        |   |   |   | - |   |   |   | 778 |   |   |   | - |   |
| Property, plant, equipment and other assets                                                 |   |              |     |   |   |   | - |   |   |   | 38,773 |   |   |   | - |   |
| Investment property                                                                         |   |              | 1,206    |   |   |   | - |   |   |   | 603,104 |   |   |   | 320 |   |
| Long term liabilities                                                                       |   |              | -        |   |   |   | - |   |   |   | (213,363 | ) |   |   | - |   |
| Profit (Loss)from realization of subsidiaries                                               |   |              | (150     | ) |   |   | - |   |   |   | 60,733 |   |   |   | (40 | )  |
| Realization of capital reserves from foreign currency translation adjustments               |   |              | -        |   |   |   | - |   |   |   | (781 | ) |   |   | - |   |
|                                                                                        |   |              | 1,260    |   |   |   | - |   |   |   | 479,309 |   |   |   | 334 |   |
| Proceed from realization of subsidiaries which were disposed of in previous years           |   |              | -        |   |   |   | - |   |   |   | 4,413 |   |   |   | - |   |
|                                                                                        |   |              | 1,260    |   |   |   | - |   |   |   | 483,722 |   |   |   | 344 |   |
| Appendix D –                                                                          |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Initially consolidated subsidiaries                                                         |   |              |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prepayment lease rights                                                                     |   |              | (1,253   | ) |   |   | - |   |   |   | - |   |   |   | (332 | ) |
| Fix assets                                                                                  |   |              | (517     | ) |   |   | - |   |   |   | - |   |   |   | (137 | ) |
| Minority interest                                                                           |   |              | 518      |   |   |   | - |   |   |   | - |   |   |   | 137 |   |
|                                                                                        |   |              | (1,252   | ) |   |   |   |   |   |   |   |   |   |   | 332 |   |

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ELBIT IMAGING LTD.

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| NOTE 1 - | GENERAL |
|----------|---------|

|   | A. | Elbit Imaging Ltd. ("the Company") is incorporated in Israel. The Company's registered office is at 2 Weizman St. Tel Aviv, Israel.  The Company's shares are registered for trade on the Tel Aviv Stock Exchange and in the United States on NASDAQ. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | The Group engages, directly and through its investee companies, in Israel and abroad, mainly in the following areas: |
|--------|----|----------------------------------------------------------------------------------------------------------------------|

|   | · | Commercial and entertainment centers - Initiation, construction, and sale of commercial and entertainment centers and other mixed-use  property projects, predominantly  in the retail sector, located in central and eastern Europe and in India. in certain circumstances and depending on market conditions, the Group operates and manages commercial and entertainment centers prior to its sale. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Hotels - Hotels operation and management, primarily in major European cities. |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | Image guide treatment - Investments in the research and development, production and marketing of magnetic resonance imaging guided focused ultrasound treatment equipment. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Residential projects - Initiation, construction and sale of residential projects and other mixed-use real property projects, predominately residential, located primarily in India and in Eastern Europe. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Fashion apparel – distribution and marketing of fashion apparel and accessories in Israel. |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · | Other activities - Other activities consist of: (i) venture-capital investments; (ii) investments in hospitals and farm and dairy plants in India, which are in preliminary stages; and (iii) wholesale trade of home applications in India. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | C. | Definitions |
|--------|----|-------------|

|   | Group | - | The Company and its Investees. |
|--------|-------|---|--------------------------------|

|   | Investees | - | Subsidiaries, joint ventures and associates. |
|--------|-----------|---|----------------------------------------------|

|   | PC | - | Plaza Centers N.V. Group, a material subsidiary (68%) operating in the commercial and entertainment centers. |
|--------|----|---|--------------------------------------------------------------------------------------------------------------|

|   | Parent Company | - | Europe Israel (M.M.S.) Ltd. ("EIL"). |
|--------|----------------|---|--------------------------------------|

|   | Europe Israel Group | - | Europe Israel (M.M.S.) Ltd. and its investee companies. |
|--------|---------------------|---|---------------------------------------------------------|

|   | Control Centers | - | Control Centers Ltd. - the controlling shareholder of EIL ("CC"). |
|--------|-----------------|---|-------------------------------------------------------------------|

|   | Control Centers Group | - | Control Centers and its investee companies. |
|--------|-----------------------|---|---------------------------------------------|

|   | Ultimate controlling party | - | The controlling shareholder of Control Centers, Mr. Mordechay Zisser, who through December 31, 2009 served as the Company's Executive Chairman of the Board ,and subsequently serves as the Company's President. |
|--------|----------------------------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Related parties | - | As defined in International Accounting Standard ("IAS") no. 24. |
|--------|-----------------|---|-----------------------------------------------------------------|

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| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES |
|----------|---------------------------------|

|   | A. | Statement of compliance |
|--------|----|-------------------------|

|   | B.  | Basis for preparation |
|--------|----------|-----------------------|

|   | C. | Presentation of the income statements |
|--------|----|---------------------------------------|

|   | D. | Convenience translation |
|--------|----|-------------------------|

|   | E. | Operating cycle |
|--------|----|-----------------|

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| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | F. | Basis for consolidation |
|--------|----|-------------------------|

|   | (i) | The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company ("Subsidiaries"). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the reporting periods are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as the case may be. Where necessary, adjustments are made to the financial statements of subsidiaries to adjust their accounting policies with those of the Company. Material intra-group transactions, balances, income and expenses are fully eliminated on consolidation. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | In cases whereby the Group acquires the minority interest, the difference between the cost of acquisition and the minority interest's book value acquired is recognized as goodwill. If the difference is negative it is recognized as an income in the income statement. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | In transactions in which the Group attained control through step acquisitions of an entity which do not met the definition of business combinations, are accounted based on the cost of the asset acquired at each step. |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | G. | Interest in joint ventures |
|--------|----|----------------------------|

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| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | H. | Investments in associates |
|--------|----|---------------------------|

|   | I. | Foreign currency |
|--------|----|------------------|

|   | (I)  | Foreign currency transactions |
|--------|-----------|-------------------------------|

|   | (II)  | Financial statements of foreign operations |
|--------|------------|--------------------------------------------|

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| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | I. | Foreign currency (cont.) |
|--------|----|--------------------------|

|   | (II)  | Financial statements of foreign operations (cont.) |
|--------|------------|----------------------------------------------------|

|   | (III) | Rates of exchange of NIS, in effect, in relation to foreign currency (in NIS) are as follows: |
|--------|-------|-----------------------------------------------------------------------------------------------|

|                        |   | December -31 |   |
|-----------------------------|--------|--------------|--------|
|                        |   | 2009         |   |   | 2008 |   |
|                        |   |         |   |   |   |   |
| US Dollar ($)          |   |         | 3.775  |   |   |   | 3.802 |   |
| EURO ( €)        |   |         | 5.442  |   |   |   | 5.297 |   |
| British Pound (£) |   |         | 6.111  |   |   |   | 5.548 |   |
| Romanian New Lei (RON)      |   |         | 1.278  |   |   |   | 1.329 |   |
| Indian Rupee (INR)          |   |         | 0.081  |   |   |   | 0.077 |   |

|                        |   | Year ended December 31 |   |
|-----------------------------|--------|------------------------|--------|
|                        |   | 2009                   |   |   | 2008 |   |   | 2007 |   |
|                        |   |                   |   |   |   |   |   |   |   |
| US Dollar ($)          |   |                   | (0.71  | ) |   |   | (1.14 | ) |   |   | (8.97 | ) |
| EURO (€)         |   |                   | 2.74   |   |   |   | (6.40 | ) |   |   | 1.71 |   |
| British Pound (£) |   |                   | 10.14  |   |   |   | (28.04 | ) |   |   | (6.29 | ) |
| Romanian New Lei (RON)      |   |                   | (3.84  | ) |   |   | (17.9 | ) |   |   | (4.74 | ) |
| Indian Rupee (INR)          |   |                   | 5.195  |   |   |   | (24.6 | ) |   |   | 1.05 |   |

|   | J.  | Cash and cash equivalents |
|--------|----------|---------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | K. | Financial assets |
|--------|----|------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | K. | Financial assets (cont.) |
|--------|----|--------------------------|

|   | L. | Inventories |
|--------|----|-------------|

|   | •  | Hotel inventory and fashion merchandise - by the "first-in, first-out" method; |
|--------|---------------|--------------------------------------------------------------------------------|

|   | • | Image guided treatment inventories -raw materials on the basis of moving average cost per unit; finished products on the basis of standard cost, which approximates actual production cost (materials, labor and indirect manufacturing costs). |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | M. | Trading property |
|--------|----|------------------|

|   | N. | Property plant and equipment |
|--------|----|------------------------------|

|   | (I) | Property plant and equipment are stated at cost less accumulated deprecation and accumulated impairment losses. Government grants have been deducted from cost of assets for which they have been granted. Cost of land and building include direct construction and supervision costs incurred in the construction period as well as borrowing costs capitalized in accordance with the Group's accounting policy described in note 2AD. Improvements and renovations are charged to cost of assets. Maintenance and repair costs are charged to the statement of income as incurred. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (II) | Depreciation is calculated by the straight-line method over the assets estimated useful lives. Leasehold improvements are amortized over the estimated useful period of use not exceeding the lease period (including the period of renewal options that the Group intends to exercise). |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                       |   | %                  |       |
|----------------------------|--------|--------------------|------------|
|                       |   |               |       |
| Freehold land              |   |               | 0          |   |
| Hotels                     |   |               | 1.1 - 1.5  |   |
| Other buildings            |   |               | 2.0 - 2.5  |   |
| Building operating systems |   | 7.0 (average) |       |
| Others (*)                 |   |               | 6.0 - 33.0 |   |

|   | (*) | Consists mainly of leasehold improvements aircraft, motor vehicles, office furniture and equipment, machinery and equipment, electronic equipment, computers and peripheral equipment. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | O. | Investment property |
|--------|----|---------------------|

|   | P.  | Leasing |
|--------|----------|---------|

|   | Q. | Other assets and deferred expenses |
|--------|----|------------------------------------|

|   | R.  | Goodwill |
|--------|----------|----------|

|   | S.  | Intangible assets |
|--------|----------|-------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | T.  | Income taxes |
|--------|----------|--------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | T.  | Income taxes (cont.) |
|--------|----------|----------------------|

|   | U. | Impairment of tangible and intangible assets (excluding goodwill and including investments in associates) |
|--------|----|-----------------------------------------------------------------------------------------------------------|

|   | V.  | Financial liabilities and equity instruments issued by the Group |
|--------|----------|------------------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | V.  | Financial liabilities and equity instruments issued by the Group (cont.) |
|--------|----------|--------------------------------------------------------------------------|

|   | (i)  | Financial liabilities at FVTPL |
|--------|-----------|--------------------------------|

|   | (ii)  | Other financial liabilities |
|--------|------------|-----------------------------|

|   | W.  | Derivative financial instruments and hedge accounting |
|--------|----------|-------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | W.  | Derivative financial instruments and hedge accounting (cont.) |
|--------|----------|---------------------------------------------------------------|

|   | § | Cash flow hedge |
|--------|--------|-----------------|

|   | § | Hedges of net investments in foreign operations |
|--------|--------|-------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | X.  | Provisions |
|--------|----------|------------|

|   | Y.  | Grants from the Office of Chief Scientist ("OCS") |
|--------|----------|---------------------------------------------------|

|   | Z.  | Retirement benefit costs |
|--------|----------|--------------------------|

|   | AA.  | Share-based payments |
|--------|-----------|----------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AA.  | Share-based payments (cont.) |
|--------|-----------|------------------------------|

|   | AB. | Revenue recognition |
|--------|-----|---------------------|

|   | (i) | Revenues from leasing of property and management fees, as well as other revenues relating to the operations of commercial and entertainment centers, are recognized over the term of the lease and/or the service. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii)  | Revenues from hotel operations are recognized upon performance of service. |
|--------|------------|----------------------------------------------------------------------------|

|   | (iii) | Revenues on sales of real estate assets and trading properties are recognized when all the following conditions are satisfied: |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------|

|   | a. | the Group has transferred to the buyer the significant risks and rewards of ownership of the asset sold; |
|--------|----|----------------------------------------------------------------------------------------------------------|

|   | b. | the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the asset sold; |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | the amount of revenue can be measured reliably; |
|--------|----|-------------------------------------------------|

|   | d. | it is probable that the economic benefits associated with the transaction will flow to the Group (including the fact that the buyer's initial and continuing investment is adequate to demonstrate commitment to pay); |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AB. | Revenue recognition (cont.) |
|--------|-----|-----------------------------|

|   | (iii) | (cont.) |
|--------|-------|---------|

|   | e | the costs incurred or to be incurred in respect of the transaction can be measured reliably; and |
|--------|---|--------------------------------------------------------------------------------------------------|

|   | f. | there are no significant acts that the Group is obliged to complete according to the sale agreement. |
|--------|----|------------------------------------------------------------------------------------------------------|

|   | (iv) | Revenues from sale of medical products and rendering services are recognized when all the following conditions have been satisfied: |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------|

|   | a. | persuasive evidence of an arrangement exists; |
|--------|----|-----------------------------------------------|

|   | b. | delivery has occurred, or services have been rendered; |
|--------|----|--------------------------------------------------------|

|   | c. | the amount of revenue can be measured reliably; and |
|--------|----|-----------------------------------------------------|

|   | d. | it is probable  that the economic benefits associated with the transaction will flow to the Group. |
|--------|----|--------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AB. | Revenue recognition (cont.) |
|--------|-----|-----------------------------|

|   | (iv) | (cont.): |
|--------|------|----------|

|   | (v) | Revenues from the sale of goods in the retail industry are recognized upon delivery. |
|--------|-----|--------------------------------------------------------------------------------------|

|   | AC. | Research and development costs |
|--------|-----|--------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AD. | Capitalization of borrowing costs |
|--------|-----|-----------------------------------|

|   | AE. | Earnings (loss) per share |
|--------|-----|---------------------------|

|   | AF. | Statement of cash flows |
|--------|-----|-------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AG. | Critical judgment in applying accounting policies and use of estimates |
|--------|-----|------------------------------------------------------------------------|

|   | (1) | Use of estimates |
|--------|-----|------------------|

|   | a. | Impairment/ write down of real estate properties |
|--------|----|--------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AG. | Critical judgment in applying accounting policies and use of estimates (cont.) |
|--------|-----|--------------------------------------------------------------------------------|

|   | (1) | Use of estimates (cont.) |
|--------|-----|--------------------------|

|   | a. | Impairment/ write down of real estate properties (cont.) |
|--------|----|----------------------------------------------------------|

|   | b. | Litigation and other contingent liabilities |
|--------|----|---------------------------------------------|

|   | c. | Accounting for income taxes |
|--------|----|-----------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AG. | Critical judgment in applying accounting policies and use of estimates (cont.) |
|--------|-----|--------------------------------------------------------------------------------|

|   | (1) | Use of estimates (cont.) |
|--------|-----|--------------------------|

|   | d. | Potential penalties, guarantees issued and expired building permits |
|--------|----|---------------------------------------------------------------------|

|   | e. | Valuation of debentures measured at FVTPL |
|--------|----|-------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AG. | Critical judgment in applying accounting policies and use of estimates (cont.) |
|--------|-----|--------------------------------------------------------------------------------|

|   | (1) | Use of estimates (cont.) |
|--------|-----|--------------------------|

|   | e. | Valuation of debentures measured at FVTPL (cont.) |
|--------|----|---------------------------------------------------|

|   | f. | Valuations of derivative, embedded derivative and share based payment arrangements |
|--------|----|------------------------------------------------------------------------------------|

|   | § | Derivative transactions (mainly PC's swaps transactions): mainly theinterest rate yield curves of the adjusted NIS and Euro. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | § | Embedded derivative: the fair value of the underlying assets (i.e. the Group's hotels in London); the expected volatility of the hotels; and the probability and the term for a Transaction (as defined in the agreement) to occur. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | Share based payment arrangements : the share price in respect of options plans adopted by the Group's private investees which has no quoted market price; the expected stock price volatility over the term of the plan; and actual and projected employee stock option exercise behaviors. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Critical judgment in applying accounting policies |
|--------|-----|---------------------------------------------------|

|   | a. | Capitalization of financing costs |
|--------|----|-----------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AG. | Critical judgment in applying accounting policies and use of estimates (cont.) |
|--------|-----|--------------------------------------------------------------------------------|

|   | (2) | Critical judgment in applying accounting policies (cont.) |
|--------|-----|-----------------------------------------------------------|

|   | a. | Capitalization of financing costs (cont.) |
|--------|----|-------------------------------------------|

|   | b. | Classification of investment as held to maturity |
|--------|----|--------------------------------------------------|

|   | c. | Transfer of real estate assets from investment property to trading property |
|--------|----|-----------------------------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AG. | Critical judgment in applying accounting policies and use of estimates (cont.) |
|--------|-----|--------------------------------------------------------------------------------|

|   | (2) | Critical judgment in applying accounting policies (cont.) |
|--------|-----|-----------------------------------------------------------|

|   | d. | Revenue recognition from sale of trading property |
|--------|----|---------------------------------------------------|

|   | e. | As for critical judgment in respect of inactive market for PC's debentures, see item e. above. |
|--------|----|------------------------------------------------------------------------------------------------|

|   | f. | According to the company management judgment the rights specified in InSightec's shareholders agreement ( see note 11 A (2)) does not confer rights to the minority to participate in operational and financial decisions of InSightec in the ordinary course of business and therefore would not overcome the presumption of control in InSightec's by the company. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | AH. | Reclassification |
|--------|-----|------------------|

|   | AI. | New standards and Interpretations which have been adopted in these financial statements |
|--------|-----|-----------------------------------------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AI. | New standards and Interpretations which came into effect in 2009 and have been adopted in these financial statements (cont.) |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------|

|   | (1) | IFRS 8, Operating Segments - the standard itemizes how an entity must report on segments reporting in the annual financial statements and makes reference to selected details with respect to segments reporting in interim reports. In addition, the standard relates to the disclosure that is necessary in connection with products and services, geographical regions and principal customers. The standard is applicable for annual reporting periods commencing on January 1, 2009, with restatement of comparative figures upon the initial adoption of the standard. The adoptions of the standards did not caused changes in the Group's reportable segments in the years 2008 and 2007; however, certain data in the reportable segments of 2008 and 2007 were retroactively restated in order to comply with the requirements of the new standard. In addition during 2009 an additional amendment to IFRS 8 has been published which is in effect as from January 1, 2010. Such amendment is not expected to have a material affect on the Group's financial statements. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | IAS 1, Presentation of Financial Statements (Revised) - In the framework of the amendment to this standard, changes were made in the current presentation format of financial statements. The presentation and disclosure requirements for financial statements were also expanded, including the presentation of an additional report known as “the statement of comprehensive income”, and the addition of a balance sheet as of the beginning of the earliest period presented in the financial statements in cases of a retroactive change in accounting policies , reclassification or restatement. The standard is applicable to reporting periods that begin on January 1, 2009. As a result of the initial application of the standard, the Company initially included in these financial statements, an additional report named statements of comprehensive income for each of the three years ended on December 31, 2009. In addition, during 2009 an additional amendment to IAS1 has been published which is in effect commencing January 1, 2010. Such amendment is not expected to have a material affect on the Group's financial statements. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | IAS 23, Borrowing Costs (Revised) - the standard stipulates the accounting treatment of borrowing costs. The standard eliminates the immediate recognition of borrowing costs related to qualified assets in the statement of operations. The standard is applicable for borrowing costs relating to qualified assets as to which the capitalization period commences after January 1, 2009. The initial application of the standard did not have any affect on the Group's financial statements. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Amendment to IFRS 7, Disclosures about Financial Instruments -The amendments require enhanced disclosures about fair value measurements and liquidity risk. Among other things, the new amendment: (i) clarifies that the existing IFRS 7 fair value disclosures must be made separately for each class of financial instrument;(ii) adds disclosure of any change in the method for determining fair value and the reasons for the change ; and (iii) establishes a three-level hierarchy for making fair value measurements: |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | § | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AI. | New standards and Interpretations which came into effect in 2009 and have been adopted in these financial statements (cont.) |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | (cont.) |
|--------|-----|---------|

|   | (5) | IFRIC 15, Agreements for the Construction of Real Estate - the clarification stipulates the accounting treatment of revenues and related expenses of entities which construct real estate by themselves or by means of subcontractors, as well as supplying goods or rendering services that are included in the framework of agreements for construction of real estate. The clarification deals with the determination as to whether the agreement to construct real estate falls within IAS 11, “Construction Contracts”, or within IAS 18, “Revenues”. Revenues from agreements which, pursuant to the provisions of the clarification, are within the context of IAS 11 will be recognized in accordance with the percentage of completion method. Revenues from agreements, which pursuant to the provisions of the clarification, are for the supply of goods, will be recognized at the time that the risks and rewards are transferred to the buyer, and revenues from agreements for rendering services will be recognized according to the stage of completion of the transaction as of the balance sheet date. The provisions of the clarification are effective for annual reporting periods which commenced on January 1, 2009.  The initial application of the standard did not have any affect on the Group's financial statements. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | IFRIC 16, Hedges of a Net Investment in a Foreign Operation - the clarification stipulates the nature of the hedged risk and of the amount of the hedged item in the framework of a hedge of a net investment in a foreign operation. In addition, the clarification determines that the hedge instrument might be held by any of the entities in the Group. Furthermore, the clarification determines the amount which should be classified from shareholders’ equity to the statement of operations, at the time that the foreign operation is realized, with respect to which hedge accounting was applied to a net investment in a foreign operation. The provisions of the clarification are effective for annual reporting periods which commenced on January 1, 2009. The initial application of the standard did not have any affect on the Group's financial statements. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | Addendum to IFRS 2, Share Based Payments - Vesting Conditions and Cancellation - the addendum to the standard determined the vesting conditions which have to be taken into account in fair value measurement of share based payment arrangements. In addition, the addendum explains the measurement of fair value of instruments with non- vesting conditions and of cancellations. The addendum will apply to annual reporting periods commencing on January 1, 2009. The initial application of the standard did not have any affect on the Group's financial statements. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AI. | New standards and Interpretations which came into effect in 2009 and have been adopted in these financial statements (cont.) |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | IFRIC 19 -Extinguishing Liabilities with Equity Instruments - The Interpretation applies when a debtor extinguishing a liability fully or partly by issuing equity instruments to the creditor. If a debtor issues equity instruments to a creditor to extinguish all or part of a financial liability, those equity instruments are 'consideration paid' in accordance with IAS 39. Accordingly, the debtor should derecognize the financial liability fully or partly. The debtor should measure the equity instruments issued to the creditor at fair value, unless fair value is not reliably determinable, in which case the equity instruments issued are measured at the fair value of the liability extinguished. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | AJ. | New accounting standards and clarifications issued that are not yet effective |
|--------|-----|-------------------------------------------------------------------------------|

|   | (1) | IFRS 3, Business Combinations (Revised) - the new standard stipulates the accounting treatment for business combinations. Among other things, the standard determines measurement provisions for contingent consideration in business combinations which is to be evaluated at fair value. The transaction costs directly connected with the business combination will be recorded to the statement of operations when incurred. Minority interests will be measured at the time of the business combination at their share in the fair value of the assets, (including goodwill), liabilities and contingent liabilities of the acquired entity, or at their share in the fair value of the net assets, as aforementioned, but excluding their share in the goodwill. As for business combinations where control is achieved after a number of acquisitions (step acquisition), the earlier purchases of the acquired company will be measured at the time that control is achieved at their fair value, while recording the difference to the statement of operations. The standard will apply to business combinations that take place from January 1, 2010 and thereafter. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | IAS 27, Consolidated and Separate Financial Statements (Revised) - the standard provides the accounting treatment of consolidated and separate financial statements. Among other things, the standard stipulates that transactions with minority shareholders, in the context of which the Company retains control before and after the transaction, will be treated as capital transactions. In respect of transaction with the minority, subsequent to which the Company losses control in the subsidiary, the investment retained will be measured at fair value as of that date, with the difference as compared to investment's book value to be recorded to the statement of operations. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AJ. | New accounting standards and clarifications issued that are not yet effective (cont.) |
|--------|-----|---------------------------------------------------------------------------------------|

|   | (2) | (cont.) |
|--------|-----|---------|

|   | (3) | Amendment to IAS 17, Leases-The amendment states that lease of land will be classified as financial or operational lease according to the general principals set in the standard. The implementation of amendment will apply retroactively for reporting periods commencing on January 1, 2010 and thereafter. Earlier implementation is permitted. The amendment will be implemented retroactively in relations to existing leases for which all the information required in the standard is available at the beginning of the lease term. When the information is not available, the classification of the leases will be examined at the inception of the amendment. The Management of the Company anticipates that that It is likely that the changes will affect the classification of some of the Group’s leases of land. However, such classification will not materially affect the Company operational results, its liabilities and its shareholders equity. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | IFRS9, Financial Instruments- IFRS 9 divides all financial assets that are currently in the scope of IAS 39 into two classifications – those measured at amortized cost and those measured at fair value  based on the following principles: |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2 - | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
|----------|-----------------------------------------|

|   | AJ. | New accounting standards and clarifications issued that are not yet effective (cont.) |
|--------|-----|---------------------------------------------------------------------------------------|

|   | (3) | (cont.) |
|--------|-----|---------|

|   | (4) | The following are new accounting standards and clarifications which are not yet effective and, in the opinion of the Company’s management, are not applicable to the Group or their effect is considered immaterial: |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Amendment to IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations; |
|--------|-----|------------------------------------------------------------------------------------|

|   | (ii) | Amendments to IAS 7,  Statements of Cash Flows; |
|--------|------|-----------------------------------------------------------|

|   | (iii) | IFRIC 17, Distribution of Non-Cash Assets to the Shareholders; |
|--------|-------|----------------------------------------------------------------|

|   | (iv) | Amendments to IFRIC 9, Embedded Derivative and IAS 39, Financial  Instruments :Recognition and Measurements; |
|--------|------|------------------------------------------------------------------------------------------------------------------------|

|   | (v) | Amendments to IAS 39, Financial Instruments: Recognition and Measurement – Eligible Hedged Items; |
|--------|-----|---------------------------------------------------------------------------------------------------------|

|   | (vi) | Amendment to IAS 32, Financial Instruments: Presentation-Rights Issues; |
|--------|------|-------------------------------------------------------------------------|

|   | (vii) | Amendment to IAS 24, Related Party Disclosure; |
|--------|-------|------------------------------------------------|

|   | (viii) | Amendment to IFRIC 14, Prepayments of minimum funding requirements. |
|--------|--------|---------------------------------------------------------------------|

----

----

| NOTE 3 - | CASH AND CASH EQUIVALENTS |
|----------|---------------------------|

|                                         |   | December 31       |      |
|----------------------------------------------|--------|-------------------|-----------|
|                                         |   | 2009              |      |   | 2008 |   |
|                                         |   | (in thousand NIS) |      |
|                                         |   |              |      |   |   |   |
| Deposits in banks and financial institutions |   |              | 1,349,994 |   |   |   | 1,599,651 |   |
| Cash                                         |   |              | 158,307   |   |   |   | 90,782 |   |
|                                         |   |              | 1,508,301 |   |   |   | 1,690,433 |   |

| NOTE 4 - | SHORT-TERM DEPOSITS AND INVESTMENTS |
|----------|-------------------------------------|

|   | A. | Composition: |
|--------|----|--------------|

|                                          | December 31   |   |
|-----------------------------------------------|---------------|--------|
|                                          | 2009          |   |   | 2008 |   |
|                                          | Interest      |   |   |   |
|                                          | rate          |   |   |   |
|                                          | %             |   | (in thousand NIS) |   |
|                                          |          |   |   |   |   |   |   |
| Deposits at banks and financial institutions: |          |   |   |   |   |   |   |
|     US dollar             | 1.85          |   |   | 72,873 |   |   |   | 72,076 |   |
|     Euro (i)              | see (i) below |   |   | 172,810 |   |   |   | (*) 197,583 |   |
|     Others                |  0.25%   |   |   | 9,946 |   |   |   | 4 |   |
|                                          |          |   |   | 255,629 |   |   |   | 269,663 |   |
|                                          |          |   |   |   |   |   |   |   |   |
| Marketable securities held for trading:       |          |   |   |   |   |   |   |   |   |
|     Government bonds      |          |   |   | 70,067 |   |   |   | 63,421 |   |
|     Corporate bonds       |          |   |   | 62,724 |   |   |   | 45,425 |   |
|     Shares                |          |   |   | 69,518 |   |   |   | 61,846 |   |
|                                          |          |   |   | 202,309 |   |   |   | 170,692 |   |
|                                          |          |   |   |   |   |   |   |   |   |
| Available for sale financial assets (ii)      |          |   |   | 81,843 |   |   |   | 45,599 |   |
|                                          |          |   |   |   |   |   |   |   |   |
| Derivative measured at FVTPL (iii)            |          |   |   | 23,938 |   |   |   | - |   |
|                                          |          |   |   |   |   |   |   |   |   |
|                                          |          |   |   | 563,719 |   |   |   | 485,954 |   |

|   | (*) | See note 2 AH |
|--------|-----|---------------|

|   | (i) | An amount of NIS 87 million as of December 31, 2009 is restricted due to bank facility agreements signed to finance projects in Eastern Europe. This amount carries an annual interest rate of 3M Euribor+1.65%. The remaining amount as of December 31, 2009 of NIS 86 million is pledged as security for derivative and financial instrument transactions with banks and financial institutions which bears an interest of between 0.75% – 1.4% and 1 month Euribor respectively. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 4 - | SHORT-TERM DEPOSITS AND INVESTMENTS (Cont.) |
|----------|---------------------------------------------|

|   | A. | Composition: (cont.) |
|--------|----|----------------------|

|   | (ii) | Interest-bearing available-for-sale financial assets with a face value of NIS 86.9 million and NIS 60.4 million are outstanding as of December 31 2009 and 2008, respectively. The available-for-sale financial assets have stated interest rates of 1.2% to 9.4% and mature between 1 year and perpetual. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | In May 2009, PC entered into a forward transaction (forward A) with an Israeli bank, in according to PC will buy NIS 357 million and will sale Euro. Forward A transaction is to be settled in December 2010. In September 2009, PC executed an opposite forward transaction with the same bank and same amounts and generated a gain of NIS 14.5 million from such transaction. In November 2009, PC entered into several forward transactions (forward B)  with Israeli banks, according to PC will buy NIS 504 million and will sale Euro. Forward B transactions are to be settled in December 2010. As a result of these transactions, a gain of NIS 9.8 million was recorded in these financial statements. For commitments regarding the derivatives, see note 30 C (7). |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | Liens – see note 23D. |
|--------|----|-----------------------------|

| NOTE 5 - | TRADE ACCOUNTS RECEIVABLES |
|----------|----------------------------|

|                                |   | December 31       |   |
|-------------------------------------|--------|-------------------|--------|
|                                |   | 2009              |   |   | 2008 |   |
|                                |   | (in thousand NIS) |   |
|                                |   |              |   |   |   |   |
| Outstanding accounts                |   |              | 53,653 |   |   |   | 44,748 |   |
| Less - allowance for doubtful debts |   |              | (8,604 | ) |   |   | (10,008 | ) |
|                                |   |              | 45,049 |   |   |   | 34,740 |   |

| NOTE 6 - | OTHER RECEIVABLES |
|----------|-------------------|

|                              |   | December 31       |    |
|-----------------------------------|--------|-------------------|---------|
|                              |   | 2009              |    |   | 2008 |   |
|                              |   | (in thousand NIS) |    |
|                              |   |              |    |   |   |   |
| Income taxes                      |   |              | 5,660   |   |   |   | 2,067 |   |
| Other government institutions (i) |   |              | 61,553  |   |   |   | 99,167 |   |
| Related parties                   |   |              | 8,627   |   |   |   | 8,113 |   |
| Loans to third parties (ii)       |   |              | 27,852  |   |   |   | 7,984 |   |
| Other                             |   |              | 16,198  |   |   |   | 16,863 |   |
|                              |   |              | 119,890 |   |   |   | 134,194 |   |

|   | (i) | Includes mainly VAT receivable due to projects in Romania and Poland. |
|--------|-----|-----------------------------------------------------------------------|

|   | (ii) | As of December 31, 2009 - mainly partners in jointly controlled entities. |
|--------|------|---------------------------------------------------------------------------|

----

----

| NOTE 7 - | PREPAYMENTS AND OTHER ASSETS |
|----------|------------------------------|

|                                                                                         |   | December 31 |   |
|----------------------------------------------------------------------------------------------|--------|-------------|--------|
|                                                                                         |   | 2009        |   |   | 2008 |   |
|                                                                                         |   | Interest    |   |   |   |   |
|                                                                                         |   | rate        |   |   |   |   |
|                                                                                         |   | %           |   |   | (in thousand NIS) |   |
|                                                                                         |   |        |   |   |   |   |   |   |   |
| Restricted bank deposits designated for acquisition and construction of trading property (i) |   |        |   |   |   |   |   |   |   |
|                                                                                         |   |        |   |   |   |   |   |   |   |
| Euro                                                                                         |   |        | 0.25   |   |   |   | 31,018 |   |   |   | 75,948 |   |
| Other                                                                                        |   |        | *      |   |   |   | 8,108 |   |   |   | 22,333 |   |
|                                                                                         |   |        |   |   |   |   | 39,126 |   |   |   | 98,281 |   |
|                                                                                         |   |        |   |   |   |   |   |   |   |   |   |   |
| Advance for plot purchase (ii)                                                               |   |        |   |   |   |   | 235,444 |   |   |   | 224,543 |   |
| Advance to suppliers                                                                         |   |        |   |   |   |   | 46,684 |   |   |   | 71,137 |   |
| Prepaid expenses                                                                             |   |        |   |   |   |   | 13,952 |   |   |   | 10,652 |   |
|                                                                                         |   |        |   |   |   |   | 335,206 |   |   |   | 404,613 |   |

|   | (*) | This amount bears an interest of 90% of the Warsaw interbank bid note. |
|--------|-----|------------------------------------------------------------------------|

|   | (i) | Include mainly advances paid designated for projects by PC in Romania and Poland. |
|--------|-----|-----------------------------------------------------------------------------------|

|   | (ii) | Include mainly advances in the amount of NIS 224 million (2008: NIS 197 million) for the purchase of plots in India (see note 8D). |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------|

| NOTE 8 - | TRADING PROPERTY |
|----------|------------------|

|   | A. | Composition: |
|--------|----|--------------|

|                                                          |   | December 31       |      |
|---------------------------------------------------------------|--------|-------------------|-----------|
|                                                          |   | 2009              |      |   | 2008 |   |
|                                                          |   | (in thousand NIS) |      |
|                                                          |   |              |      |   |   |   |
| Balance as of January 1                                       |   |              | 3,279,775 |   |   |   | 1,738,213 |   |
| Acquisition and construction costs                            |   |              | 685,373   |   |   |   | 1,345,749 |   |
| Transfer from investment property                             |   |              | -         |   |   |   | 425,727 |   |
| Disposal during the year                                      |   |              | -         |   |   |   | (232,682 | ) |
| Capitalized borrowing costs                                   |   |              | 146,521   |   |   |   | 164,200 |   |
| Write-down to net realizable value (see H below and note 26N) |   |              | (216,962  | ) |   |   | (8,248 | ) |
| Addition due to acquisitions of subsidiary                    |   |              | 152,215   |   |   |   | - |   |
| Foreign currency translation adjustments                      |   |              | 110,688   |   |   |   | (153,184 | ) |
| Balance as of December 31                                     |   |              | 4,157,610 |   |   |   | 3,279,775 |   |

----

----

| NOTE 8 - | TRADING PROPERTY (CONT.) |
|----------|--------------------------|

|   | B. | Additional information: |
|--------|----|-------------------------|

|                                                       |   | December 31       |      |
|------------------------------------------------------------|--------|-------------------|-----------|
|                                                       |   | 2009              |      |   | 2008 |   |
|                                                       |   | (in thousand NIS) |      |
|                                                       |   |              |      |   |   |   |
| Accumulated write-down to net realizable value             |   |              | 225,210   |   |   |   | 8,248 |   |
|                                                       |   |              |      |   |   |   |   |   |
| Composition of trading property per stages of development: |   |              |      |   |   |   |   |   |
| Operational (*)                                            |   |              | 478,742   |   |   |   | - |   |
| Under construction                                         |   |              | 1,385,976 |   |   |   | 1,286,000 |   |
| Under planning and design                                  |   |              | 2,292,892 |   |   |   | 1,993,775 |   |
| Total                                                      |   |              | 4,157,610 |   |   |   | 3,279,775 |   |

|   | 3. | Composition of trading property distinguished between freehold and leasehold rights: |
|--------|----|--------------------------------------------------------------------------------------|

|      |   | December 31       |      |
|-----------|--------|-------------------|-----------|
|      |   | 2009              |      |   | 2008 |   |
|      |   | (in thousand NIS) |      |
|      |   |              |      |   |   |   |
| Freehold  |   |              | 2,743,509 |   |   |   | 2,177,369 |   |
| Leasehold |   |              | 1,414,101 |   |   |   | 1,102,406 |   |
|      |   |              | 4,157,610 |   |   |   | 3,279,775 |   |

|   | C. | Additional information in respect of PC's trading property |
|--------|----|------------------------------------------------------------|

----

----

| NOTE 8 - | TRADING PROPERTY (CONT.) |
|----------|--------------------------|

|   | C. | Additional information in respect of PC's trading property (cont.) |
|--------|----|--------------------------------------------------------------------|

|                        |   |           |   |                        |   |                        |   | As of December 31, 2009                             |   |
|-----------------------------|--------|----------------|--------|-----------------------------|--------|-----------------------------|--------|-----------------------------------------------------|--------|
| Project                     |   | Location       |   | Purchase / transaction date |   | Rate of ownership by PC (%) |   | Nature of rights                                    |   | Status of registration of  land |   | Status of permit |
|                        |   |           |   |                        |   |                        |   |                                                |   |   |   |   |
| Suwalki Plaza               |   | Poland         |   | Jun-06                      |   | 100                         |   | Ownership                                           |   | Completed |   | Under construction |
| Zgorzelec Plaza             |   | Poland         |   | Dec-06                      |   | 100                         |   | Leasing for 25 years                                |   | Completed |   | under construction |
| Torun Plaza                 |   | Poland         |   | Feb-07                      |   | 100                         |   | Perpetual leasehold                                 |   | In process |   | Planning and development stage |
| Lodz                        |   | Poland         |   | Sep-01                      |   | 100                         |   | Ownership/ Perpetual usufruct                       |   | Completed |   | Planning and development stage |
| Lods - new                  |   | Poland         |   | Sep-09                      |   | 100                         |   | Ownership                                           |   | Completed |   | Planning and development stage |
| Kielce Plaza                |   | Poland         |   | Jan-08                      |   | 100                         |   | Perpetual leasehold                                 |   | Completed |   | Planning and development stage |
| Lesnzo Plaza                |   | Poland         |   | Jun-08                      |   | 100                         |   | Perpetual leasehold                                 |   | Completed |   | planning and development stage |
| Liberec Plaza               |   | Czech Republic |   | Jun-06                      |   | 100                         |   | Construction lease period with subsequent ownership |   | Completed |   | Operational |
| Opava Plaza                 |   | Czech Republic |   | Jun-06                      |   | 100                         |   | Construction lease period with subsequent ownership |   | Completed |   | Planning and development stage |
| Roztoky                     |   | Czech Republic |   | May-07                      |   | 100                         |   | Ownership                                           |   | Completed |   | Planning and development stage |
| Riga Plaza                  |   | Latvia         |   | Feb-04                      |   | 50                          |   | Ownership                                           |   | Completed |   | Operational |
| Koregaon Park               |   | India          |   | Oct-06                      |   | 100                         |   | Ownership                                           |   | Completed |   | Under construction |
| Kharadi                     |   | India          |   | Feb-07                      |   | 50                          |   | Ownership                                           |   | Completed |   | Planning and development stage |
| Trivandrum                  |   | India          |   | Jun-07                      |   | 50                          |   | Ownership                                           |   | Completed |   | Planning and development stage |
| Casa Radio                  |   | Romania        |   | Feb-07                      |   | 75                          |   | Leasing for 49 years                                |   | Completed |   | Under construction |
| Timisoara Plaza             |   | Romania        |   | Mar-07                      |   | 100                         |   | Ownership                                           |   | Completed |   | Planning and development stage |
| Miercurea Ciuc Plaza        |   | Romania        |   | Jul-07                      |   | 100                         |   | Ownership                                           |   | Completed |   | Under construction |
| Iasi Plaza                  |   | Romania        |   | Jul-07                      |   | 100                         |   | Ownership                                           |   | In Process |   | Planning and development stage |
| Slatina Plaza               |   | Romania        |   | Aug-07                      |   | 100                         |   | Ownership                                           |   | Completed |   | Planning and development stage |
| Targu Mures Plaza           |   | Romania        |   | Mar-08                      |   | 100                         |   | Ownership                                           |   | Completed |   | Planning and development stage |
| Honedoara Plaza             |   | Romania        |   | Feb-08                      |   | 100                         |   | Ownership                                           |   | Completed |   | Planning and development stage |
| Constanta Plaza             |   | Romania        |   |  July-09               |   | 100                         |   | Ownership                                           |   | Completed |   | Planning and development stage |
| Belgrade Plaza (*)          |   | Serbia         |   | Aug-07                      |   | 100                         |   | Leasing for 99 years                                |   | In Process |   | Planning and development stage |
| Kragujevac Plaza (*)        |   | Serbia         |   | Oct-07                      |   | 100                         |   | Leasing for 99 years                                |   | In Process |   | Planning and development stage |
| Sport-Star Plaza (*)        |   | Serbia         |   | Dec-07                      |   | 100                         |   | Leasing for 99 years                                |   | In Process |   | Planning and development stage |
| Shumen Plaza                |   | Bulgaria       |   | Nov-07                      |   | 100                         |   | Ownership                                           |   | In Process |   | Planning and development stage |
| Sofia Plaza Business Center |   | Bulgaria       |   | Jan-09                      |   | 51                          |   | Ownership                                           |   | In process |   | Planning and development stage |
| Dream Island (i)            |   | Hungary        |   | Sep-03                      |   | 43.5                        |   | Land use rights                                     |   | Completed |   | Under construction |
| Arena Plaza Extension       |   | Hungary        |   | Nov-05                      |   | 100                         |   | Land use rights                                     |   | Completed |   | Planning and development stage |
| Uj Udvar                    |   | Hungary        |   | Sep-07                      |   | 35                          |   | Ownership                                           |   | Completed |   | Planning and development stage |
| Helios Plaza                |   | Greece         |   | May-02                      |   | 100                         |   | Ownership                                           |   | Completed |   | Planning and development stage |

|   | (*) | In respect of all the projects in Serbia, PC is retaining the 100% holding in these projects after a decision to discontinue the negotiations with a Serbian developer. As of the balance sheet date, PC paid an amount of €1.3 million (NIS 7 million) as part of a settlement agreement signed with the Serbian developer and obligated to pay him evry time there is any development in the projects. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 8 - | TRADING PROPERTY (CONT.) |
|----------|--------------------------|

|   | C. | Additional information in respect of Pc's trading property (cont.) |
|--------|----|--------------------------------------------------------------------|

|   | (i) | In July 2008 a PC's associated company (ErCorner) (50%) through its associate, Alom Sziget (60%) which owns approximately 320,000 square meters of land on the island of Obuda in the Danube River, located in the heart of Budapest, Hungary (signed a concession agreement with the ministry of finance in Hungary for a casino license for its planned entertainment and mixed use Dream Island development in Budapest. According to concession agreement, the casino license, which will be formally issued towards the opening of the casino, will be granted to Alom Sziget for a period of twenty years from the date of opening of the casino, with an option to extend the license term by additional ten years (subject to the fulfillment of certain condition). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | D. | Additional information in respect of EPI's trading property |
|--------|----|-------------------------------------------------------------|

|   | (1) | Chennai |
|--------|-----|---------|

----

----

| NOTE 8 - | TRADING PROPERTY (CONT.) |
|----------|--------------------------|

|   | D. | Additional information in respect of EPI's trading property (Cont.) |
|--------|----|---------------------------------------------------------------------|

|   | (2) | Bangalore |
|--------|-----|-----------|

----

----

| NOTE 8 - | TRADING PROPERTY (CONT.) |
|----------|--------------------------|

|   | D. | Additional information in respect of EPI's trading property (Cont.) |
|--------|----|---------------------------------------------------------------------|

|   | (2) | Bangalore (Cont.) |
|--------|-----|-------------------|

|   | E. | Disposals of trading property |
|--------|----|-------------------------------|

|   | (1) | On July 10, 2007, PC has executed a binding agreement for the sale of its entire interest (100%) in a company which holds the rights in and to the Arena Plaza shopping and entertainment center in Budapest ("Arena") to UK based Active Asset Investment Management ("aAIM"). On December 18, 2007 PC and aAIM executed an addendum to the transaction agreement according to which aAIM represented that all conditions precedent for the consummation of the transaction have been fulfilled by PC and/or waived by aAIM. Accordingly, the parities executed an amicable closing of the transaction which is effective as from November 30, 2007 ("Closing Effective Date"). As a result of this transaction, the Group recorded in its 2007 financial statements revenues from sale of trading property in the amount of NIS 2,091 million and recognized a gain of NIS 1,145 million. Following purchase price adjustments conducted during 2008, the Group recognized an additional gain of NIS 117.7 million. As for indemnifications provided by PC to aAim, see note 23C (5). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | During 2007 and 2008, PC executed several transactions, in addition to the Arena transaction described in the previous paragraph, for the sale of commercial centers to Klepeirre within the framework of an agreement signed in July 2005, as detailed in the following table: |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Commercial Center |   | Ownership by PC (%) |   | Date of delivery |   | Revenues recognized(NIS million) |   |   | Gain Recognized(NIS million) |   |
|-------------------|--------|---------------------|--------|------------------|--------|----------------------------------|--------|--------|------------------------------|--------|
|              |   |                |   |             |   |                             |   |   |                         |   |
| Sosnowiec Plaza   |   | 100%                |   | May 2007         |   |                             | 226    |   |                         |   | 55 |   |
| Rybnik Plaza      |   | 100%                |   | May 2007         |   |                             | 269    |   |                         |   | 61 |   |
| Lublin Plaza      |   | 50%                 |   | July 2007        |   |                             | 224    |   |                         |   | 57 |   |
| Plzen Plaza       |   | 100%                |   | June 2008        |   |                             | 328    |   |                         |   | 95 |   |
| Total             |   |                |   |             |   |                             | 1,047  |   |                         |   | 268 |   |

----

----

| NOTE 8 - | TRADING PROPERTY (CONT.) |
|----------|--------------------------|

|   | F. | As of December 31, 2009 the Group pledged trading property in the amount of NIS 1,260 million in order to secure borrowings provided to the Group by financial institutions. See also note 23D. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | G. | As for commitments in respect of construction services and purchase of plots see note 23A (3). |
|--------|----|------------------------------------------------------------------------------------------------|

|   | H. | The majority projects of the trading property were valued as of December 31, 2009 by independent third party appraiser. PC's management made adjustments to the fair values determined by the appraiser to reflect the net realizable value by neutralizing the developers profit on costs from the valuations. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                               |   | Retail |       |   | Offices |   |
|----------------------------------------------------|--------|--------|------------|--------|---------|--------|
|                                               |   | 2009   |       |   | 2008    |   |   | 2009 |   |   | 2008 |   |
| Estimated rental prices per sqm per month (in EUR) |   |   |       |   |    |   |   |   |   |   |   |   |
| Romania                                            |   |   | 10-22      |   |    |   | 17-26 |   |   |   | 12.5 |   |   |   | 13.5 |   |
| Czech Republic                                     |   |   | 13-15      |   |    |   | 17.5-18.5 |   |   |   | 13 |   |   |   | 13 |   |
| Serbia                                             |   |   | 16-36      |   |    |   | 16-42 |   |   |   | 17 |   |   |   | 19 |   |
| Latvia                                             |   |   | 17.4       |   |    |   | 18 |   |   |   | N/A |   |   |   | N/A |   |
| Poland                                             |   |   | 14-18      |   |    |   | 16-19 |   |   |   | 11.75 |   |   |   | 13 |   |
| Greece                                             |   |   | 30         |   |    |   | N/A |   |   |   | N/A |   |   |   | 18 |   |
| Hungary                                            |   |   | 10-24      |   |    |   | 11-25 |   |   |   | 11.5 |   |   |   | 11.5 |   |
| Bulgaria                                           |   |   | 12-22      |   |    |   | 17.4 |   |   |   | 12 |   |   |   | N/A |   |
| India                                              |   |   | 10-18      |   |    |   | 13-19 |   |   |   | 10.7 |   |   |   | 9 |   |
|                                               |   |   |       |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Average risk adjusted yield used (in percentage)   |   |   |       |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Romania                                            |   |   | 7.00-9.70  |   |    |   | 6.00-8.75 |   |   |   | 9.65 |   |   |   | 8.85 |   |
| Czech Republic                                     |   |   | 7.50-8.25  |   |    |   | 7.50 |   |   |   | 7.50 |   |   |   | 7.50 |   |
| Serbia                                             |   |   | 9.25-10.50 |   |    |   | 8.75-10 |   |   |   | 9.25 |   |   |   | 8.75 |   |
| Latvia                                             |   |   | 9.25       |   |    |   | 8 |   |   |   | N/A |   |   |   | N/A |   |
| Poland                                             |   |   | 7.75-8.50  |   |    |   | 7.25-7.66 |   |   |   | 7.75 |   |   |   | 7.25 |   |
| Greece                                             |   |   | 7.25       |   |    |   | N/A |   |   |   | N/A |   |   |   | 8 |   |
| Hungary                                            |   |   | 8.75-9.00  |   |    |   | 8.5-9 |   |   |   | 8.75 |   |   |   | 8.50 |   |
| Bulgaria                                           |   |   | 8.50-9.25  |   |    |   | 9 |   |   |   | 8.5 |   |   |   | N/A |   |
| India                                              |   |   | 10-12      |   |    |   | 10-12 |   |   |   | 12 |   |   |   | 12 |   |

----

----

| NOTE 9 - | DEPOSITS, LOANS AND OTHER LONG-TERM BALANCES |
|----------|----------------------------------------------|

|   | A. | Composition: |
|--------|----|--------------|

|                                                                                  |   | December 31       |    |
|---------------------------------------------------------------------------------------|--------|-------------------|---------|
|                                                                                  |   | 2009              |    |   | 2008 |   |
|                                                                                  |   | (in thousand NIS) |    |
|                                                                                  |   |              |    |   |   |   |
| Deposits at banks and financial institutions (i)                                      |   |              | 111,451 |   |   |   | (*) 127,083 |   |
| Held to maturity financial instruments (ii)                                           |   |              | 315,101 |   |   |   | 385,755 |   |
| Financial instruments designated at FVTPL (iii)                                       |   |              | 70,481  |   |   |   | 52,253 |   |
| Derivative measured at FVTPL (iv)                                                     |   |              | 109,656 |   |   |   | 107,657 |   |
| Convertible loan for the acquisition of interest in jointly controlled subsidiary (v) |   |              | 20,144  |   |   |   | 20,061 |   |
| Loans to interest holders in investee companies                                       |   |              | 15,968  |   |   |   | 15,240 |   |
| Loans to associates                                                                   |   |              | 2,698   |   |   |   | 16,321 |   |
| Others                                                                                |   |              | 3,252   |   |   |   | 4,768 |   |
|                                                                                  |   |              | 648,751 |   |   |   | 729,138 |   |
| Less - allowance for doubtful debts                                                   |   |              | (23,056 | ) |   |   | (22,805 | ) |
|                                                                                  |   |              | 625,695 |   |   |   | 706,333 |   |

| (*) See note 2 AH. |   |   |
|--------------------|--------|--------|

|   | (i) | December 31, 2009: Include NIS 86 million linked to the Euro and bearing annual interest rate of 0.42%-1.05% per annum and NIS 20 million linked to the NIS bearing interest of 1%-4.0% per annum. The deposits are mainly pledged as security for the repayment of interest rate swap transactions, long term borrowing, construction and other liabilities obtained by Group companies, which have been included as due and payable concurrently with the liabilities repayment dates. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | During 2007 and 2008 the Company (through its wholly owned subsidiary) and PC entered into several transactions with several financial institutions, according to which the Company and PC invested an amount of € 35.0 million (NIS 191 million) and € 38.0 million (NIS 207 million), respectively, in financial notes ("Notes") for a period of 15 years. The Notes bear an interest of 11.5%-12% per annum, which is payable only if the margin between the 30 years Euro swap interest rate and the 10 years Euro swap interest rate (measured on a daily basis) is higher than the margin stated in the agreement. The issuers have a call option to redeem the Notes at par value in a specific dates included in the investments agreements and any quarter thereafter. The principal amount of the Notes is 100% protected at the maturity date. In August 2009 and March 2010, Notes issued to the Company with a par value of Euro 15 million (NIS 82 million) and Euro 20 million (NIS 109 million), respectively, were redeemed by the issuers. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  (iii) | In February 2008, PC entered into a financial transaction with an issuing bank, according to which PC invested an amount of € 13 million (NIS 71 million) in financial notes ("Notes") which pays a variable interest linked to the 10 year EUR CMS rate subject to a minimum annual interest rate of 6.25% and a maximum annual interest rate of 12.50%. The Note maturity date is February 19, 2018. The principal is 100% protected at maturity. Gain adjustments to fair value in 2009 amounted to NIS 17 million (in 2008: loss of NIS 15.8 million). |
|--------|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | During 2007 and 2008 PC executed several cross currency interest rate swap transactions with Israeli banks in the total principal amount of NIS 1,103 million. In accordance with the terms of the agreement, PC will pay the banks an interest of 6M Euribor plus a margin of 2.2%-3.6% and will receive 4.5%-5.4% interest linked to the Israeli CPI with the same amortization schedule as PC's series A and B debentures. In addition, at each payment date of the debentures, PC will receive principal amount in NIS and will pay the principal amount in Euro (subject to the amortization schedule). The derivatives are measured at fair value through profit and loss. The fair value was computed based on a valuation technique by a third party expert. Accordingly, a gain of NIS 71 million was recorded in 2009 (in 2008 and 2007 - a gain of NIS 96 and NIS 12.5 million, respectively). |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 9 - | DEPOSITS, LOANS AND OTHER LONG-TERM BALANCES (cont.) |
|----------|------------------------------------------------------|

|   | A. | Composition: (cont.) |
|--------|----|----------------------|

|   | (iv) | (cont.) |
|--------|------|---------|

|   | (v) | See note 23 B (7). |
|--------|-----|--------------------|

|   | B. | Liens - see note 23D. |
|--------|----|-----------------------|

| NOTE 10 - | INVESTMENTS IN ASSOCIATES |
|-----------|---------------------------|

|   | A. | Composition: |
|--------|----|--------------|

|                                                                                                               |   | December 31       |    |
|--------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|
|                                                                                                               |   | 2009              |    |   | 2008 |   |
|                                                                                                               |   | (in thousand NIS) |    |
|                                                                                                               |   |              |    |   |   |   |
| Cost (i)                                                                                                           |   |              | 104,919 |   |   |   | 99,898 |   |
| Accumulated losses, net                                                                                            |   |              | (54,883 | ) |   |   | (49,633 | ) |
| Impairment                                                                                                         |   |              | (2,611  | ) |   |   | - |   |
| Acquisition of subsidiaries                                                                                        |   |              | (2,598  | ) |   |   | - |   |
| Foreign currency translation adjustments                                                                           |   |              | (3,230  | ) |   |   | (3,610 | ) |
|                                                                                                               |   |              | 41,597  |   |   |   | 46,655 |   |
|                                                                                                               |   |              |    |   |   |   |   |   |
| (i)    Including goodwill and allocation of investments to research and development in process |   |              | 37,056  |   |   |   | 35,486 |   |

|   | B. | Gamida Cell Ltd. ("Gamida") |
|--------|----|-----------------------------|

----

----

| NOTE 10 - | INVESTMENTS IN ASSOCIATES (Cont.) |
|-----------|-----------------------------------|

|   | C. | The following is summarized data outlining items extracted from the associates' financial statements: |
|--------|----|-------------------------------------------------------------------------------------------------------|

|        |   | As at December 31and for the year then ended |    |
|-------------|--------|----------------------------------------------|---------|
|        |   | 2009                                         |    |   | 2008 |   |   | 2007 |   |
|        |   | (in thousand NIS)                            |    |
|        |   |                                         |    |   |   |   |   |   |   |
| Assets      |   |                                         | 100,026 |   |   |   | 231,281 |   |   |   | 245,222 |   |
| Liabilities |   |                                         | (53,875 | ) |   |   | (164,132 | ) |   |   | (161,890 | ) |
| Net assets  |   |                                         | 46,151  |   |   |   | 67,149 |   |   |   | 83,332 |   |
|        |   |                                         |    |   |   |   |   |   |   |   |   |   |
| Revenues    |   |                                         | 22,729  |   |   |   | 28,792 |   |   |   | 42,800 |   |
|        |   |                                         |    |   |   |   |   |   |   |   |   |   |
| Loss        |   |                                         | (29,566 | ) |   |   | (35,745 | ) |   |   | (42,780 | ) |

| NOTE 11 - | ADDITIONAL INFORMATION AS TO INVESTMENTS IN SUBSIDIARIES AND CHANGES THEREOF |
|-----------|------------------------------------------------------------------------------|

|   | A. | InSightec Ltd. ("InSightec") |
|--------|----|------------------------------|

|   | (1) | InSightec Ltd. is engaged in the development, production and marketing of magnetic resonance imaging guided and focused ultrasound treatment equipment. The industry in which InSightec operates is characterized by rapid technological development. Substantially all of InSightec's current sales are derived from a few applications of InSightec's products. Other applications of InSightec's technology are in the early stages and there can be no assurance that these applications will be successful InSightec is continuing research and development for additional applications for such products. As of the balance sheet date, the Group holds 71.3% in InSightec and 59.5% on a fully diluted basis. The fully diluted holdings in InSightec is calculated including 1.2 millions options exercisable into InSightec's ordinary shares which vest upon the initial public offering of InSightec and/or other "Material Change of the Company". |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | As of the balance sheet date, General Electric Health Care ("GE") holds approximately 16.9% of InSightec’s shares on a fully diluted basis. The shareholders agreement stipulates several limitations on the execution of certain material transactions or activities not in the ordinary course of business of Insightech, without obtaining GE’s prior approval. In addition, the approval of certain transactions requires the vote of 70% of InSightec's preferred B shares of which as for the balance sheet date the Company holds 64.3%. The shareholders agreement also imposes certain limitation and rights on shares transactions and rights for the Group and GE ,in case one party  fundamentally breach the agreement, to acquire the other's stake in InSightec, at certain penalty value. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | In March 2009, InSightec signed an agreement for an internal round of financing in the aggregate amount of $15.0 million (NIS 56 million), which was fully invested during 2009. The investment is in the form of series B preferred shares of InSightec at a price of $6 per share. The series B preferred shares are senior to all other shares and junior to all creditors. Each series B preferred share may be converted at any time at the holder’s option into the number of ordinary shares equal to the original issue price of the Shares divided by $6. Upon a qualified IPO, the shares will be automatically so converted. In the event Insightech is sold, liquidated or wounded up for any reason, the holders of series B preferred shares shall receive on a pro rata basis among themselves, prior to any payments to any other equity holders, the original issue price of the series B preferred shares. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 11 - | ADDITIONAL INFORMATION AS TO INVESTMENTS IN SUBSIDIARIES AND CHANGES THEREOF (Cont.) |
|-----------|--------------------------------------------------------------------------------------|

|   | A. | InSightec Ltd. ("InSightec")(cont.) |
|--------|----|-------------------------------------|

|   | (3) | (cont.) |
|--------|-----|---------|

|   | (4) | In December 2009, the Group acquired from GE 1 million shares of Insightec for a total consideration of $ 2 million dollars (NIS 7.9). Said amount was recorded in the financial statements as goodwill. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | In February 2010, the Company committed to provide Insightec financial supporting up to an amount of $15 million (under terms to be agreed between the parties according to market conditions), and as long as needed for Insightec to continue its activity until February 10, 2011. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | In 2005, InSightec, its shareholders and the Israeli Tax Authorities have concluded the principles, subject to which the merger of InSightec and its wholly owned subsidiary (TxSonics) was approved by the Income Tax Ordinance, retroactively from December 31, 2002. As per law and approval, taxable consolidated loss of InSightec and TxSonics may be offset against future taxable income, over a 7 year period (16% each year), however not exceeding 50% of annual taxable net income per each year. Said approval provides, inter alia, that profit generated by the Company from the sale of its holdings in InSightec shall be considered as C.F.C. profits and shall be taxable at a rate of 25%, or any lower rate as determined by tax authorities. The Company undertook, among other things, to deposit its shares in InSightec with a trustee, as security for the tax payment to the Israeli Tax Authorities, upon realization of the shares. Should the companies fail to fulfill the terms of the approval and provisions of the law, validity of the approval shall be terminated retroactively. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | Plaza Center N.V. ("PC") |
|--------|----|--------------------------|

|   | (1) | PC conducts its activities in the field of establishing, selling and operating shopping and entertainment centres, as well as other mixed use projects (retail, office, residential) in Central and Eastern Europe, and India. As of the balance sheet date the Group holds 68% in PC (62.91% on a fully diluted basis). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 11 - | ADDITIONAL INFORMATION AS TO INVESTMENTS IN SUBSIDIARIES AND CHANGES THEREOF (Cont.) |
|-----------|--------------------------------------------------------------------------------------|

|   | A. | InSightec Ltd. ("InSightec")(cont.) |
|--------|----|-------------------------------------|

|   | (2) | On October 20, 2008 PC announced its intention to commence a share repurchase    program in the framework of which PC will purchase up to approximately 19.3 million shares, representing approximately 6.6% of PC's share capital. In addition, the Company also informed its intention to purchase PC's shares which shall be executed within the above-mentioned limit of PC's repurchasing program. Through December 31, 2008 PC purchased approximately 9.2 million shares for a total consideration of € 5.5 million and the Company purchased 0.2 million shares for a total consideration of € 0.1 million. During January 2009, PC purchased additional approximately 5.3 million shares in a total consideration of € 3.5 million (NIS 18 million) and the Company purchased additional approximately 4.6 million shares in the total consideration of € 3.1 million (NIS 16.6 million). As a result of these transactions the Group recorded a gain of approximately NIS 64 and NIS 45.6 million in the financial statements of 2009 and 2008, respectively. Such gains represent the excess shareholders' equity acquired by the Group over the consideration paid. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | On June 12, 2008, PC has paid a cash dividend in the aggregate amount of € 57 million. The Company's share in such dividend was € 39 million. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | C. | BEA Hotels N.V. ("BH") |
|--------|----|------------------------|

|   | (1) | BH is a party to shareholder agreements with Park Plaza N.V. (a public company its shares are traded in the AIM) with respect to three hotels in the United Kingdom and three hotels in the Netherland. In accordance with the terms of these agreements, BH and Park Plaza have equal representation in the board of directors of each hotel company. The agreements also provide for rights of first refusal, tag along, drag along rights and that some shares (5%-10%) held by Park Plaza in the UK hotel companies, will not confer voting rights until such time as Park Plaza shall have provided and completed its full equity contribution (as defined in the agreements) in each respective hotel. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | 100% of the voting and equity rights in a company that holds and operates the Radisson Astrid and Park Inn hotels in Antwerp, Belgium. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Approximately 77% of SC Bucuresti Turism S.A. ("Bucuresti") which owns a complex consisting of the Radisson hotel, and the Centrville hotel (an apartment hotel), situated in Bucharest, Romania. Bucuresti was purchased through a privatization tender published by the State Ownership Fund of the Romanian government, which was approved by the supreme court of Romania. For information concerning legal actions filed in connection with the purchase and ownership of Bucuresti shares - see note  23B.(5). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 11 - | ADDITIONAL INFORMATION AS TO INVESTMENTS IN SUBSIDIARIES AND CHANGES THEREOF (CONT.) |
|-----------|--------------------------------------------------------------------------------------|

|   | D. | Elbit- Plaza India Real Estate Holding Ltd. ("EPI") |
|--------|----|-----------------------------------------------------|

|   | E. | As of the balance sheet date the Group holds 6 joint venture companies which hold and operate six hotels in the UK and in the Netherland; 12 joint ventures companies which are in various stage of development and construction of trading property in eastern Europe and India; and 2 joint venture companies which hold plots in India. Commencing the second quarter of 2009, PC proportionately consolidated Ercorner (see also note 8C). |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                    |   | At December 31and for the year then ended |       |
|-------------------------|--------|-------------------------------------------|------------|
|                    |   | (in thousand NIS)                         |       |
|                    |   | 2009                                      |       |   | 2008 |   |   | 2007 |   |
|                    |   |                                      |       |   |   |   |   |   |   |
| Current assets          |   |                                      | 1,283,657  |   |   |   | 984,051 |   |   |   | 285,431 |   |
| Non-current assets      |   |                                      | 694,544    |   |   |   | 651,129 |   |   |   | 897,945 |   |
| Current liabilities     |   |                                      | (1,049,477 | ) |   |   | (460,202 | ) |   |   | (141,034 | ) |
| Non-current liabilities |   |                                      | (216,994   | ) |   |   | (523,434 | ) |   |   | (968,095 | ) |
| Net assets              |   |                                      | 711,730    |   |   |   | 651,544 |   |   |   | 74,247 |   |
|                    |   |                                      |       |   |   |   |   |   |   |   |   |   |
|                    |   |                                      |       |   |   |   |   |   |   |   |   |   |
| Revenues                |   |                                      | 242,847    |   |   |   | 246,346 |   |   |   | 488,947 |   |
| Expenses                |   |                                      | (325,650   | ) |   |   | (282,431 | ) |   |   | (477,519 | ) |
| Net profit (loss)       |   |                                      | (82,803    | ) |   |   | (36,085 | ) |   |   | 11,428 |   |

----

----

| NOTE 12 - | PROPERTY, PLANT AND EQUIPMENT |
|-----------|-------------------------------|

|   | A. | Composition: |
|--------|----|--------------|

|                                                                     |   | Real estate                               |      |   |              |   |   |   |   |
|--------------------------------------------------------------------------|--------|-------------------------------------------|-----------|--------|-------------------|--------|--------|--------|--------|
|                                                                     |   | Hotels                                    |      |   |              |   |   |   |   |   |   |   |
|                                                                     |   | Operating                                 |      |   | Underconstruction |   |   | Other  |   |   | Other fixed assets |   |   | Total |   |
|                                                                     |   | ( i n  t h o u s a n d  N I S ) |      |
| Cost:                                                                    |   |                                      |      |   |              |   |   |   |   |   |   |   |   |   |   |
| Balance as of January 1                                                  |   |                                      | 1,538,575 |   |              |   | 55,250 |   |   |   | 35,942 |   |   |   | 173,373 |   |   |   | 1,803,140 |   |
| Additions during the year                                                |   |                                      | 64,736    |   |              |   | 8,113  |   |   |   | - |   |   |   | 20,983 |   |   |   | 93,832 |   |
| Subsidiaries not previously consolidated                                 |   |                                      | -         |   |              |   | -      |   |   |   | - |   |   |   | 517 |   |   |   | 517 |   |
| Disposals during the year                                                |   |                                      | (1,112    | )      |              |   | -      |   |   |   | - |   |   |   | (3,072 | ) |   |   | (4,184 | ) |
| Disposals in respect of subsidiaries exit  from consolidation- |   |                                      | -         |   |              |   | -      |   |   |   | - |   |   |   | (366 | ) |   |   | (366 | ) |
| Foreign currency translation adjustments                                 |   |                                      | 57,795    |   |              |   | 1,160  |   |   |   | 980 |   |   |   | 2,873 |   |   |   | 62,808 |   |
| Balance as of December 31                                                |   |                                      | 1,659,994 |   |              |   | 64,523 |   |   |   | 36,922 |   |   |   | 194,308 |   |   |   | 1,955,747 |   |
|                                                                     |   |                                      |      |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accumulated depreciation:                                                |   |                                      |      |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance as of January 1                                                  |   |                                      | 104,998   |   |              |   | -      |   |   |   | 2,738 |   |   |   | 28,739 |   |   |   | 136,475 |   |
| Additions during the year                                                |   |                                      | 60,782    |   |              |   | -      |   |   |   | 504 |   |   |   | 20,623 |   |   |   | 81,909 |   |
| Disposals during the year                                                |   |                                      | (1,063    | )      |              |   | -      |   |   |   | - |   |   |   | (1,008 | ) |   |   | (2,071 | ) |
| Disposals in respect of subsidiaries exit from consolidation-            |   |                                      | -         |   |              |   | -      |   |   |   | - |   |   |   | (97 | ) |   |   | (97 | ) |
| Foreign currency translation adjustments                                 |   |                                      | 25,311    |   |              |   | -      |   |   |   | 71 |   |   |   | (23 | ) |   |   | 25,359 |   |
| Balance as of December 31                                                |   |                                      | 190,028   |   |              |   | -      |   |   |   | 3,313 |   |   |   | 48,234 |   |   |   | 241,575 |   |
|                                                                     |   |                                      |      |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for impairment:                                                |   |                                      |      |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance as of January 1                                                  |   |                                      | 32,900    |   |              |   | -      |   |   |   | 7,946 |   |   |   | 7,566 |   |   |   | 48,412 |   |
| Impairment loss recognized(see note 26N (i))                             |   |                                      | 15,129    |   |              |   | -      |   |   |   | - |   |   |   | 1,500 |   |   |   | 16,629 |   |
| Foreign currency translation adjustments                                 |   |                                      | 812       |   |              |   | -      |   |   |   | 217 |   |   |   | 273 |   |   |   | 1,302 |   |
| Balance as of December 31                                                |   |                                      | 48,841    |   |              |   | -      |   |   |   | 8,163 |   |   |   | 9,339 |   |   |   | 66,343 |   |
| Payment on account of fixed assets                                       |   |                                      | -         |   |              |   | -      |   |   |   | - |   |   |   | 791 |   |   |   | 791 |   |
|                                                                     |   |                                      |      |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net book value                                                           |   |                                      | 1,421,125 |   |              |   | 64,523 |   |   |   | 25,446 |   |   |   | 137,526 |   |   |   | 1,648,620 |   |

----

----

| NOTE 12 - | PROPERTY, PLANT AND EQUIPMENT (CONT.) |
|-----------|---------------------------------------|

|   | A. | Composition (cont.): |
|--------|----|----------------------|

|                                             |   | Real estate                               |      |   |              |   |     |   |   |
|--------------------------------------------------|--------|-------------------------------------------|-----------|--------|-------------------|--------|----------|--------|--------|
|                                             |   | Hotels                                    |      |   |              |   |     |   |   |   |   |   |
|                                             |   | Operating                                 |      |   | Underconstruction |   |     | Other  |   |   | Otherfixed assets |   |   | Total |   |
|                                             |   | ( i n  t h o u s a n d  N I S ) |      |
| Cost:                                            |   |                                      |      |   |              |   |     |   |   |   |   |   |   |   |   |
| Balance as of January 1                          |   |                                      | 1,206,373 |   |              |   | 515,572  |   |   |   | 41,461 |   |   |   | 121,437 |   |   |   | 1,884,843 |   |
| Hotels whose constructions ended during the year |   |                                      | 562,622   |   |              |   | (562,622 | )      |   |   | - |   |   |   | - |   |   |   | - |   |
| Additions during the year                        |   |                                      | 6,921     |   |              |   | 183,439  |   |   |   | - |   |   |   | 77,482 |   |   |   | 267,842 |   |
| Disposals during the year                        |   |                                      | (1,510    | )      |              |   | (112     | )      |   |   | (2,802 | ) |   |   | (21,563 | ) |   |   | (25,987 | ) |
| Foreign currency translation adjustments         |   |                                      | (235,831  | )      |              |   | (81,027  | )      |   |   | (2,717 | ) |   |   | (3,983 | ) |   |   | (323,558 | ) |
| Balance as of December 31                        |   |                                      | 1,538,575 |   |              |   | 55,250   |   |   |   | 35,942 |   |   |   | 173,373 |   |   |   | 1,803,140 |   |
|                                             |   |                                      |      |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accumulated depreciation:                        |   |                                      |      |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance as of January 1                          |   |                                      | 95,226    |   |              |   | -        |   |   |   | 2,236 |   |   |   | 16,929 |   |   |   | 114,391 |   |
| Additions during the year                        |   |                                      | 50,842    |   |              |   | -        |   |   |   | 645 |   |   |   | 16,951 |   |   |   | 68,438 |   |
| Disposals during the year                        |   |                                      | -         |   |              |   | -        |   |   |   | - |   |   |   | (4,724 | ) |   |   | (4,724 | ) |
| Foreign currency translation adjustments         |   |                                      | (41,070   | )      |              |   | -        |   |   |   | (143 | ) |   |   | (417 | ) |   |   | (41,630 | ) |
| Balance as of December 31                        |   |                                      | 104,998   |   |              |   | -        |   |   |   | 2,738 |   |   |   | 28,739 |   |   |   | 136,475 |   |
|                                             |   |                                      |      |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for impairment:                        |   |                                      |      |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance as of January 1                          |   |                                      | 31,126    |   |              |   | -        |   |   |   | - |   |   |   | - |   |   |   | 31,126 |   |
| Impairment loss recognized                       |   |                                      | 3,757     |   |              |   | -        |   |   |   | 7,946 |   |   |   | 7,566 |   |   |   | 19,269 |   |
| Foreign currency translation adjustments         |   |                                      | (1,983    | )      |              |   | -        |   |   |   | - |   |   |   | - |   |   |   | (1,983 | ) |
| Balance as of December 31                        |   |                                      | 32,900    |   |              |   | -        |   |   |   | 7,946 |   |   |   | 7,566 |   |   |   | 48,412 |   |
|                                             |   |                                      |      |   |              |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net book value                                   |   |                                      | 1,400,677 |   |              |   | 55,250   |   |   |   | 25,258 |   |   |   | 137,068 |   |   |   | 1,618,253 |   |

|   | B. | Composition of real estate assets distinguished between freehold and leasehold rights: |
|--------|----|----------------------------------------------------------------------------------------|

|           |   | December 31       |      |
|----------------|--------|-------------------|-----------|
|           |   | 2009              |      |   | 2008 |   |
|           |   | (in thousand NIS) |      |
|           |   |              |      |   |   |   |
| Freehold       |   |              | 1,222,264 |   |   |   | 1,208,296 |   |
| Leasehold      |   |              | 288,822   |   |   |   | 272,889 |   |
| Net book value |   |              | 1,511,086 |   |   |   | 1,481,185 |   |

|   | C. | Annual depreciation rates - see note 2N. |
|--------|----|------------------------------------------|

|   | D | As of December 31, 2009 the Group pledged property plant and equipment in the amount of NIS 1,535 million in order to secure borrowings provided to the Group by financial institutions. See also note 23D. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 13 - | INVESTMENT PROPERTY |
|-----------|---------------------|

|   | A. | Composition: |
|--------|----|--------------|

|                                                      |   | December 31       |    |
|-----------------------------------------------------------|--------|-------------------|---------|
|                                                      |   | 2009              |    |   | 2008 |   |
|                                                      |   | (in thousand NIS) |    |
| Cost                                                      |   |              |    |   |   |   |
| Balance as of January 1                                   |   |              | 102,506 |   |   |   | 272,857 |   |
| Additions during the year                                 |   |              | 306     |   |   |   | 291,508 |   |
| Transfer to trading property                              |   |              | -       |   |   |   | (425,727 | ) |
| Foreign currency translation adjustments                  |   |              | 3,382   |   |   |   | (36,132 | ) |
| Balance as of December 31                                 |   |              | 106,194 |   |   |   | 102,506 |   |
|                                                      |   |              |    |   |   |   |   |   |
| Accumulated depreciation                                  |   |              |    |   |   |   |   |   |
| Balance as of January 1                                   |   |              | 23,609  |   |   |   | 12,977 |   |
| Depreciation and impairment recognized (see note 26N (i)) |   |              | 1,080   |   |   |   | 8,964 |   |
| Foreign currency translation adjustments                  |   |              | 1,018   |   |   |   | 1,668 |   |
| Balance as of December 31                                 |   |              | 25,707  |   |   |   | 23,609 |   |
|                                                      |   |              |    |   |   |   |   |   |
| Net book value                                            |   |              | 80,487  |   |   |   | 78,897 |   |
|                                                      |   |              |    |   |   |   |   |   |
| Fair value of investment property (i)                     |   |              | 101,137 |   |   |   | 94,230 |   |

|   | (i) | The fair value of the majority of the investment property was determined by internal valuations using the discounted cash flows method and taking into consideration the actual rental income and the relevant market yield. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | Additional Information |
|--------|----|------------------------|

----

----

| NOTE 14 - | OTHER ASSETS AND DEFERRED EXPENSES |
|-----------|------------------------------------|

|   | A. | Composition: |
|--------|----|--------------|

|                                    |   | December 31       |    |
|-----------------------------------------|--------|-------------------|---------|
|                                    |   | 2009              |    |   | 2008 |   |
|                                    |   | (in thousand NIS) |    |
| Cost                                    |   |              |    |   |   |   |
| Prepaid leasehold rights (see B. below) |   |              | 134,373 |   |   |   | 123,847 |   |
| Others                                  |   |              | 21,118  |   |   |   | 11,724 |   |
|                                    |   |              | 155,491 |   |   |   | 135,571 |   |
|                                    |   |              |    |   |   |   |   |   |
| Accumulated amortization and impairment |   |              |    |   |   |   |   |   |
| Prepaid leasehold rights (see B. below) |   |              | 15,521  |   |   |   | 14,054 |   |
| Others                                  |   |              | 3,479   |   |   |   | 3,453 |   |
|                                    |   |              | 19,000  |   |   |   | 17,507 |   |
| Amortized cost                          |   |              | 136,491 |   |   |   | 118,064 |   |

|   | B. | Additional information: |
|--------|----|-------------------------|

| Asset                                               |   | Lease characteristics            |   | Lease term                                                                                   |   | Annual lease payment                                                                                                                                 |
|-----------------------------------------------------|--------|----------------------------------|--------|----------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                |   |                             |   |                                                                                         |   |                                                                                                                                                 |
| Utrecht Park Plaza hotel, the Netherlands           |   | Capitalized                      |   | 50 years(through 2038)                                                                       |   | NA                                                                                                                                                   |
|                                                |   |                             |   |                                                                                         |   |                                                                                                                                                 |
| Sherlock Holmes Park Plaza hotel, United Kingdom(i) |   | Partially capitalized sub- lease |   | 99 years (through  2095)                                                           |   | £0.6 million (NIS 3.7 million) adjusted every five years on the basis of "open market value".                                                   |
|                                                |   |                             |   |                                                                                         |   |                                                                                                                                                 |
| River Bank Park Plaza hotel, United Kingdom         |   | Partially capitalized            |   | 125 years (through  2125)                                                          |   | £ 0.6 million (NIS 3.7 million), adjusted every five years based on the CPI in England, with the next adjustment to be carried out in May 2010. |
|                                                |   |                             |   |                                                                                         |   |                                                                                                                                                 |
| Hotel in Tiberius, Israel (ii)                      |   | Capitalized                      |   | 49 years (through 2056) with an option to extend the lease term with an additional 49 years. |   | NA                                                                                                                                                   |
|                                                |   |                             |   |                                                                                         |   |                                                                                                                                                 |
| Dairy farm in Gujarat, India (iii)                  |   | Un-capitalized                   |   | 30 years (through 2038).                                                                     |   | Rupee 1,215 thousands (NIS 101 thousands). Rent payment will be adjusted after 10 years based on market rates.                                       |
|                                                |   |                             |   |                                                                                         |   |                                                                                                                                                 |
| Hospital in Goa, India (iv)                         |   | Un-capitalized                   |   | 30 years (through 2039) with an option to extend the lease term with an additional 30 years. |   | Rupee 5,149 thousands (NIS 417 thousands). Rent payment will be adjusted after each 3 years in 10%.                                                  |

----

----

| NOTE 14 - | OTHER ASSETS AND DEFERRED EXPENSES (CONT.) |
|-----------|--------------------------------------------|

|   | B. | Additional information (cont.): |
|--------|----|---------------------------------|

|   | (i) | The lessee and the land lord are currently under dispute regarding the rent adjustment of the Sherlock Holmes Park Plaza hotel (which was initially initiated in October 2006) whereby the land lord claims an increase of the rent to £1.6 million (NIS 10 million) per annum. The Group is of the opinion, based on a professional advice, that the rent review should be calculated on the basis of the value of the hotel prior to the refurbishment and improvement works executed by the lessee and that the Group will not bear any material costs in respect of this dispute. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Within the framework of the lease agreement, the Company has undertaken to finalize the construction in July 2010, Within the framework of the lease agreement the Company has provided the Israeli Land Authority ("ILA") with two bank guarantees in the aggregate amount of NIS 10 million linked to the increase in the Israeli consumer price index in order to secure the Company's undertakings under the lease agreement.  In accordance with the lease agreement, in case of non-compliance with its terms the contract can be canceled.  The company's management is of the opinion that the ILA will extend the lease agreement. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | In February 2008, the Group executed a memorandum of agreement ("Memorandum") with the Government of the State Gujarat, India pursuant to which the Group will establish a modern dairy farm with approximately 10,000 cows and an ultra modern dairy plant that will produce basic and premium dairy products. The Government of Gujarat accordingly signed in March 2008 a lease deed with respect to a land measuring approximately 500 acres, by which upon exercise thereof the Group shall be awarded the land on a long term lease ending in 2038 for the purpose of establishing the dairy farm and the dairy plant. |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | In December 2009, the Group executed a project development and implementation agreement with the government of Goa, India pursuant to which the Group will build and operate a 150-200 beds hospital by a joint venture company in which the government of Goa will be 15% shareholder for no consideration. The Group undertakes to finalize the construction and operate 100 beds within a period not exceeding 2 years. The remaining 50-100 beds will be operated within the next 4 years. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE 15 - | INTANGIBLE ASSETS |
|-----------|-------------------|

|                                    |   | December 31       |   |
|-----------------------------------------|--------|-------------------|--------|
|                                    |   | 2009              |   |   | 2008 |   |
|                                    |   | (in thousand NIS) |   |
| Cost                                    |   |              |   |   |   |   |
| Goodwill (i)                            |   |              | 51,192 |   |   |   | 44,725 |   |
| Distribution rights                     |   |              | 4,815  |   |   |   | 2,763 |   |
|                                    |   |              | 56,007 |   |   |   | 47,488 |   |
| Accumulated amortization and impairment |   |              |   |   |   |   |   |   |
| Distribution rights                     |   |              | 2,521  |   |   |   | 906 |   |
| Amortized cost                          |   |              | 53,486 |   |   |   | 46,582 |   |

----

----

| NOTE 15 - | INTANGIBLE ASSETS (Cont.) |
|-----------|---------------------------|

|   | (i) | The goodwill is attributable to the following cash generating units: an amount of NIS 31 million (2008: NIS 32 million) to the Bucuresti hotel and an amount of NIS 20 million (2008: NIS 13 million) to the activities of InSightec. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE 16 - | SHORT-TERM CREDITS |
|-----------|--------------------|

|   | A. | Composition: |
|--------|----|--------------|

|                                   | December 31            |   |
|----------------------------------------|------------------------|--------|
|                                   | 2009                   |   |   | 2008 |   |
|                                   | Interest               |   |   |   |
|                                   | rate                   |   |   |   |
|                                   | %                      |   | (in thousand NIS) |   |
|                                   |                   |   |   |   |   |   |   |
| US dollars                             | Libor+  1.75 |   |   | 91,518 |   |   |   | 91,791 |   |
| Euro (i)                               | Euribor+0.4-4.7        |   |   | 1,010,786 |   |   |   | (*) 737,996 |   |
| NIS                                    | Prime+  1.1  |   |   | 39,302 |   |   |   | 17,824 |   |
| Others                                 |                   |   |   | 46,892 |   |   |   | - |   |
|                                   |                   |   |   | 1,188,498 |   |   |   | 847,611 |   |
|                                   |                   |   |   |   |   |   |   |   |   |
| Current maturities (see note 23D. (3)) |                   |   |   | 1,030,466 |   |   |   | 604,533 |   |
|                                   |                   |   |   |   |   |   |   |   |   |
|                                   |                   |   |   | 2,218,964 |   |   |   | 1,452,144 |   |

|   | B. | Liens and financial covenants - see note 23D and 23E. |
|--------|----|-------------------------------------------------------|

----

----

| NOTE 17 - | PAYABLES AND OTHER CREDIT BALANCES |
|-----------|------------------------------------|

|                                                                    |   | December 31       |    |
|-------------------------------------------------------------------------|--------|-------------------|---------|
|                                                                    |   | 2009              |    |   | 2008 |   |
|                                                                    |   | (in thousand NIS) |    |
|                                                                    |   |              |    |   |   |   |
| Income taxes                                                            |   |              | 14,227  |   |   |   | 19,273 |   |
| Other government institutions                                           |   |              | 8,248   |   |   |   | 6,345 |   |
| Wages and fringe benefits                                               |   |              | 44,262  |   |   |   | 49,609 |   |
| Accrued interest payable                                                |   |              | 48,108  |   |   |   | 49,158 |   |
| Related parties                                                         |   |              | 11,848  |   |   |   | 10,489 |   |
| Liability in respect of acquisition of trading property                 |   |              | 42,765  |   |   |   | 50,531 |   |
| Expenses accrued in connection with the realization of trading property |   |              | -       |   |   |   | 3,005 |   |
| Accrued expenses, commissions and others                                |   |              | 31,992  |   |   |   | 29,294 |   |
|                                                                    |   |              | 201,450 |   |   |   | 217,704 |   |

| NOTE 18 - | OTHER LIABILITIES |
|-----------|-------------------|

|                                    |   | December 31       |    |
|-----------------------------------------|--------|-------------------|---------|
|                                    |   | 2009              |    |   | 2008 |   |
|                                    |   | (in thousand NIS) |    |
|                                    |   |              |    |   |   |   |
| Liability for construction services (i) |   |              | 86,164  |   |   |   | 86,971 |   |
| Income in advance                       |   |              | 31,801  |   |   |   | 18,275 |   |
|                                    |   |              | 117,965 |   |   |   | 105,246 |   |

|   | (i) | Within the framework of an agreement for the acquisition of 75% holding in a company holding the Casaradio Project in Romania (Project Company), PC has undertaken to ensure that the Project Company will construct an office building for the Government of Romania at the Project Company’s own costs |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE 19 - | BORROWINGS |
|-----------|------------|

|   | A. | Composition: |
|--------|----|--------------|

|                                                     |   | December 31       |       |
|----------------------------------------------------------|--------|-------------------|------------|
|                                                     |   | 2009              |       |   | 2008 |   |
|                                                     |   | (in thousand NIS) |       |
| At amortized cost:                                       |   |              |       |   |   |   |
| Loans from banks and financial institutions(see D below) |   |              | 1,488,072  |   |   |   | (*) 1,403,430 |   |
| Debentures issued by Company (see E. below)              |   |              | 2,417,046  |   |   |   | 2,264,158 |   |
| Debentures issued by PC (see F2 below)                   |   |              | 151,230    |   |   |   | - |   |
| Convertible debentures (see G below)                     |   |              | 99,038     |   |   |   | 70,671 |   |
|                                                     |   |              | 4,155,386  |   |   |   | 3,738,259 |   |
| At FVTPL:                                                |   |              |       |   |   |   |   |   |
| Debentures issued by PC(see F1 below)                    |   |              | 1,193,713  |   |   |   | 927,787 |   |
|                                                     |   |              | 5,349,099  |   |   |   | 4,666,046 |   |
| Less recruitment expenses loans                          |   |              |       |   |   |   |   |   |
| Cost of raising                                          |   |              |       |   |   |   |   |   |
| Less - current maturities (see note 23D.(3))             |   |              | (1,030,466 | ) |   |   | (604,533 | ) |
|                                                     |   |              | 4,318,633  |   |   |   | 4,061,513 |   |

| (*) See note 2 AH. |   |   |
|--------------------|--------|--------|

----

----

| NOTE 19 - | BORROWINGS (CONT.) |
|-----------|--------------------|

|   | B. | Linkage basis and interest rates: |
|--------|----|-----------------------------------|

|               |   | December 31, 2009     |   |
|--------------------|--------|-----------------------|--------|
|               |   |                  |   |   |   |   |
|               |   | Interest rates        |   |   |   |   |
|               |   | %                     |   |   | (in thousand NIS) |   |
| NIS                |   | 6.25                  |   |   |   | 99,038 |   |
| NIS                |   | Israeli CPI + 5.0-6.3 |   |   |   | 2,367,202 |   |
| NIS                |   | Prime+0.5             |   |   |   | 1,273 |   |
| Pound sterling (i) |   | 7.7                   |   |   |   | 552,316 |   |
| Euro               |   | Euribor+ 0.4-1.75     |   |   |   | 615,436 |   |
| Euro               |   | 4.7 – 5.6       |   |   |   | 226,961 |   |
| NIS (ii)           |   | Israeli CPI + 4.5-5.4 |   |   |   | 1,344,943 |   |
| US dollar          |   | Libor+ 1.7-4.0        |   |   |   | 141,930 |   |
|               |   |                  |   |   |   |   | 5,349,099 |   |

|   | (i) | The interest on this loan is hedged by a swap transaction - see note 20A.( ii) |
|--------|-----|--------------------------------------------------------------------------------|

|   | (ii) | As for swap transactions executed in respect of these debentures - see note 9A.(iv) |
|--------|------|-------------------------------------------------------------------------------------|

|   | C. | Repayment schedule: |
|--------|----|---------------------|

|                      |   | December 31       |      |
|---------------------------|--------|-------------------|-----------|
|                      |   | 2009              |      |
|                      |   | (in thousand NIS) |      |
|                      |   |              |      |
| 2010 - current maturities |   |              | 1,030,466 |   |
| 2011                      |   |              | 875,954   |   |
| 2012                      |   |              | 575,439   |   |
| 2013                      |   |              | 712,246   |   |
| 2014                      |   |              | 810,077   |   |
| 2015 and thereafter       |   |              | 1,344,917 |   |
|                      |   |              | 5,349,099 |   |

|   | D. | The following table provide breakdown of the Group's loans from banks and financial institutions: |
|--------|----|---------------------------------------------------------------------------------------------------|

|                                          |   | December 31       |      |
|-----------------------------------------------|--------|-------------------|-----------|
|                                          |   | 2009              |      |   | 2008 |   |
|                                          |   | (in thousand NIS) |      |
|                                          |   |              |      |   |   |   |
| Loans provided to the Company and Elscint (i) |   |              | 309,837   |   |   |   | 303,441 |   |
| Loans provided to PC                          |   |              | 43,929    |   |   |   | 23,676 |   |
| Loans provided to Project Companies(ii)       |   |              | 1,134,306 |   |   |   | 1,076,313 |   |
|                                          |   |              | 1,488,072 |   |   |   | 1,403,430 |   |

----

----

| NOTE 19 - | BORROWINGS (CONT.) |
|-----------|--------------------|

|   | D. | (cont.) |
|--------|----|---------|

|   | (i) | As part of the loans agreements signed between the Company, Elscint and an Israeli bank, an arrangement to accelerate repayment was established as follows: (i) amounts received by the Companies, from public or private offerings of securities of the Companies (and/or of their subsidiaries which were financed by the loan funds), as part of a business merger, as a result of the realization of assets and/or investments, or as a result of refinancing or any other receipt of capital by the Companies (and/or their subsidiaries, as above), will be used first to repay the loans; (ii) net amounts to received from realization of the shares of PC or BH  or shares of their  Project Companies, by means of sale or issuance to a third party or the sale of a project owned thereby  (in full or part), will serve to repay part of the loans (relative to the portion sold) that were received to finance the investment in shares or projects realized, as the case may be; (iii) part of the net amounts to be received from refinancing will be used initially to repay the loans. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Includes mainly loans provided to the Group's Project Companies in the hotel segment. |
|--------|------|---------------------------------------------------------------------------------------|

|   | E. | Following the significant terms of the Company debentures as of December 31, 2009: |
|--------|----|------------------------------------------------------------------------------------|

|   |   |            |   |       |   |                                                     |   | Amortized cost     |      |
|--------|--------|-----------------|--------|------------|--------|----------------------------------------------------------|--------|--------------------|-----------|
|   |   | Linkage         |   | Interest   |   |                                                     |   | as at December 31, |      |
| Series |   | basis           |   | rate       |   | Repayment terms                                          |   | 2009               |      |   | 2008 |   |
|   |   |            |   | %          |   |                                                     |   | (in thousand NIS)  |      |
|   |   |            |   |       |   |                                                     |   |               |      |   |   |   |
| A      |   | Israeli CPI (i) |   | 6.0        |   | 10 semi-annual equal installments commencing August 2009 |   |               | 600,038   |   |   |   | 609,909 |   |
| B      |   | US dollar       |   | Libor+2.65 |   | 10 semi-annual equal installments commencing August 2009 |   |               | 49,842    |   |   |   | 55,701 |   |
| C      |   | Israeli CPI (i) |   | 5.3        |   | 10 annual installments commencingSeptember 2009          |   |               | 447,206   |   |   |   | 474,509 |   |
| D      |   | Israeli CPI (i) |   | 5.0        |   | 8 annual installments commencingApril 2013               |   |               | 698,769   |   |   |   | 673,854 |   |
| E      |   | Israeli CPI (i) |   | 6.3        |   | 10 annual installments commencingJuly 2012               |   |               | 71,687    |   |   |   | 68,988 |   |
| F(ii)  |   | Israeli CPI (i) |   | 5.7        |   | 6 annual installments commencingOctober 2010             |   |               | 549,504   |   |   |   | 381,197 |   |
|   |   |            |   |       |   |                                                     |   |               | 2,417,046 |   |   |   | 2,264,158 |   |

|   | (i) | Linked to the increase in the Israeli CPI over the base index as of the date the debentures were issued. In June 2009 the Company issued an additional NIS 30 million par value series A debentures in the TASE. The total aggregate net consideration received amounted to NIS 33 million. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | In August 2009 the Company issued an additional NIS 141.6 million par value series F debentures in the TASE. The total aggregate net consideration received amounted to NIS 154 million. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 19 - | BORROWINGS (CONT.) |
|-----------|--------------------|

|   | F. | PC's debentures are un-secured and non-convertible and are registered for trade in Tel Aviv Stock Exchange (“TASE”). The debentures will be repaid by PC, inter alia, at the option of the trustee or the holders of the debentures if PC delays the publication of its financial statements for more than 60 days from the dates provided by applicable law, or if the debentures cease to be rated for a period of more than 60 days. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (1) | PC's debentures measured at FVTPL: |
|--------|-----|------------------------------------|

|   |   |    |            |     |   |            |   | Fair value                                                      |   |   | Payments to be paid contractually at maturity |   |
|--------|--------|---------|-----------------|----------|--------|-----------------|--------|-----------------------------------------------------------------|--------|--------|-----------------------------------------------|--------|
|   |   | Linkage |            | Interest |   |            |   | as of December 31,                                              |   |   | as of December 31,                            |   |
| Series |   | basis   |            | rate     |   | Repayment terms |   | 2009(ii)                                                        |   |   | 2008(ii)                                      |   |   | 2009(ii) |   |   | 2008(ii) |   |
|   |   |    |            | %        |   |            |   | (In thousand NIS)                                               |   |   | (In thousand NIS)                             |   |
|   |   |    |            |     |   |            |   |                                                            |   |   |                                          |   |   |   |   |   |   |   |
|   | A      |    | Israeli CPI (i) |     |   | 4.5             |   | 8 annual equal installments commencing December  2010 |   |   | 323,139                                       |   |   |   | 247,770 |   |   |   | 339,411 |   |   |   | 326,932 |   |
|   | B      |    | Israeli CPI (i) |     |   | 5.4             |   | 5 annual equal installments commencing July 2011                |   |   | 870,574                                       |   |   |   | 680,017 |   |   |   | 860,744 |   |   |   | 829,097 |   |
|   |   |    |            |     |   |            |   |                                                            |   |   | 1,193,713                                     |   |   |   | 927,787 |   |   |   | 1,200,155 |   |   |   | 1,156,029 |   |

|   | (i) | The debentures are linked (principal and interest) to the increase Israeli CPI over the base index at the date of the debentures' issuance. As of the balance sheet date PC has swap transactions in respect of part of its Series B debentures with par value of NIS 798 million. As for additional information - see note 9A.(iv) |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | PC's debentures (except the additional Notes issued in August 2009-see below) were designated to FVTPL in accordance with the provisions stipulated in note 2V. The Fair value of PC's debentures as of December 31,2009 was computed based on their quoted market price in the TASE  while  their  fair value as of December 31,2008 was computed based on reports of a third party experts (see note 30D.(2)d and note 2 AG.(1)e.). |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | PC's debentures measured at amortized cost |
|--------|-----|--------------------------------------------|

|   | G. | (i) | On August 3, 2009, the Company issued approximately NIS 112 million principal amount of Series 1 convertible debentures, bearing a fixed interest rate of 6.25% per annum, without linkage. The total aggregate net proceeds amounted to approximately NIS 117.7 million. The Series 1 convertible debentures are to be paid in two equal installments on December 31, 2013 and December 31, 2014 and are convertible into the Company's ordinary shares at the price of NIS 128 per share until July 31, 2013 and at the price of NIS 200 per share thereafter. |
|--------|----|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 19 - | BORROWINGS (CONT.) |
|-----------|--------------------|

|   | G. | (i)    (cont.). |
|--------|----|-------------------------------------|

|   | (ii) | Convertible debentures issued by InSightec in August 2006 (as amended in preferred A shares purchase agreement) and in September 2004 (as amended in the 2006 agreement and in the preferred A shares purchase agreement) to its existing shareholders in the total amount of $36.0 million (the "Notes").The debentures bear interest, payable on a semi-annual basis, at the rate of LIBOR + 3%. The Group's share in InSightec's convertible debentures amount to $ 17.3 million. Within the framework of financing round executed in March 2009 (see note11A. (3)) all InSightec's convertible Notes (principal and accrued interest up through December 31, 2008) were repaid in return of InSightec's preferred B shares at a price of $6 per share. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | H. | Liens and financial covenants - see note 23D and 23E. |
|--------|----|------------------------------------------------------------|

| NOTE 20 - | OTHER LONG-TERM FINANCIAL LIABILITIES |
|-----------|---------------------------------------|

|   | A. | Composition: |
|--------|----|--------------|

|                                                                                        |   | December 31       |   |
|---------------------------------------------------------------------------------------------|--------|-------------------|--------|
|                                                                                        |   | 2009              |   |   | 2008 |   |
|                                                                                        |   | (in thousand NIS) |   |
|                                                                                        |   |              |   |   |   |   |
| Loans from the Office of Chief Science ("OCS") (i)                                          |   |              | 27,970 |   |   |   | 29,739 |   |
| Derivative designated as hedging instruments(ii)                                            |   |              | 39,220 |   |   |   | 37,534 |   |
| Embedded derivative financial liability carried at fair value through profit and loss (iii) |   |              | 27,969 |   |   |   | 24,518 |   |
| Others                                                                                      |   |              | 1,527  |   |   |   | 1,330 |   |
|                                                                                        |   |              | 96,686 |   |   |   | 93,121 |   |

|   | (i) | The liability to the OCS reflects the total  grants received from the OCS by InSightec net of royalties paid up to each balance sheet date discounted at the applicable interest rate for similar loans having the same terms and conditions (2009 - 28%, 2008 and 2007 - 29%). InSightec is obliged to pay royalties to the OCS -in respect of products, the development of which was funded by grants provided by the OCS - at a rate of 3% of revenues, for the initial three years through the end of 2006 and 3.5% of revenues as and from 2007 and up to the amount of the grants received. Refund of the grants is contingent on future revenues and InSightec has no obligation to refund the grants if sufficient revenues are not generated. InSightec’s technology developed with OCS funding is subject to transfer restrictions, which may impair its ability to sell its technology assets or to outsource manufacturing. The restrictions continue to apply even after InSightec has paid the full amount of royalties’ payable for the grants. In addition, the restriction may impair InSightec’s ability to consummate a merger or similar transaction in which the surviving entity is not an Israeli company. The revenues used in determining the liability to the OCS were taken till 2015 as InSightec's management company estimates that this is the year in which the obligation will be settled. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 20 - | OTHER LONG-TERM FINANCIAL LIABILITIES |
|-----------|---------------------------------------|

|   | A. | Composition: |
|--------|----|--------------|

|   | (ii) | Several Groups' companies have entered into an interest rate swap transaction with financial institutions (which granted thereto a variable-interest bearing loan) according to which the interest on the loans will be fixed through the loans terms. The swap transactions were designated as hedging instruments in a cash flow hedge. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Within the framework of a credit facility agreement executed in March 2006, B.H. jointly controlled subsidiaries that hold 3 hotels in the U.K. ("Project Companies") are committed to pay the financing bank additional exit fee in the event of cash distributions deriving from the sale, disposal, refinancing of the hotels which were financed by the refinancing loan funds or repayment of the loan (“Transactions”). The exit fee will be calculated as the amount equivalent to 15% of the difference between the market value of the hotels as determined in such Transactions and the current agreed value of the hotels.  The estimated fair value of the Exit Fee was computed based a report from a third party expert using the Black-Scholes model. |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE 21 - | OTHER LONG TERM LIABILITIES |
|-----------|-----------------------------|

|   | A. | Composition: |
|--------|----|--------------|

|                                        |   | December 31       |   |
|---------------------------------------------|--------|-------------------|--------|
|                                        |   | 2009              |   |   | 2008 |   |
|                                        |   | (in thousand NIS) |   |
|                                        |   |              |   |   |   |   |
| Pre-paid rent income                        |   |              | 1,289  |   |   |   | 1,760 |   |
| Provisions                                  |   |              | 11,309 |   |   |   | 8,687 |   |
| Retirement benefit obligation (see B below) |   |              | 4,852  |   |   |   | 4,993 |   |
|                                        |   |              | 17,450 |   |   |   | 15,440 |   |

----

----

| NOTE 21 - | OTHER LONG TERM LIABILITIES(CONT.) |
|-----------|------------------------------------|

|   | B. | The Group companies' liability to employees upon their retirement includes, primarily, voluntary and/or involuntary termination severance payments as well as adaptation grants. The liabilities are partially covered by ordinary deposits to employees’ accounts at accredited pension and severance-pay funds and/or by acquiring insurance policies. Such deposits are not under the custody or management of the Group companies. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                               |   | December 31       |    |
|----------------------------------------------------|--------|-------------------|---------|
|                                               |   | 2009              |    |   | 2008 |   |
|                                               |   | (in thousand NIS) |    |
|                                               |   |              |    |   |   |   |
| Present value of funded defined benefit obligation |   |              | 18,400  |   |   |   | 18,214 |   |
| Fair value of plan assets                          |   |              | (13,548 | ) |   |   | (13,221 | ) |
| Net liability arising from defined obligation      |   |              | 4,852   |   |   |   | 4,993 |   |
|                                               |   |              |    |   |   |   |   |   |

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

|                               |   | December 31 |    |
|------------------------------------|--------|-------------|---------|
|                               |   | 2009        |    |   | 2008 |   |
|                               |   | %           |    |   | % |   |
|                               |   |        |    |   |   |   |
| Discount rates                     |   |        | 1.7-3.1 |   |   |   | 2.6-3.5 |   |
| Expected return on plan assets     |   |        | 2.6-3.5 |   |   |   | 3.5-3.7 |   |
| Expected nominal salaries increase |   |        | 5.4-6   |   |   |   | 1.9-5 |   |

----

----

| NOTE 22 - | INCOME TAXES |
|-----------|--------------|

|   | A. | Composition: |
|--------|----|--------------|

|                      |   | Year endedDecember 31 |    |
|---------------------------|--------|-----------------------|---------|
|                      |   | 2009                  |    |   | 2008 |   |   | 2007 |   |
|                      |   | (in thousand NIS)     |    |
|                      |   |                  |    |   |   |   |   |   |   |
| Current                   |   |                  | 2,320   |   |   |   | 6,153 |   |   |   | 11,072 |   |
| Deferred                  |   |                  | (31,980 | ) |   |   | 23,195 |   |   |   | 5,090 |   |
| In respect of prior years |   |                  | (5,911  | ) |   |   | (4,612 | ) |   |   | 126 |   |
|                      |   |                  | (35,571 | ) |   |   | 24,736 |   |   |   | 16,288 |   |

|   | B. | Principle tax laws applicable to the major Group companies in their country of residence: |
|--------|----|-------------------------------------------------------------------------------------------|

|   | (1) | Israel |
|--------|-----|--------|

|   | a. | The provision for current taxes of the Company and its  Israeli subsidiaries  was determined until 2007 in accordance  to the provisions of the Income Tax Ordinance and the Income Tax Law (Adjustments for Inflation)-1985, which established the measurement of the results for tax purposes on a real basis pursuant to changes in the CPI. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | As from January 1, 2003, certain statutory provisions came into force and effect, concerning, among other things, the tax reform in Israel in respect of the following: |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1. | (i) | Taxation of profits of foreign companies considered as Controlled Foreign Companies ("CFC"), if all the following conditions are met: (i) its shares or its rights on it are not listed in a stock exchange, however if they are partly listed, then less than 30% of the shares or of the rights of the company were offered to the public (ii) majority of revenues thereof are passive, as same is defined by law, or majority of profits thereof derive from passive revenues; (iii) the tax rate applying to the passive profits thereof in their country of residence does not exceed 20%; and (iv) more than 50% of the means of control therein are held, directly or indirectly, by Israeli residents. In accordance with the statutory provisions, a controlling shareholder in those companies having unpaid profits, as defined by law, is deemed to have been distributed with a dividend representing its respective share in such profits ("Deemed Dividend"). |
|--------|----|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 22 - | INCOME TAXES (CONT.) |
|-----------|----------------------|

|   | B. | Principle tax laws applicable to the major Group companies in their country of residence (Cont.): |
|--------|----|---------------------------------------------------------------------------------------------------|

|   | (1) | Israel |
|--------|-----|--------|

|   | b. | (cont.) |
|--------|----|---------|

|   | 1. | (cont.) |
|--------|----|---------|

|   | (ii) | Taxation of a dividend received in Israel, out of profits generated or accrued abroad, as well as a dividend originating abroad. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------|

|   |   | A Deemed Dividend and/or the distribution of dividends, as stated, will be subject to a tax rate of 25%, less withholding taxes which would have been paid abroad in respect of such dividend, had it in fact been distributed. Each Israeli assessee has the right to elect, at its sole discretion, to be assessed according to the Israeli corporate tax rate less taxes payable abroad in respect of these profits (including under certain circumstances taxes payable by a company held by the distributing company), as the case may be. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | Capital gain from the realization of assets which were acquired subsequent to January 1, 2003 will be taxed at a rate of 25%. Capital gain for assets which were acquired before January 1, 2003, will be taxed at a rate of 25% for the portion of the gain relating to the period subsequent to this date up to the realization date and corporate tax rate for the portion of the gain relating to the period from the acquisition date up to January 1,2003. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | Method of loss offsetting - regarding business losses, capital losses, passive losses, marketable securities losses and CFC losses. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | During 2004, the Company, EIL and Elscint have finalized an arrangement with the Israeli Tax Authorities, with effect from December 31, 2002, whereby a new tax basis has been determined for the Company’s investments (on a consolidated basis) in foreign subsidiaries ("Regulated Revaluation" and "Regulated Assets"). The arrangement provides for no additional tax to be imposed in Israel on gains generated from the realization of Regulated Assets, and on dividends distributed therefrom, and all up to the amount of the Regulated Revaluation. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | The Netherlands |
|--------|-----|-----------------|

|   | b. | Companies resident in the Netherlands are subject to corporate income tax at the general rate of 25.5%. Under the amended rules effective January 1, 2007 tax losses may be carried backward for one year and carried forward for nine years. Transitional rules apply for tax losses on account of tax years up through 2002 which may be carried forward and set of against income up through 2011. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 22 - | INCOME TAXES (CONT.) |
|-----------|----------------------|

|   | B. | Principle tax laws applicable to the major Group companies in their country of residence (Cont.): |
|--------|----|---------------------------------------------------------------------------------------------------|

|   | (2) | The Netherlands |
|--------|-----|-----------------|

|   | a. | (cont.) |
|--------|----|---------|

|   | b. | Under the participation exemption rules, income including dividends and capital gains derived by Netherlands companies in respect of qualifying investments in the nominal paid up share capital of resident or non resident investee companies, are exempt from Netherlands corporate income tax provided the conditions as set under these rules have been satisfied. Such conditions require, among others, a minimum percentage ownership interest in the investee company and require the investee company to satisfy either of, or both the newly introduced Assets’ Test and the amended Subject to Tax Test. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | Under the Israel Netherland income tax treaty Dividend distributions from a Netherlands company to qualifying Israeli corporate shareholders holding at least 25% of the shares of such Netherlands company is subject to withholding tax at a rate of 5% provided certain compliance related formalities have been satisfied. In other situations, dividend distributions from Netherlands companies to Israeli shareholders are subject to withholding tax at a rate of 15%. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | England |
|--------|-----|---------|

|   | a. | Operating income and capital gains generated by the British resident group companies are subject to a 28% tax rate. Dividends received from an England. Resident company is taxed in accordance with the jurisdiction of the company receiving the dividend (in the Netherlands - tax exempt); No tax credits are allowed for distributed dividends. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | Profit from rent of real estate held as an investment and let in England by companies not resident in the England, are charged to England income tax at 22%. Any gains on disposal are not taxable in the England. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 22 - | INCOME TAXES (CONT.) |
|-----------|----------------------|

|   | c. | (cont.) |
|--------|----|---------|

|   | (4) | India |
|--------|-----|-------|

|   | (5) | Cyprus |
|--------|-----|--------|

----

----

| NOTE 22 - | INCOME TAXES (CONT.) |
|-----------|----------------------|

|   | C. | Effective tax rate: |
|--------|----|---------------------|

|                                                                                                                                                            |   | Year ended December 31 |     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|----------|
|                                                                                                                                                            |   | 2009                   |     |   | 2008 |   |   | 2007 |   |
|                                                                                                                                                            |   | (in thousand NIS)      |     |
|                                                                                                                                                            |   |                   |     |   |   |   |   |   |   |
| Company's statutory tax rate (%)                                                                                                                                |   |                   | 26       |   |   |   | 27 |   |   |   | 29 |   |
|                                                                                                                                                            |   |                   |     |   |   |   |   |   |   |   |   |   |
| Profit(loss) before income taxes                                                                                                                                |   |                   | (706,549 | ) |   |   | (4,259 | ) |   |   | 925,607 |   |
|                                                                                                                                                            |   |                   |     |   |   |   |   |   |   |   |   |   |
| The theoretical tax                                                                                                                                             |   |                   | (183,703 | ) |   |   | (1,150 | ) |   |   | 268,426 |   |
|                                                                                                                                                            |   |                   |     |   |   |   |   |   |   |   |   |   |
| Differences in tax burden in respect of:                                                                                                                        |   |                   |     |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                            |   |                   |     |   |   |   |   |   |   |   |   |   |
| Exempt income, net of unrecognized expenses                                                                                                                     |   |                   | 24,410   |   |   |   | (59,028 | ) |   |   | (327,482 | ) |
| Utilization of prior-year losses for which deferred taxes had not previously been recorded                                                                      |   |                   | (7,781   | ) |   |   | (32,451 | ) |   |   | (18,899 | ) |
| Losses and other timing differences for which deferred taxes had not been created                                                                               |   |                   | 128,815  |   |   |   | 153,358 |   |   |   | 125,213 |   |
| Variances from different measurement principles applied for the financial statements and those applied for income tax purposes (including exchange differences) |   |                   | (17,518  | ) |   |   | (79,253 | ) |   |   | 6,068 |   |
| Differences in tax rates on income of foreign subsidiaries                                                                                                      |   |                   | 22,576   |   |   |   | 43,655 |   |   |   | (44,812 | ) |
| Adjustment due to changes in tax rate                                                                                                                           |   |                   | -        |   |   |   | - |   |   |   | 208 |   |
| The Group's share in results of associated companies                                                                                                            |   |                   | 3,736    |   |   |   | 3,455 |   |   |   | 3,466 |   |
| Taxes for prior years                                                                                                                                           |   |                   | (5,911   | ) |   |   | (4,612 | ) |   |   | 126 |   |
| Other differences, net                                                                                                                                          |   |                   | (195     | ) |   |   | 762 |   |   |   | 3,974 |   |
|                                                                                                                                                            |   |                   | (35,571  | ) |   |   | 24,736 |   |   |   | 16,288 |   |

|   | D. | Carry forward losses and deductions: |
|--------|----|--------------------------------------|

----

----

| NOTE 22 - | INCOME TAXES (CONT.) |
|-----------|----------------------|

|   | D. | Carry forward losses and deductions: (cont.) |
|--------|----|----------------------------------------------|

|                |   | December 31       |    |
|---------------------|--------|-------------------|---------|
|                |   | 2009              |    |
|                |   | (in thousand NIS) |    |
|                |   |              |    |
| 2010                |   |              | 7,455   |   |
| 2011                |   |              | 9,447   |   |
| 2012                |   |              | 17,250  |   |
| 2013                |   |              | 28,585  |   |
| 2014 and thereafter |   |              | 272,259 |   |
|                |   |              | 334,996 |   |

----

----

| NOTE 22 - | INCOME TAXES (CONT.) |
|-----------|----------------------|

|   | E. | Deferred income taxes: |
|--------|----|------------------------|

|   | (1) | Composition: |
|--------|-----|--------------|

|                                                                                                    |   | Balance as of January 1, 2009 |    |   | Charge to profit and loss account |   |   | Charged to foreign currency translation reserve |   |   | Charge to hedging reserve |   |   | Foreign currency translation adjustments |   |   | Initially-consolidated subsidiary |   |   | Balance as of December 31, 2009 |   |
|---------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------|--------|-----------------------------------|--------|--------|-------------------------------------------------|--------|--------|---------------------------|--------|--------|------------------------------------------|--------|--------|-----------------------------------|--------|--------|---------------------------------|--------|
|                                                                                                    |   | (In thousand NIS)             |    |
| Accelerated depreciation differences in respect of property plant and equipment and investment property |   |                          | (29,556 | )      |                              |   | (3,081 | )                                               |   |   | -                         |   |   |                                     | -      |   |                              |   | 275    |                            |   |   | (668 | ) |   |   | (33,031 | ) |
| Differences between fair value of real estate at acquisition and related cost for income tax purposes   |   |                          | (27,298 | )      |                              |   | 195    |                                            |   |   | -                         |   |   |                                     | -      |   |                              |   | (251   | )                               |   |   | - |   |   |   | (27,354 | ) |
| Timing differences - income and expenses                                                                |   |                          | (54,018 | )      |                              |   | 42,304 |                                            |   |   | (2,680                    | )      |   |                                     | (348   | )      |                              |   | (3,454 | )                               |   |   | (120 | ) |   |   | (18,317 | ) |
| Carry forward tax losses and deductions                                                                 |   |                          | 45,758  |   |                              |   | (7,438 | )                                               |   |   | -                         |   |   |                                     | -      |   |                              |   | 1,118  |                            |   |   | - |   |   |   | 39,438 |   |
| Net deferred taxes                                                                                      |   |                          | (65,114 | )      |                              |   | 31,980 |                                            |   |   | (2,680                    | )      |   |                                     | (348   | )      |                              |   | (2,312 | )                               |   |   | (788 | ) |   |   | (39,264 | ) |

|                                                                                                    |   | Balance as of January 1, 2008 |    |   | Charge to profit and loss account |   |         | Charge to foreign currency translation reserve |   |   | Charge to hedging reserve |   |   | Foreign currency translation adjustments |   |   | Balance as of December 31, 2008 |   |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|--------|----------------------------------------|--------|--------------|------------------------------------------------|--------|--------|---------------------------|--------|--------|------------------------------------------|--------|--------|---------------------------------|--------|
|                                                                                                    |   | (In thousand NIS)                  |    |
| Accelerated depreciation differences in respect of Property plant and equipment and investment property |   |                               | (29,596 | )      |                                   |   | (3,584       | )                                              |   |   | -                         |   |   |                                     | -      |   |                            |   | 3,624 |   |   |   | (29,556 | ) |
| Differences between fair value of real estate at acquisition and related cost for income tax purposes   |   |                               | (31,727 | )      |                                   |   | 92           |                                           |   |   | -                         |   |   |                                     | -      |   |                            |   | 4,337 |   |   |   | (27,298 | ) |
| Timing differences - income and expenses                                                                |   |                               | (980    | )      |                                   |   | (*) (59,059) |                                           |   |   | 4,912                     |   |   |                                     | 3,733  |   |                            |   | (2,624 | ) |   |   | (54,018 | ) |
| Carry forward tax losses and deductions                                                                 |   |                               | 7,164   |   |                                   |   | 39,354       |                                           |   |   | -                         |   |   |                                     | -      |   |                            |   | (760 | ) |   |   | 45,758 |   |
| Net deferred taxes                                                                                      |   |                               | (55,139 | )      |                                   |   | (23,195      | )                                              |   |   | 4,912                     |   |   |                                     | 3,733  |   |                            |   | 4,577 |   |   |   | (65,114 | ) |

----

----

| NOTE 22 - | INCOME TAXES (CONT.) |
|-----------|----------------------|

|   | E. | Deferred income taxes (cont.) |
|--------|----|-------------------------------|

|   | (2) | The deferred taxes are presented as follow: |
|--------|-----|---------------------------------------------|

|                  |   | December 31       |    |
|-----------------------|--------|-------------------|---------|
|                  |   | 2009              |    |   | 2008 |   |
|                  |   | (in thousand NIS) |    |
|                  |   |              |    |   |   |   |
|                  |   |              |    |   |   |   |
| Long-term liabilities |   |              | (39,264 | ) |   |   | (65,114 | ) |
| Long-term receivables |   |              | -       |   |   |   | - |   |
|                  |   |              | (39,264 | ) |   |   | (65,114 | ) |

|   | (3) | The Group did not record deferred tax assets in respect of the following items: |
|--------|-----|---------------------------------------------------------------------------------|

|                                                                                                    |   | December 31       |    |
|---------------------------------------------------------------------------------------------------------|--------|-------------------|---------|
|                                                                                                    |   | 2009              |    |   | 2008 |   |
|                                                                                                    |   | (in thousand NIS) |    |
|                                                                                                    |   |              |    |   |   |   |
| Accelerated depreciation differences in respect of property plant and equipment and investment property |   |              | 48,873  |   |   |   | 33,425 |   |
| Timing differences - income and expenses                                                                |   |              | 8,427   |   |   |   | 10,727 |   |
| Carry forward tax losses and deductions                                                                 |   |              | 530,001 |   |   |   | 435,931 |   |
|                                                                                                    |   |              | 587,301 |   |   |   | 480,083 |   |

|   | F. | Final tax assessments |
|--------|----|-----------------------|

|   | G. | Deferred taxes in respect of investment in investee companies |
|--------|----|---------------------------------------------------------------|

|   | H. | The total accumulated current and deferred taxes expenses, which were charged directly to the shareholders' equity, as of December 31, 2009, is NIS 3,898 thousands. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS |
|-----------|---------------------------------------------------|

|   | A. | Commitments |
|--------|----|-------------|

|   | (1) | The Group’s hotels located in the Netherlands and England are managed by Park Plaza Hotel Group ("Park Plaza") and the Group's hotels Located in Romania and Belgium are managed by the Rezidor Group ("Rezidor" and together with Park Plaza "Management Companies"). The respective Group's companies owning the hotels will pay the Management Companies certain agreed upon fee  which will be calculated as percentage from their room revenue ("Base fee") as well as certain agreed upon percentage from their gross operating profit ("Management  fee") and all as defined in the agreements. The companies owning the hotels will also participate in certain portions of the expenses incurred by the Management Companies in the course of performance of their due obligations (mainly marketing and advertising expenses), up to certain percentage of the gross operating profit. Within the terms of the management agreements with Park Plaza the  Group's companies were granted a sub-franchise by Park Plaza allowing them the utilization, throughout the term of the management agreements, of the "Park Plaza" name, in relation to the hotels owned and operated thereby, in consideration for royalties not exceeding certain percentage of their room revenues ("Franchise fee"). See note 26 F. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | In 2005 InSightec entered into a worldwide distribution and sale representation agreement with GE Healthcare ("GE"), granting GE the exclusive rights to market and promote InSightec’s product subject to the achievement of minimum sales targets. The agreement allows InSightec to continue to make direct sales of its product worldwide and does not initially apply to Russia and Japan. GE is entitled to a commission based on payment actually received from customers retained from their marketing efforts. In July 2008, GE and InSightec have signed an amendment to the distribution agreement effective from January 1, 2008. According to the amendment GE will continue to distribute InSightec's products, but on non exclusive basis. In addition the rate of GE's commissions was revised and will be based on the deal's structure. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | A. | Commitments |
|--------|----|-------------|

|   | (3) | Minimum future rental payments due under the Group's current operating leases as of December 31, 2009 are as follows: |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------|

| Year ended December 31, |   | (in thousand NIS) |    |
|-------------------------|--------|-------------------|---------|
|                    |   |              |    |
| 2010                    |   |              | 39,740  |   |
| 2011                    |   |              | 39,378  |   |
| 2012                    |   |              | 39,005  |   |
| 2013                    |   |              | 37,838  |   |
| 2014                    |   |              | 32,574  |   |
| Thereafter              |   |              | 606,025 |   |
|                    |   |              | 794,560 |   |

|   | (4) | Aggregate amount of the Group's commitments in respect of construction services and in respect of purchase of plots totaled, as of December 31, 2009, approximately NIS 1,308 million including estimated payments to related party see note 27 A (1). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | (a) | Elbit Trade and Retail Ltd. (formerly Mango) ("Elbit Trade") is a party to a distribution, support and service agreements signed in May 2005 with a third party for a 10-year period, subject to fulfillment of certain conditions, which entitled it to market the brand name MANGO-MNGTM in Israel. |
|--------|-----|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Elbit Trade is a party to franchise agreement executed in October 2007 with a third party for a term of 5 years (with an automatic renewal for additional 5 years) which entitled it, subject to certain conditions, to market the brand name G-Star in Israel. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Elbit Trade is a party to a franchise agreement which grant it, subject to fulfillment of certain conditions, the exclusive rights to market Gap and Banana Republic brands names in Israel. The term of the franchise agreement is for 5 years with an extension of additional 5 years, subject to fulfillment of certain conditions that includes among others minimum amounts of purchases. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | As for commitments to related parties- see note 27. |
|--------|-----|-----------------------------------------------------|

|   | (7) | In relation to commitments deriving from lease agreement with ILA see note 14B (ii) |
|--------|-----|-------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | B. | Claims |
|--------|----|--------|

|   | (1) | On November 2, 1999 a number of institutional and other investors, holding shares in Elscint, instituted a claim against the Company, Elscint, EIL, Control Centers Ltd, past and present officers in the said companies and others. Together with the claim an application was filed to certify the claim as a class action on behalf of everyone who was a shareholder in Elscint on September 6, 1999 and until the lodging of the claim, excluding the Company and certain other shareholders. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | B. | Claims (cont.) |
|--------|----|----------------|

|   | (1) | (cont.) |
|--------|-----|---------|

|   | (2) | On September 6, 2006 a third party instituted two claims before the Haifa District Court in which he sued the Company, Elscint, EIL, Control Centers Ltd. and others. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | B. | Claims (cont.) |
|--------|----|----------------|

|   | (2) | (cont.) |
|--------|-----|---------|

|   | (3) | In September 1999 the Company, Elscint, Elscint's past directors and others were served with a copy of a claim instituted by a shareholder in Elscint. Together with the claim an application was filed to certify the claim as a class action on behalf of everyone who was a minority shareholder in Elscint on the date of instituting the claim and was such a shareholder on February 18, 1999. The plaintiff claim that the Company acted, through Elscint's directors, systemically with the aim of emptying and diluting Elscint of its business, assets, capital and value, whilst enriching other companies in the Group at the expense of Elscint and at the expense of The minority shareholders of Elscint. The Plaintiff also alleges that the several transactions executed by the Company and Elscint in 1998 for the sale of substantially all of their assets and business in the CT, MRI and Focused Ultrasound business as well as a transaction to grant options ("Option Transaction") to the former chairman of the Company, were all done whilst oppressing the minority shareholders of Elscint and in contravention of Section 235 of the Israeli Companies Ordinance. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | B. | Claims (cont.) |
|--------|----|----------------|

|   | (3) | (cont.) |
|--------|-----|---------|

|   | (4) | Elscint and its subsidiaries are parties to several written demands as well as certain court claims, filed against them by third parties (including governmental institutions), some without any specified amount, and others in the aggregate principal amount of $52 million (NIS 196 million), as royalties or compensation for damages allegedly caused as a result of the companies’ actions and/or products, which mainly relate to the medical imaging business sold by Elscint in 1998 and 1999. Management of the companies based-inter alia- on legal opinions and/or on past experience, believes that no significant costs will incur thereof as a result of said claims and or written demands exceeding the provisions included in respect thereof in the financial statements. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | During March 2007 the Romanian National Department of Anticorruption resumed a criminal investigation against number of suspects for certain events relating to the period prior to the acquisition of control in Bucuresti by the Group's subsidiary ("Domino"). Such criminal indictment was returned-in December 2005- by the Romanian court to the prosecution office due to lack of substance. Such criminal investigation may have an indirect effect on the validity of the privatization and thereby an indirect effect on the Group's rights in Bucuresti, notwithstanding Domino is not being investigated. Based on layers advice the outcome of such legal procedures is uncertain, however as long as domino will continue to be a party  not implicated in this case the likelihood of a negative effect on this financial statement is remote. On November 10, 2008 the National Anticorruption Directorate ordered to release all the defendants in the case file from criminal pursuit, as well as to remove the preventive measures taken in the case .As of the date of approval of these financial statements, such decision has not been challenged. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | B. | Claims (cont.) |
|--------|----|----------------|

|   | (6) | A former employee of EIL group filed in October 2005, a lawsuit against Vectory Investment Ltd. (a company in EIL group). The plaintiff requested the court to issue a mandatory injunction against Vectory ordering it to transfer the Plaintiff shares of certain Investees of the Group and shares of other companies within the EIL Group. The Plaintiff evaluated his claim to an aggregate amount of NIS 285,000. In January 2006 Vectory filed a statement of defence in respect of this claim and further added and instituted a counterclaim against the plaintiff in the sum of NIS 15 million. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | B. | Claims (cont.) |
|--------|----|----------------|

|   | (6) | (cont.) |
|--------|-----|---------|

|   | (7) | Clal Insurance Enterprises Holdings Ltd (Clal) and the company turned a dispute which arises between them to Mediation proceeding, with respect to a set of agreements between the parties, dated June 30, 2008 (Shareholders Agreement, Share purchase Agreement and a Convertible Note). The dispute between the parties includes mutual claims of breach of contract, regarding to the aforesaid agreements. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | The Company and its subsidiaries are currently involved in various legal proceeding relating to their ordinary course of activities. Although the final outcome of these claims cannot be estimated at this time, the managements of these companies believe based on legal advice, that the claims will not materially impact the Group companies. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | C. | Other contingent liabilities |
|--------|----|------------------------------|

|   | (1) | The General Meeting of the Company's shareholders approved the grant of prospective indemnification undertaking to directors (including the controlling shareholder) and officers (including in their capacity as officers of subsidiaries). Total aggregate indemnification shall not exceed the lower of 25% of the shareholders' equity as recorded in the Company's most recent financial statements prior to such payment, or $40.0 million, and all in excess of an amount paid (if paid) by insurance companies under certain risk policies. The Company’s shareholders also approved an exemption of directors and officers (other than controlling parties) from liability for any damage caused by breach of a duty of care towards the Company. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Elscint's shareholders approved in their General Meeting (in October 2000), the grant of prospective indemnification undertaking to directors and officers  of Elscint (including in their capacity as officers of subsidiaries). Total indemnification shall not exceed the lower of 25% of the shareholders' equity as set forth  in Elscint's most recent consolidated financial statements prior to such payment or $50.0 million, in excess of any amounts paid (if paid) by insurance companies pursuant to insurance policies maintained by the Company from time to time. Elscint’s shareholders also approved an exemption of directors and officers from liability in respect of any damage caused to Elscint by breach of duty of care. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | a. | PC is obliged to indemnify and to hold harmless its directors and officers, to the fullest extent permitted by the laws of any relevant jurisdiction, against any liability arising out of their powers, duties or responsibilities as a director or officer of any PC group member. Such indemnification was approved for grant by PC's board. In November 2007 the Company's shareholders approved the grant of deed of indemnity to one of PC's directors who serves as a non- executive director of PC and to the Company's and PC's Executive Chairman of the Board and its controlling shareholder, save that the maximum indemnification to the Chairman shall not exceed 25% of the shareholders equity of PC based on PC's last consolidated financial statements prior to such payment. |
|--------|-----|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | InSightec is obliged to indemnify and to hold harmless its directors and officers, to the fullest extent permitted by the laws of any relevant jurisdiction, against any liability. The total indemnity for each Insightec's officer, in accordance with the letter of indemnity (in addition to the amounts received from the insurers), will not exceed the lower of 10 million dollars and one million dollars with the addition of 25% of Insightec's shareholders' equity, in accordance with its latest audited financial statements (as long as the equity capital is positive) with the addition of the reimbursement of legal expenses totaling 1 million dollars, subject to the terms and conditions laid down in the letter of indemnity. Furthermore, Insightec granted the officers and Directors an exemption from all responsibility and any damage that will be caused to Insightec by them, in case of breaching their obligation of caution, (with the exception of the breach of the obligation of caution in division, as defined in the Israeli Companies Law) subject to the Israeli Companies Law. The granting of the letter of indemnity and the exemption are subject to the approval of the Company's shareholders' meeting. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  c. | On September 10, 2006, Gemida (affiliate company) granted its Board of Directors, a letter of indemnity for any monetary obligation with respect to a claim, including a compromise agreement or arbitration verdict, carried out during the time of the service of as Gemida's Director, as well as with respect to reasonable legal expenses including payments of legal fees for a procedure or investigation that will be conducted against the Director. |
|--------|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | C. | Other contingent liabilities (cont.) |
|--------|----|--------------------------------------|

|   |  (4) | a. | The Company received, in 2003, a letter from a certain insurer ("the Insurer") of EIL, Elscint and the Company (the "Insured Companies"), which insured against, inter alia, the lawsuit as described in item B(1) above, alleging against the Insured Companies, inter alia, that the Insured Companies have breached their disclosure duties under Section 6(a) to the Insurance Contract Law 1981, by failing to disclose to the Insurer material information prior to the issuance of additional cover to the policy purchased by EIL (the "Policy"), effective as of July 1999 (the "Additional Cover"), and prior to the replacement of the Policy and the Additional Cover by the issuance of a new policy effective as of August 1999 (the "Replacement Cover"). The letter states that the Policy, Additional Cover and Replacement Cover (the "Insurance Cover") issued by the Insurer will be cancelled unless the Insured Companies indicate that circumstances as at the issuance of the Insurance Cover differ from those stated in the letter. The Company's legal counsel replied on behalf of the Insured Companies on March 20, 2003, rejecting all allegations. As of the date of approval of these financial statements the Company has not received any reply thereto from the Insurer. |
|--------|-----------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | In January 2006, the Company and Elscint entered into an agreement with one of the insurers of both the Company and Elscint which insured the Company and Elscint, inter alia, with respect to the lawsuit described in item B(1) above. In accordance with the terms of the agreement the Company, Elscint and their former and current directors and officers released the insurer from all liabilities that will arise from the abovementioned claim in consideration for a one-time payment in the amount of $0.2 million. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | In the framework of the transactions for the sale of the Group's real estate assets, the Group has undertaken to indemnify the respective purchasers for any losses and costs incurred in connection with the sale transactions. The indemnifications usually include: (i) Indemnifications in respect of integrity of title on the assets and/or the shares sold (i.e: that the assets and/or the shares sold are owned by the Group and are clean from any encumbrances and/or mortgage and the like). Such indemnifications generally survived indefinitely and are caped to the purchase price in each respective transaction. To the company's management best knowledge as of the approval date of these financial statements, no claim of any kind was received at the Group with respect to these indemnifications; and (ii) Indemnifications in respect of other representation and warranties included in the sales agreements (such as: development of the project, responsibility to defects in the development project, tax matter and others). Such indemnifications are limited in time (generally 3 years from closing) and are generally caped to 25% to 50% of the purchase price. The Tax authorities have challenged the applied tax treatment in two of the entities previously sold. Currently the issue is being re-examined by the first instance of the authorities. The Group's management estimates, based inter alia on a professional opinion and past experience that no significant costs will be born thereby, in respect of these indemnifications. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | C. | Other contingent liabilities (cont.) |
|--------|----|--------------------------------------|

|   | (6) | A former subsidiary of PC incorporated in Prague, Czech Rep. ("Bestes"), which was sold in June 2006 is a party to an agreement with a third party ("Lessee"), for the lease of commercial areas in a center constructed on property owned thereby, for a period of 30 years, with an option to extend the lease period by additional 30 years, in consideration for € 6.9 million (NIS 37.5 million), which as of the balance sheet date has been fully paid. According to the lease agreement, the Lessee has the right to terminate the lease subject to fulfillment of certain conditions as stipulated in the agreement. Within the framework of the agreement for the sale of Bestes to Klepierre in June 2006, it was agreed that PC will remain liable to Klepierre in case the Lessee terminates its contract.  PC’s management is of the opinion that this commitment will not result in any material amount due to be paid by it. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | In 2001, the "Elezra Group" won the right to purchase, through privatization, the shares of the State of Israel owned Afridar - Ashkelon Housing and Development Ltd. ("Afridar"). The Elezra Group consists of Elezra Developments and Investments Ltd. ("Elezra") and Elbit Medical Holdings Ltd. - a subsidiary of the Company ("Elbit Holdings"), as well as the Company and Mr. Eli Elezra as an interested party (altogether: the "Group"). Immediately following the win of the right, the members of the Group signed a principle-agreement so as to regulate and govern the relations thereof, according to which Elezra would bear the entire acquisition costs of the Afridar shares (NIS 80 million), while the Company and/or Elbit Holdings would hold the Afridar shares, which would be registered in their name, in trust for Elezra. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | D. | Liens, collateral and guarantees |
|--------|----|----------------------------------|

|   | (1) | a. | As security for a loan of NIS 258 million granted to the Company by an Israeli bank, the Company undertook not to pledge, in favor of third parties, any existing and prospective assets, without the bank’s prior consent (excluding pledges of new assets and/or projects granted in favor of those who financed or refinanced -the acquisition and/or execution of same). The Company further undertook to provide under certain circumstances, some additional securities as detailed in the agreement, including a secondary lien on assets and interests acquired through funds provided by the credit line. |
|--------|-----|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | As security for loans totaling NIS 92 million granted to the Company by another Israeli bank, the Company undertook, in favor thereof, not to pledge the majority of its shares in Elscint, without the bank’s prior consent. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | As security of a long term credit facility of NIS 52 million received from an Israeli bank, Elscint has registered, as a security for the credit, a first-ranking pledge in favor of the bank on the B.H shares and granted certain additional first and second ranking pledges on shares of subsidiaries owned thereby. Elscint also undertook not to grant any floating or fixed charges of any rank, on any existing and prospective assets, in favor of third parties, without the bank’s prior consent (excluding pledges of assets and/or projects, granted in favor of those who financed or refinanced -the acquisition and/or execution of same). Elscint further undertook to provide additional collateral, as detailed in the agreement, including first or second ranking pledges on assets and interests acquired by means of the credit line, and all as may be required by the bank. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Projects under credit facilities |
|--------|-----|----------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | D. | Liens and collateral (cont.) |
|--------|----|------------------------------|

|   | (3) | Projects under credit facilities (cont.) |
|--------|-----|------------------------------------------|

|   | (4) | As to bank deposits made to secure long term  borrowings, short term credits and other liabilities of the Group - see note 30C.(7). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | Within the framework of the franchise and support agreements executed by Elbit Trade with third parties (see notes 23.A.(5)), Elbit Trade has furnished the third parties with letters of credit in the aggregate amount of € 6.4 million (NIS 35 million) in order to secure payments to the third parties under the agreements. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | E. | Financial covenants |
|--------|----|---------------------|

|   | (1) | Within the framework of a loan agreements executed by the Company with an Israeli bank, the balance of which as of December 31, 2009 NIS 258 million (see note 19D (i)), the Company undertook to comply with financial covenants, including, among other, an undertaking to maintain throughout the term of the credit a minimum ratio of "adjusted shareholders equity" of the Company to its "adjusted balance sheet," all as defined in the agreement. The Company also committed to a minimum "net operating profit", before financial expenses and before depreciation and amortization. The Company further committed to a minimum "net asset value" of PC (after deduction of loans, including shareholders' loans) which is to be determined by an external appraiser. The covenants will remain in full force and effect for as long as the credit provided by the bank to the Company or to EIL exceeds $30.0 million (NIS 113 million). Should the Company fail to comply with all or any of said financial covenants, or upon the occurrence of an event of default (including failure to provide additional securities), the bank shall then be entitled to demand the immediate repayment of the loan. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | E. | Financial covenants (cont.) |
|--------|----|-----------------------------|

|   | (2) | Within the framework of a loan agreements executed by Elscint with an Israeli bank, the balance of which as of December 31, 2009 amounted to NIS 52 million (see note19D (i), Elscint undertook to comply with certain financial covenants, namely maintaining a minimum ratio of shareholders’ equity to total balance sheet assets and others. Should Elscint fail to comply with the financial covenant, or upon the occurrence of certain events of default, then the bank shall be entitled to demand immediate repayment of the loans. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Within the framework of loan agreements executed by the Group's Project Companies (i.e., companies which engaged in the purchase, construction and  operations of hotels and/or commercial centers), the Project Companies have undertaken to comply with certain financial and operational covenants, namely: complying with "a minimum debt service cover ratio", "loan outstanding amount" to secured assets value ratio; complying with certain restrictions on interest rates; maintaining certain cash balances for current operations; maintaining equity to project cost ratio and net profit to current bank's debt; occupancy percentage; average room or rental fee rates, a minimum "ratio of total room revenue per available rooms" and others. Should the Project Companies fail to comply with said financial covenants, or upon the occurrence of certain events of default, then the bank shall be entitled to demand immediate repayment of the loans. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | As of December 31, 2009, a Project Company in the hotel segment which has been granted with a long term loan in the amount of approximately NIS 116 million is in breach of certain covenants under the loan agreement. The parties to the agreement follow the terms and conditions provided therein in respect of the long term repayment schedule or in accordance with the agreement with the bank, as the case may be accordingly, the total outstanding loan, as of December 31, 2009, has been classified to current maturity of long term debts within the current liabilities. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 23 - | COMMITMENTS, CONTINGENCIES, LIENS AND COLLATERALS (CONT.) |
|-----------|-----------------------------------------------------------|

|   | E. | Financial covenants (cont.) |
|--------|----|-----------------------------|

|   | (ii) | As of December 31, 2009, Project Companies ("Borrowers") in the hotel segment have been granted with a long-term loan in which the Group's share is approximately NIS 568.6 million. The facility agreement which is non-recourse to the shareholders of the Borrowers, or to any affiliates of the Borrowers, contains a debt service cover ratio ("DSCR") covenant by which the ratio of net operating income (including relevant management fees) to debt service cost, on a quarterly basis, must not be less than agreed upon level, all as specified in the facility agreement. In the context of determining whether the Borrowers are in compliance with such covenant, the bank has disputed the inclusion in net operating income of the hotels of certain revenue received from, and expenses paid to, affiliates of the Borrowers on the ground, inter alia, that the relevant transactions were in breach of the facility agreement, since, in the opinion of the bank, they entered into other than on arm’s-length commercial terms in the ordinary course of the Borrowers’ business. If the disputed transactions were to be excluded from net operating income, the DSCR covenant for the fourth quarter of 2009 would not have been met, and as a result the Borrowers would not have been in compliance with the DSCR covenant with respect to said quarter. In that event, or if the transactions were not on arm’s-length commercial terms in the ordinary course of the Borrowers’ business, there would be an event of default under the facility agreement, which entitles the bank to demand immediate repayment of all amounts outstanding under the facility agreement. As of December 31, 2009 and the approval date of the financial statements the bank has not yet sought to exercise any right of acceleration. However, in January 2010, the bank notified the Borrowers that it indents to commence declaratory proceedings in the High Court seeking declaration that an event of default has occurred under the facility agreement. However, as of the approval date of these financial statements, such proceedings have not yet been initiated by the bank. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  (iii) | PC's subsidiary which has been granted with a loan the balance of which as of €39 million (NIS 212 million) for financing construction of trading property is not in compliance with certain covenants included in the loan agreement. PC negotiating with the financing bank in respect of settling the bank requirement and a waiver on all covenants was provided until June 30, 2011. Such loan is presented within the short term credit. |
|--------|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 24 - | SHARE CAPITAL |
|-----------|---------------|

|   | A. | Composition: |
|--------|----|--------------|

|                       |   | Ordinary shares            |
|----------------------------|--------|----------------------------|
|                       |   | of NIS 1.00 par value each |
|                       |   | December 31                |
|                       |   | 2009                       |   |   | 2008 |   |   | 2007 |   |
|                       |   |                       |   |   |   |   |   |   |   |
| Authorized share capital   |   |                       | 50,000,000 |   |   |   | 50,000,000 |   |   |   | 50,000,000 |   |
| Issued and outstanding (*) |   |                       | 25,461,490 |   |   |   | 25,454,703 |   |   |   | 25,454,524 |   |

|   | (*) | December 31, 2009, 2008 and 2007 - excluding 2,800,000 treasury shares. |
|--------|-----|-------------------------------------------------------------------------|

|   | B. | Dividend declared |
|--------|----|-------------------|

|   | (1) | On April 19, 2007, the Company has distributed a dividend in the amount of NIS 160.9 million (which represents NIS 6.3 per share). Out of the said amount, NIS 0.7 million was paid to employees and was recorded as salary expenses in 2007 financial statements. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | On June 2, 2008, the Company has distributed a dividend in the amount of NIS 168.0 million (which represents NIS 6.6 per share). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | In January  2007, the Company's board of directors, has adopted a dividend distribution policy (the "Policy"), pursuant to which the Company will distribute a cash dividend of at least 50% of its surpluses generated by the Company every year, provided such dividend does not exceed 50% of the cash flow accrued by the Company from dividends and repayment of owners' loans received by the Company from its subsidiaries in that year, all in accordance with the Company's audited and consolidated annual financial statements. The Company will publish a detailed report with respect to any such distribution under the Policy, at a time close to the publication date of its annual financial statements for the previous year. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 25 - | OPTIONS PLANS |
|-----------|---------------|

|   |   |
|--------|--------|

|   | A. | Options plan adopted by the Company |
|--------|----|-------------------------------------|

----

----

| NOTE 25 - | OPTIONS PLANS (CONT.) |
|-----------|-----------------------|

|   | A. | Options plan adopted by the Company (cont.) |
|--------|----|---------------------------------------------|

|                                 |   | Number of options         |      |
|--------------------------------------|--------|---------------------------|-----------|
|                                 |   | Year ended December 31    |      |
|                                 |   | 2009                      |      |   | 2008 |   |   | 2007 |   |
|                                 |   | Number of options (i)(ii) |      |   | Weighted average exercise price (iii) |   |   | Number of options (i)(iii) |   |   | Weighted average exercise price (iii) |   |   | Number of options (i) |   |   | Weighted average exercise price(iii) |   |
|                                 |   |                      |      |   | (NIS) |   |   |   |   |   | (NIS) |   |   |   |   |   | (NIS) |   |
| Balance at the beginning of the year |   |                      | 1,683,499 |   |   |   | 54 |   |   |   | 848,083 |   |   |   | 89.7 |   |   |   | 857,250 |   |   |   | 89.7 |   |
| Granted                              |   |                      | 129,000   |   |   |   | 32 |   |   |   | 836,750 |   |   |   | 32 |   |   |   | - |   |   |   | - |   |
| Exercised                            |   |                      | (14,749   | ) |   |   | 51 |   |   |   | (1,334 | ) |   |   | 89.7 |   |   |   | (500 | ) |   |   | 89.7 |   |
| Forfeited                            |   |                      | (16,833   | ) |   |   | 86 |   |   |   | - |   |   |   |   |   |   |   | (8,667 | ) |   |   | 89.7 |   |
| Balance at the end of the year       |   |                      | 1,780,917 |   |   |   | 52 |   |   |   | 1,683,499 |   |   |   | 61.0 |   |   |   | 848,083 |   |   |   | 89.7 |   |
|                                 |   |                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options exercisable at the year end  |   |                      | 1,096,999 |   |   |   | 65 |   |   |   | 564,499 |   |   |   | 89.7 |   |   |   | 285,250 |   |   |   | 89.7 |   |

|   | (i) | Include 353,500 options which were granted to the Company's directors (excluding the Company's chairman of the board) at an exercise price of NIS 100.0 per option. Such grant was approved by the Company's shareholders in May 2006. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Include 250,000 options which were granted to the Company's directors (excluding the Company's chairman of the board and external directors) at an exercise price of NIS 32.0 per option. Such grant was approved by the Company's shareholders in December 2008. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | After adjustments in respect of dividend distributions subsequent to the grant date. |
|--------|-------|--------------------------------------------------------------------------------------|

|                                 |   | Year ended December 31 |        |
|--------------------------------------|--------|------------------------|-------------|
|                                 |   | 2009                   |        |   | 2008 |   |   | 2007 |   |
|                                 |   |                   |        |   |   |   |   |   |   |
| Risk free interest rate (%)          |   |                   | 3.45-4.14   |   |   |   | 3.9-6.5 |   |   |   | 4.85 |   |
| Exercise coefficient                 |   |                   | 2.34        |   |   |   | 2.3-3.5 |   |   |   | 2.0 |   |
| Contractual term                     |   |                   | 5-7         |   |   |   | 5 |   |   |   | 3.67 |   |
| Expected volatility (%)              |   |                   | 60.85-64.63 |   |   |   | 47.2-57.8 |   |   |   | 37.3-38.3 |   |
| Expected dividend yield              |   | None                   |        |   | None |   |   | None |   |
| Forfeited (%)                        |   |                   | 0           |   |   |   | 0-2 |   |   |   | 2 |   |
| Total cost of benefit (NIS thousand) |   | 9,229                  | (iii)       |   | 13,819 | (ii) |   |   | 15,564 | (i) |
| Expenses recognized                  |   |                   | 13,957      |   |   |   | 10,932 |   |   |   | 19,427 |   |

|   | (i) | Represent additional cost in respect of the amendment of the option plan in January 2007 (see above). |
|--------|-----|-------------------------------------------------------------------------------------------------------|

|   | (ii) | Include NIS 1,475 thousands in respect of amendment of the exercise price in November 2008 (see above). |
|--------|------|---------------------------------------------------------------------------------------------------------|

|   | (iii) | Include NIS 1,455 thousands in respect of amendment of the exercise price, caped exercise price and the option term in May 2009 (see above) |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 25 - | OPTIONS PLANS (CONT.) |
|-----------|-----------------------|

|   | B. | Options plan adopted by PC |
|--------|----|----------------------------|

----

----

| NOTE 25 - | OPTIONS PLANS (CONT.) |
|-----------|-----------------------|

|   | B. | Options plan adopted by PC (cont.) |
|--------|----|------------------------------------|

|                                 |   | Number of options      |       |
|--------------------------------------|--------|------------------------|------------|
|                                 |   | Year ended December 31 |       |
|                                 |   | 2 0 0 9                |       |   | 2 0 0 8 |   |   | 2007 |   |
|                                 |   | Number of options (i)  |       |   | Weighted average exercise price |   |   | Number of options (i) |   |   | Weighted average exercise price |   |   | Number of options (i) |   |   | Weighted average exercise price |   |
|                                 |   |                   |       |   | (GBP) |   |   |   |   |   | (GBP) |   |   |   |   |   | (GBP) |   |
|                                 |   |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at the beginning of the year |   |                   | 30,115,208 |   |   |   | 0.52 |   |   |   | 28,945,704 |   |   |   | 1.81 |   |   |   | 26,108,602 |   |   |   | 1.80 |   |
| Granted                              |   |                   | 1,335,000  |   |   |   | 0.80 |   |   |   | 3,625,000 |   |   |   | 1.67 |   |   |   | 4,093,572 |   |   |   | 1.88 |   |
| Exercised                            |   |                   | (2,970,976 | ) |   |   | 0.52 |   |   |   | (131,711 | ) |   |   | 1.80 |   |   |   | (303,471 | ) |   |   | 1.80 |   |
| Forfeited                            |   |                   | (2,223,750 | ) |   |   | 0.50 |   |   |   | (2,323,785 | ) |   |   | 1.81 |   |   |   | (952,999 | ) |   |   | 1.81 |   |
| Balance at the end of the year       |   |                   | 26,255,482 |   |   |   | 0.532 |   |   |   | 30,115,208 |   |   |   | 0.60 |   |   |   | 28,945,704 |   |   |   | 1.81 |   |
|                                 |   |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options exercisable at the year end  |   |                   | 12,800,446 |   |   |   |   |   |   |   | 9,031,603 |   |   |   |   |   |   |   | 8,195,777 |   |   |   |   |   |

|   | (i) | Include 5,424,436 options, which were approved for grant on November 1, 2007 by the Company's shareholders meeting, to the Company's chairman of the board, who is also non executive director in PC and certain Company's directors, respectively. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                   |   | Year ended December 31 |      |
|----------------------------------------------------------------------------------------|--------|------------------------|-----------|
|                                                                                   |   | 2009                   |      |   | 2008 (ii) |   |   | 2007 |   |
|                                                                                   |   |                   |      |   |   |   |   |   |   |
| Risk free interest rate (%)                                                            |   |                   | 0.65-4.57 |   |   |   | 2.89-4.82 |   |   |   | 4.62-5.55 |   |
| Expected life of options (years)                                                       |   |                   | 5-7       |   |   |   | 5-7 |   |   |   | 5 |   |
| Expected volatility (%)                                                                |   |                   | 49-61     |   |   |   | 35-51 |   |   |   | 25-35 |   |
| Expected dividend yield                                                                |   |                   | -         |   |   |   | - |   |   |   | - |   |
| Forfeited (%)                                                                          |   |                   | 2.5-5.9   |   |   |   | 2.5-6 |   |   |   | 2.5-7.5 |   |
| Suboptimal exercise multiple                                                           |   |                   | 2.39-3    |   |   |   | 1.8-3 |   |   |   | 1.8 |   |
| Total cost of benefit for options granted(or modified) during the year (NIS thousands) |   |                   | 2,905     |   |   |   | 47,058 |   |   |   | 25,215 | (i) |
| Expenses recognized during the year (NIS thousands)                                    |   |                   | 29,461    |   |   |   | 49,820 |   |   |   | 65,575 |   |

|   | (i) | Include NIS 8.8 million in respect of re-measurement of 5,424,436 options granted by PC in October 2006 to the Company's chairman of the board and certain of the Company's directors, which was approved for grant by the Company's general shareholders meeting on November 1, 2007. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Include NIS 34.0 million in respect of the modification of the option plan in November 2008 (see above). |
|--------|------|----------------------------------------------------------------------------------------------------------|

----

----

| NOTE 25 - | OPTIONS PLANS (CONT.) |
|-----------|-----------------------|

|   | B. | Options plan adopted by PC (cont.) |
|--------|----|------------------------------------|

|   | C. | Options plan adopted by the InSightec |
|--------|----|---------------------------------------|

----

----

| NOTE 25 - | OPTIONS PLANS (CONT.) |
|-----------|-----------------------|

|   | C. | Options plan adopted by the InSightec (cont.) |
|--------|----|-----------------------------------------------|

|                                 |   | Number of options         |      |
|--------------------------------------|--------|---------------------------|-----------|
|                                 |   | Year ended December 31    |      |
|                                 |   | 2 0 0 9                   |      |   | 2 0 0 8 |   |   | 2 0 0 7 |   |
|                                 |   | Number of options (i)(ii) |      |   | Weighted average exercise price |   |   | Number of options (i) |   |   | Weighted average exercise price |   |   | Number of options (i) |   |   | Weighted average exercise price |   |
|                                 |   |                      |      |   | (USD) |   |   |   |   |   | (USD) |   |   |   |   |   | (USD) |   |
|                                 |   |                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at the beginning of the year |   |                      | 4,536,315 |   |   |   | 5.12 |   |   |   | 3,928,065 |   |   |   | 4.03 |   |   |   | 3,474,565 |   |   |   | 2.98 |   |
| Granted                              |   |                      | 853,000   |   |   |   | 6.18 |   |   |   | 658,000 |   |   |   | 12.00 |   |   |   | 516,250 |   |   |   | 11.42 |   |
| Forfeited                            |   |                      | (169,000  | ) |   |   | 6 |   |   |   | (38,000 | ) |   |   | 12.26 |   |   |   | (36,500 | ) |   |   | 11.93 |   |
| Exercised                            |   |                      | (93,000   | ) |   |   | 0.0025 |   |   |   | (11,750 | ) |   |   | 0.0025 |   |   |   | (26,250 | ) |   |   | 0.0025 |   |
| Balance at the end of the year (*)   |   |                      | 5,127,315 |   |   |   | 3.01 |   |   |   | 4,536,315 |   |   |   | 5.12 |   |   |   | 3,928,065 |   |   |   | 4.03 |   |
|                                 |   |                      |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options exercisable at the year end  |   |                      | 3,365,565 |   |   |   | 1.9 |   |   |   | 3,225,690 |   |   |   | 2.4 |   |   |   | 2,926,815 |   |   |   | 1.32 |   |

|   | (*) | After Re-pricing of certain of the options’ exercise price to 6$ |
|--------|-----|------------------------------------------------------------------------|

|   | (i) | Include 100,000 options granted to the Company's CEO at an exercise price of $3.3 per share which as of the balance sheet date are fully vested. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Include 250,000 options granted to the Company's former Chairman in December 2009 following the approval of the Company's shareholders. The exercise price of the options granted was $6.60 per share with a vesting period which will occur ratably over a period of 3 years. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Outstanding as of December 31, 2009 |      |   | Exercisable asof December 31, 2009 |   |
|-------------------------------------|-----------|--------|------------------------------------|--------|
| Range of exercise prices            |      |   | Number outstanding                 |   |   | Weighted average remaining contractual life |   |   | Weighted average exercise price |   |   | Number exercisable |   |   | Weighted average exercise price |   |
| (US dollars)                        |      |   |                               |   |   | (in years) |   |   | (US dollars) |   |   |   |   |   | (US dollars) |   |
|                                |      |   |                               |   |   |   |   |   |   |   |   |   |   |
|                                | 0.0025    |   |                               |   | 2,160,690 |   |   |   | 1.87 |   |   |   | 0.0025 |   |   |   | 2,160,690 |   |   |   | 0.0025 |   |
|                                | 3.33      |   |                               |   | 300,000 |   |   |   | 1.36 |   |   |   | 3.33 |   |   |   | 300,000 |   |   |   | 3.33 |   |
|                                | 5.33-5.85 |   |                               |   | 273,875 |   |   |   | 1.55 |   |   |   | 5.81 |   |   |   | 273,875 |   |   |   | 5.81 |   |
|                                | 6.00-6.60 |   |                               |   | 2,392,750 |   |   |   | 4.90 |   |   |   | 6.06 |   |   |   | 631,000 |   |   |   | 6.00 |   |
|                                |      |   |                               |   | 5,127,315 |   |   |   |   |   |   |   |   |   |   |   | 3,365,565 |   |   |   |   |   |

----

----

| NOTE 25 - | OPTIONS PLANS (CONT.) |
|-----------|-----------------------|

|   | C. | Options plan adopted by the InSightec(cont.) |
|--------|----|----------------------------------------------|

|                                                                                   |   | Year ended December 31, |    |
|----------------------------------------------------------------------------------------|--------|-------------------------|---------|
|                                                                                   |   | 2009                    |    |   | 2008 |   |   | 2007 |   |
|                                                                                   |   |                    |    |   |   |   |   |   |   |
| Risk free interest rate (%)                                                            |   |                    | 2.5     |   |   |   | 2.5-2.7 |   |   |   | 4-4.55 |   |
|                                                                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Expected life of options (years)                                                       |   |                    | 3.5-4.9 |   |   |   | 4-4.9 |   |   |   | 4.5 |   |
|                                                                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Expected volatility (%)                                                                |   |                    | 60      |   |   |   | 60 |   |   |   | 60 |   |
|                                                                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Expected dividend yield                                                                |   | None                    |    |   | None |   |   | None |   |
|                                                                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Forfeited (%)                                                                          |   |                    | 3.5     |   |   |   | 3.5 |   |   |   | 3.5 |   |
|                                                                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Total cost of benefit for options granted(or modified) during the year (NIS thousands) |   |                    | 8,587   | (i) |   |   | 15,335 |   |   |   | 13,400 |   |
|                                                                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Expenses recognized during the  year (NIS thousands)                         |   |                    | 7,004   |   |   |   | 6,080 |   |   |   | 10,875 |   |

|   | (i)  | Include NIS 3.5 million in respect of re-pricing the Exercise price to $6.0 per option which was executed in February 2009, and NIS 2.4 million related to the 250,000 options granted to the Company's former chairman of the board. |
|--------|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 26 - | ADDITIONAL DETAILS CONCERNING INCOME STATEMENT |
|-----------|------------------------------------------------|

|                                                                    |   | Year ended December 31 |    |
|-------------------------------------------------------------------------|--------|------------------------|---------|
|                                                                    |   | 2009                   |    |   | 2008 |   |   | 2007 |   |
|                                                                    |   | (in thousand NIS)      |    |
|                                                                    |   |                   |    |   |   |   |   |   |   |
| A.    Revenues from commercial centers              |   |                   |    |   |   |   |   |   |   |
|                                                                    |   |                   |    |   |   |   |   |   |   |
| Sales of trading property (i)                                           |   |                   | -       |   |   |   | 439,339 |   |   |   | 2,819,820 |   |
| Rental income and management fees                                       |   |                   | 43,240  |   |   |   | 31,251 |   |   |   | 43,978 |   |
| Others                                                                  |   |                   | 42,226  |   |   |   | 53,573 |   |   |   | 53,818 |   |
|                                                                    |   |                   | 85,466  |   |   |   | 524,163 |   |   |   | 2,917,616 |   |
| (i)    See note 8E.                                 |   |                   |    |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                   |    |   |   |   |   |   |   |   |   |   |
| B.    Revenues from hotel operations and management |   |                   |    |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                   |    |   |   |   |   |   |   |   |   |   |
| Rooms                                                                   |   |                   | 242,466 |   |   |   | 244,162 |   |   |   | 261,397 |   |
| Food, beverage and other services                                       |   |                   | 134,254 |   |   |   | 123,855 |   |   |   | 116,978 |   |
| Rental of commercial space                                              |   |                   | 20,016  |   |   |   | 16,203 |   |   |   | 16,852 |   |
|                                                                    |   |                   | 396,736 |   |   |   | 384,220 |   |   |   | 395,227 |   |
|                                                                    |   |                   |    |   |   |   |   |   |   |   |   |   |
| C.    Gains from sale of real estate assets         |   |                   |    |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                   |    |   |   |   |   |   |   |   |   |   |
| Sales of investment property (i)                                        |   |                   | -       |   |   |   | - |   |   |   | 17,800 |   |
| Sales of hotels (ii)                                                    |   |                   | -       |   |   |   |   |   |   |   | 44,821 |   |
|                                                                    |   |                   | -       |   |   |   | - |   |   |   | 62,621 |   |
|                                                                    |   |                   |    |   |   |   |   |   |   |   |   |   |

|   | (i) | Mainly in respect of the sale of PC's Duna Plaza offices, Hungary in May 2007. |
|--------|-----|-------------------------------------------------------------------------------------|

|   | (ii) | Mainly in respect of the sale of the Group's 50% holding in the Ballet Institute building, Hungary in June 2007. |
|--------|------|------------------------------------------------------------------------------------------------------------------|

| D.    Gains from change of  shareholding in subsidiaries |   |   |   |   |   |   |   |   |   |
|----------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                   |   |   |   |   |   |   |   |   |   |
| Change of shareholding in PC (i)                                                       |   |   | 16,478 |   |   |   | 49,122 |   |   |   | - |   |
| Change of shareholding in InSightec (ii)                                               |   |   | 14,628 |   |   |   | -      |   |   |   | 5,310 |   |
|                                                                                   |   |   | 31,106 |   |   |   | 49,122 |   |   |   | 5,310 |   |

|   | (i) | 2009 and 2008: see note11B.(2); |
|--------|-----|---------------------------------|

|   | (ii) | See note 11A.(3) |
|--------|------|------------------|

----

----

| NOTE 26 - | ADDITIONAL DETAILS CONCERNING INCOME STATEMENT (CONT.) |
|-----------|--------------------------------------------------------|

|                                                              |   | Year ended December 31 |    |
|-------------------------------------------------------------------|--------|------------------------|---------|
|                                                              |   | 2009                   |    |   | 2008 |   |   | 2007 |   |
|                                                              |   | (in thousand NIS)      |    |
|                                                              |   |                   |    |   |   |   |   |   |   |
| E.    Cost of commercial centers              |   |                   |    |   |   |   |   |   |   |
|                                                              |   |                   |    |   |   |   |   |   |   |
| Direct expenses:                                                  |   |                   |    |   |   |   |   |   |   |
| Cost of trading property sold                                     |   |                   | 1,956   |   |   |   | 232,681 |   |   |   | 1,492,020 |   |
| Wages and fringe benefits                                         |   |                   | 10,471  |   |   |   | 11,306 |   |   |   | 9,039 |   |
| Allowance for doubtful debts                                      |   |                   | 3,683   |   |   |   | - |   |   |   | - |   |
| Energy costs                                                      |   |                   | 13,268  |   |   |   | 8,410 |   |   |   | 8,901 |   |
| Taxes and insurance                                               |   |                   | 4,492   |   |   |   | 3,280 |   |   |   | 3,139 |   |
| Maintenance of property and other expenses                        |   |                   | 25,790  |   |   |   | 23,316 |   |   |   | 34,364 |   |
|                                                              |   |                   | 59,660  |   |   |   | 278,993 |   |   |   | 1,547,463 |   |
| Other operating expenses:                                         |   |                   |    |   |   |   |   |   |   |   |   |   |
| Wages and fringe benefits                                         |   |                   | 24,725  |   |   |   | 32,599 |   |   |   | 35,195 |   |
| Stock-based compensation expenses                                 |   |                   | 15,964  |   |   |   | 36,571 |   |   |   | 44,343 |   |
| Professional services                                             |   |                   | 22,821  |   |   |   | 21,482 |   |   |   | 23,952 |   |
| Advertising                                                       |   |                   | 14,671  |   |   |   | 21,103 |   |   |   | 23,757 |   |
| Others                                                            |   |                   | 25,074  |   |   |   | 35,978 |   |   |   | 18,892 |   |
|                                                              |   |                   | 103,255 |   |   |   | 147,733 |   |   |   | 146,139 |   |
|                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                     |   |                   | 6,338   |   |   |   | 6,034 |   |   |   | 20,651 |   |
|                                                              |   |                   | 169,253 |   |   |   | 432,760 |   |   |   | 1,714,253 |   |
|                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |
| F.    Cost of hotel operations and management |   |                   |    |   |   |   |   |   |   |   |   |   |
|                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |
| Direct expenses:                                                  |   |                   |    |   |   |   |   |   |   |   |   |   |
| Wages and fringe benefits                                         |   |                   | 103,618 |   |   |   | 113,436 |   |   |   | 112,821 |   |
| Food and beverages                                                |   |                   | 30,425  |   |   |   | 26,220 |   |   |   | 22,622 |   |
| Others                                                            |   |                   | 99,711  |   |   |   | 96,185 |   |   |   | 86,774 |   |
|                                                              |   |                   | 233,754 |   |   |   | 235,841 |   |   |   | 222,217 |   |
| Other operating expenses:                                         |   |                   |    |   |   |   |   |   |   |   |   |   |
| Wages and fringe benefits                                         |   |                   | 378     |   |   |   | 515 |   |   |   | 974 |   |
| Management fees and reimbursement expenses (i)                    |   |                   | 21,265  |   |   |   | 20,477 |   |   |   | 18,864 |   |
| Business taxes, insurance and lease payments                      |   |                   | 25,354  |   |   |   | 22,270 |   |   |   | 21,559 |   |
| Others                                                            |   |                   | 11,043  |   |   |   | 22,569 |   |   |   | 16,182 |   |
|                                                              |   |                   | 58,040  |   |   |   | 65,831 |   |   |   | 57,579 |   |
|                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                     |   |                   | 61,435  |   |   |   | 53,178 |   |   |   | 50,267 |   |
|                                                              |   |                   | 353,229 |   |   |   | 354,850 |   |   |   | 330,063 |   |

|   | (i) | See note 23 A. (1) |
|--------|-----|--------------------|

----

----

| NOTE 26 - | ADDITIONAL DETAILS CONCERNING INCOME STATEMENT (CONT.) |
|-----------|--------------------------------------------------------|

|                                                                                            |   | Year ended December 31 |    |
|-------------------------------------------------------------------------------------------------|--------|------------------------|---------|
|                                                                                            |   | 2009                   |    |   | 2008 |   |   | 2007 |   |
|                                                                                            |   | (in thousand NIS)      |    |
|                                                                                            |   |                   |    |   |   |   |   |   |   |
| G.    Costs and expenses of medical systems operation                       |   |                   |    |   |   |   |   |   |   |
|                                                                                            |   |                   |    |   |   |   |   |   |   |
| Direct expenses:                                                                                |   |                   |    |   |   |   |   |   |   |
| Wages and fringe benefits                                                                       |   |                   | 7,473   |   |   |   | 7,800 |   |   |   | 7,327 |   |
| Stock-based compensation expenses                                                               |   |                   | 688     |   |   |   | 538 |   |   |   | 1,178 |   |
| Materials and subcontractors                                                                    |   |                   | 14,650  |   |   |   | 10,529 |   |   |   | 9,565 |   |
| Changes in work in process and  finished goods                                        |   |                   | 1,251   |   |   |   | (3,403 | ) |   |   | (94 | ) |
| Others                                                                                          |   |                   | 3,335   |   |   |   | 2,452 |   |   |   | 6,762 |   |
|                                                                                            |   |                   | 27,397  |   |   |   | 17,916 |   |   |   | 24,738 |   |
| Other operating expenses:                                                                       |   |                   |    |   |   |   |   |   |   |   |   |   |
| Wages and fringe benefits                                                                       |   |                   | 20,141  |   |   |   | 19,401 |   |   |   | 14,865 |   |
| Stock-based compensation expenses                                                               |   |                   | 4,445   |   |   |   | 3,841 |   |   |   | 5,135 |   |
| Advertising and commissions                                                                     |   |                   | 6,525   |   |   |   | 6,524 |   |   |   | 15,684 |   |
| Depreciation and amortization                                                                   |   |                   | 753     |   |   |   | 651 |   |   |   | 541 |   |
| Others                                                                                          |   |                   | 8,142   |   |   |   | 7,136 |   |   |   | 8,990 |   |
|                                                                                            |   |                   | 40,006  |   |   |   | 37,553 |   |   |   | 45,215 |   |
|                                                                                            |   |                   |    |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                   | 67,403  |   |   |   | 55,469 |   |   |   | 69,953 |   |
|                                                                                            |   |                   |    |   |   |   |   |   |   |   |   |   |
| H.           Cost of fashion merchandise |   |                   |    |   |   |   |   |   |   |   |   |   |
| Direct expenses:                                                                                |   |                   |    |   |   |   |   |   |   |   |   |   |
| Inventories - opening balance                                                                   |   |                   | 18,157  |   |   |   | 11,429 |   |   |   | 10,290 |   |
| Purchases                                                                                       |   |                   | 58,255  |   |   |   | 47,465 |   |   |   | 31,604 |   |
| Less - inventories closing balance                                                              |   |                   | 26,652  |   |   |   | 18,157 |   |   |   | 11,429 |   |
|                                                                                            |   |                   | 49,760  |   |   |   | 40,737 |   |   |   | 30,465 |   |
| Other operating expenses:                                                                       |   |                   |    |   |   |   |   |   |   |   |   |   |
| Wages and fringe expenses                                                                       |   |                   | 25,964  |   |   |   | 25,790 |   |   |   | 16,515 |   |
| Rental, management fee and shops' maintenance                                                   |   |                   | 35,789  |   |   |   | 28,743 |   |   |   | 20,571 |   |
| Advertising                                                                                     |   |                   | 9,952   |   |   |   | 12,924 |   |   |   | 6,634 |   |
| Depreciation and amortization                                                                   |   |                   | 8,951   |   |   |   | 5,907 |   |   |   | 4,215 |   |
| Others                                                                                          |   |                   | 3,726   |   |   |   | 3,939 |   |   |   | 1,908 |   |
|                                                                                            |   |                   | 84,382  |   |   |   | 77,303 |   |   |   | 49,843 |   |
|                                                                                            |   |                   |    |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                   | 134,142 |   |   |   | 118,040 |   |   |   | 80,308 |   |
|                                                                                            |   |                   |    |   |   |   |   |   |   |   |   |   |
| I.    Research and development expenses                                     |   |                   |    |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                   |    |   |   |   |   |   |   |   |   |   |
| Wages and fringe benefits                                                                       |   |                   | 37,666  |   |   |   | 36,555 |   |   |   | 34,410 |   |
| Stock-based compensation expenses                                                               |   |                   | 1,842   |   |   |   | 1,530 |   |   |   | 3,496 |   |
| Materials and subcontractors                                                                    |   |                   | 20,635  |   |   |   | 13,631 |   |   |   | 16,402 |   |
| Depreciation and amortization                                                                   |   |                   | 3,019   |   |   |   | 5,558 |   |   |   | 6,578 |   |
| Others                                                                                          |   |                   | 10,797  |   |   |   | 11,485 |   |   |   | 8,673 |   |
|                                                                                            |   |                   | 73,959  |   |   |   | 68,759 |   |   |   | 69,559 |   |

----

----

| NOTE 26 - | ADDITIONAL DETAILS CONCERNING INCOME STATEMENT (CONT.) |
|-----------|--------------------------------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                    |   | Year ended December 31 |     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                                                    |   | 2009                   |     |   | 2008 |   |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   | (in thousand NIS)      |     |
| J.    General and administrative expenses                                                                                                                                                                                                                                                                                                                           |   |                   |     |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   |     |   |   |   |   |   |   |
| Wages and fringe benefits                                                                                                                                                                                                                                                                                                                                                               |   |                   | 27,610   |   |   |   | 23,991 |   |   |   | 73,110 |   |
| Stock-based compensation expenses                                                                                                                                                                                                                                                                                                                                                       |   |                   | 12,209   |   |   |   | 9,531 |   |   |   | 18,724 |   |
| Depreciation and amortization                                                                                                                                                                                                                                                                                                                                                           |   |                   | 1,997    |   |   |   | 1,849 |   |   |   | 1,788 |   |
| Others                                                                                                                                                                                                                                                                                                                                                                                  |   |                   | 24,337   |   |   |   | 19,573 |   |   |   | 23,370 |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   | 66,153   |   |   |   | 54,944 |   |   |   | 116,992 |   |
| K.    Financial expense                                                                                                                                                                                                                                                                                                                                             |   |                   |     |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   |     |   |   |   |   |   |   |   |   |   |
| Interest and CPI linkage on borrowings  (i)                                                                                                                                                                                                                                                                                                                                   |   |                   | 429,417  |   |   |   | 444,825 |   |   |   | 325,298 |   |
| Loss (gain) from foreign currency translation differences (net of exchange results charged to foreign currency translation reserve)                                                                                                                                                                                                                                                     |   |                   | 2,406    |   |   |   | 28,262 |   |   |   | 10,659 |   |
| Other financial expenses                                                                                                                                                                                                                                                                                                                                                                |   |                   | 6,754    |   |   |   | 15,063 |   |   |   | 1,390 |   |
| Total financial  expenses                                                                                                                                                                                                                                                                                                                                                     |   |                   | 438,577  |   |   |   | 488,150 |   |   |   | 337,347 |   |
| Financial expenses capitalized to qualified assets (ii)                                                                                                                                                                                                                                                                                                                                 |   |                   | (155,031 | ) |   |   | (191,623 | ) |   |   | (104,781 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   | 283,546  |   |   |   | 296,527 |   |   |   | 232,566 |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   |     |   |   |   |   |   |   |   |   |   |
| (i)    Including results of swap transactions designated as cash flow hedge. In addition interest        on debentures measured at  FVTPL in the amount of NIS 62 million, NIS 73 million        and NIS 13 for the years ended December 31, 2009, 2008 and 2007 respectively. |   |                   |     |   |   |   |   |   |   |   |   |   |
| (ii)    The rate applicable to non-specific credit                                                                                                                                                                                                                                                                                                                  |   |                   | 8.6      | % |   |   | 9.3 | % |   |   | 7.8 | % |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   |     |   |   |   |   |   |   |   |   |   |
| L.    Financial incomes                                                                                                                                                                                                                                                                                                                                             |   |                   |     |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   |     |   |   |   |   |   |   |   |   |   |
| Interest on deposits and receivables                                                                                                                                                                                                                                                                                                                                                    |   |                   | 85,529   |   |   |   | 144,513 |   |   |   | 101,844 |   |
| Gain (loss) from foreign currency translation differences                                                                                                                                                                                                                                                                                                                               |   |                   | 7,196    |   |   |   | (9,235 | ) |   |   | (28,551 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   | 92,725   |   |   |   | 135,278 |   |   |   | 73,293 |   |
| M.   Change in fair value of financial  instruments at FVTPL                                                                                                                                                                                                                                                                                                   |   |                   |     |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   |     |   |   |   |   |   |   |   |   |   |
| Change in fair value of embedded derivative                                                                                                                                                                                                                                                                                                                                             |   |                   | (796     | ) |   |   | 18,711 |   |   |   | 5,303 |   |
| Change in fair value of financial instruments measured at FVTPL (mainly debentures)                                                                                                                                                                                                                                                                                                     |   |                   | (222,208 | ) |   |   | 154,189 |   |   |   | (17,330 | ) |
| Change in fair value of derivatives (mainly swap and forward transactions)                                                                                                                                                                                                                                                                                                              |   |                   | 99,120   |   |   |   | 95,668 |   |   |   | 12,531 |   |
| Gain (loss) on marketable securities                                                                                                                                                                                                                                                                                                                                                    |   |                   | 53,182   |   |   |   | (43,324 | ) |   |   | 17,843 |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   | (70,702  | ) |   |   | 225,244 |   |   |   | 18,347 |   |
| N.    Impairment, charges and other expenses, net                                                                                                                                                                                                                                                                                                                   |   |                   |     |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   |     |   |   |   |   |   |   |   |   |   |
| Impairment of real estate  assets, other property and other receivables (i)                                                                                                                                                                                                                                                                                                   |   |                   | 232,555  |   |   |   | 50,568 |   |   |   | 30,286 |   |
| Initiation expenses (ii)                                                                                                                                                                                                                                                                                                                                                                |   |                   | 30,411   |   |   |   | 21,280 |   |   |   | 7,623 |   |
| Loss (gain) from disposition of assets and liabilities (iii)                                                                                                                                                                                                                                                                                                                            |   |                   | (2,278   | ) |   |   | 2,498 |   |   |   | 6,270 |   |
| Others, net                                                                                                                                                                                                                                                                                                                                                                             |   |                   | (463     | ) |   |   | (5,549 | ) |   |   | (5,946 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                   | 260,225  |   |   |   | 68,797 |   |   |   | 38,233 |   |

----

----

| NOTE 26 - | ADDITIONAL DETAILS CONCERNING INCOME STATEMENT (CONT.) |
|-----------|--------------------------------------------------------|

|   | N. | Other expenses, net (cont.) |
|--------|----|-----------------------------|

|   | (i) | The economic and financial crisis in the world markets, which caused a decrease in the operating results of the Group's real estate assets (including mainly hotels and other assets within the property plant and equipment, and commercial centers within trading property) in addition to the increase in the yield rates applying to these real estate assets, have lead the Group to reexamine its investments in its real estate assets and its other property. As a result, the Group included in these financial statements a write-down of NIS 217 million in respect of its trading property, and impairment of NIS 15 million in respect of its property plant and equipment. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Includes mainly cost and expenses in respect of the Group's operations in India. |
|--------|------|----------------------------------------------------------------------------------|

|   | (iii) | 2007: represent loss from the sale of the Arena Herzlia, Israel commercial center in July 2007. |
|--------|-------|-------------------------------------------------------------------------------------------------|

|                                                                                                                                 |   | Year ended December 31 |     |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|----------|
|                                                                                                                                 |   | 2009                   |     |   | 2008 |   |   | 2007 |   |
|                                                                                                                                 |   | (in thousand NIS)      |     |
|                                                                                                                                 |   |                   |     |   |   |   |   |   |   |
| O.             Earnings per share                                   |   |                   |     |   |   |   |   |   |   |
|                                                                                                                                 |   |                   |     |   |   |   |   |   |   |
| 1.    Basic earning per share:                                                                                   |   |                   |     |   |   |   |   |   |   |
| The earnings and weighted average number of ordinary shares used in the calculation of the basic earning per share are as follows:   |   |                   |     |   |   |   |   |   |   |
| Profit (loss) from continuing operations                                                                                             |   |                   | (549,820 | ) |   |   | (108,648 | ) |   |   | 529,459 |   |
| Profit from discontinued operation                                                                                                   |   |                   | 16,550   |   |   |   | 4,934 |   |   |   | 10,289 |   |
| Weighted average number of shares used in computing basic earnings per share (thousands)                                             |   |                   | 25,458   |   |   |   | 25,455 |   |   |   | 25,454 |   |
|                                                                                                                                 |   |                   |     |   |   |   |   |   |   |   |   |   |
| 2.    Diluted earning per share:                                                                                 |   |                   |     |   |   |   |   |   |   |   |   |   |
| The earnings and weighted average number of ordinary shares used in the calculation of the diluted earning per share are as follows: |   |                   |     |   |   |   |   |   |   |   |   |   |
| Profit (loss) from continuing operations                                                                                             |   |                   | (550,495 | ) |   |   | (109,511 | ) |   |   | 522,876 |   |
| Profit from discontinued operation                                                                                                   |   |                   | 16,550   |   |   |   | 4,934 |   |   |   | 10,289 |   |
| Weighted average number of shares used in computing diluted earnings per share (thousands)                                           |   |                   | 25,458   |   |   |   | 25,455 |   |   |   | 25,917 |   |
| Effect of diluted options on the number of shares (thousands)                                                                        |   |                   | -        |   |   |   | - |   |   |   | 463 |   |

----

----

| NOTE 27 - | RELATED PARTIES |
|-----------|-----------------|

|   | A. | Transactions with related parties |
|--------|----|-----------------------------------|

|   | (1) | As of the balance sheet date the Company and/or its subsidiaries are bound by the following agreements, with Control Centers Ltd. ("CC"), the ultimate controlling party of the Company, and/or companies controlled thereby: |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a. | An agreement according to which the Company will receive from CC (either directly or through its subsidiaries or affiliates) coordination, planning, execution and supervision services (the “Services”) over real estate projects of the Company and/or its subsidiaries and/or affiliates as defined in the agreement in consideration for a fee equal to 5% of the actual execution costs (excluding land acquisition costs, financing cost and the consideration for CC under the agreement) of each such project ("Supervision Fees"). The agreement applies to real estate projects whose initiation began following the approval of the agreement by the Company’s shareholders meeting (May 31, 2006) and to three other real estate projects which were under early stage of development as of May 31, 2006 ("Real Estate Projects"). Supervision Fees are paid in installments upon the attainment of certain milestones. In addition, the Company will reimburse CC for all reasonable costs incurred in connection with the Services rendered thereby, not to exceed a total of €75,000 per real estate project. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | An agreement with Jet Link Ltd., for the provision of aviation services, up to 150 flight hours per annum, for the operations and in connection with projects abroad, in consideration for payment calculated on the basis of the price list of Jet Link Ltd., deducted by a 5% discount. Due to Group increasing business needs, the Group purchased during 2007 certain additional flight hours from Jet Link under the same terms stipulated in the agreement. The purchase of the additional flight hours was approved by the audit committee and the board of directors as a non-extraordinary transaction within the meaning of the Israeli Companies Law. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 27 - | RELATED PARTIES (CONT.) |
|-----------|-------------------------|

|   | A. | Transactions with related parties (cont.) |
|--------|----|-------------------------------------------|

|   | (2) | The Group furnished a local municipality with a bank guarantee in an amount of approximately NIS 4.5 million to secure payment of the land betterment tax by Marina Herzliya Limited Partnership Ltd. (a subsidiary of the Control Centers Group). Arbitration is currently being held as to such liability. The Company’s management estimates, based on professional opinion that no significant costs will be borne thereby, in respect of this guarantee. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | Benefits to key management personnel |
|--------|----|--------------------------------------|

|   | (1) | On May 31, 2006 the general shareholders' meeting approved a service agreement with a company controlled it’s the Company's executive chairman of the board (the “Management Company” and the "Chairman", respectively) according to which, the Management Company will provide the Company with executive chairman services (the “Services”). The Management Company may provide the Services to private subsidiaries and/or affiliates of the Company. In accordance with the term of the agreement, the Services will be provided by the Chairman only, as an employee of the Management Company and the Chairman will devote at least 80% of his time, skills and efforts to his role as Chairman of the Company's board of directors. The control over the Management Company will not be changed during the term of the agreement. In consideration for the Chairman's services the Company will pay the Management Company a monthly amount of $50,000 (NIS 188,750 as of December 31, 2009) as well as reimbursement of direct expenses incurred directly with the provision of the Services. The Company will provide the Management Company with an appropriate vehicle and shall bear all costs and expenses in connection with such vehicle. In accordance with the terms of the service agreement, the Management Company will be the sole employer of the Chairman and no employer-employee relationship will exist between the Chairman and the Company. The Management Company has agreed to indemnify the Company with respect to any amount, rights or benefits the Company would be required to pay the Chairman including legal fees, in connection with any determination by the labor court and/or any other competent authority that the Chairman was or is an employee of the Company during the term of the agreement. The agreement is for a five-year term commencing retroactively on August 1, 2005. The Chairman has guaranteed all of the Management Company’s obligations as far as they relate to it and has further guaranteed the Management Company’s indemnification undertakings and responsibility for damages. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | On November 1, 2007, the Company's shareholders approved a service agreement between PC and the Chairman, according to which, the Chairman will serve as PC's executive chairman of the board of directors in consideration of monthly salary of $25,000 (NIS 94,375 as of December 31, 2009) as well as reasonable expenses incurred by the Chairman in the performance of his duties under the service agreement. The salary will be reviewed by PC's board of directors each year and may be increased at the discretion of PC's board and subject to applicable law. The Chairman has waived his right to any entitlement to severance pay under the Israeli Severance Pay Law and social benefit. The service agreement commenced on October 26, 2006. Each party may terminate the service agreement by a 12-month prior notice. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 27 - | RELATED PARTIES (CONT.) |
|-----------|-------------------------|

|   | B. | Benefits to key management personnel (cont.) |
|--------|----|----------------------------------------------|

|   | (3) | On November 1, 2007 the Company's shareholders approved an annual bonus payment for the Chairman which will be calculated as follows: (i) 0% of the first NIS 100 million of Profits (as defined below); (ii) 2.5% of Profits between NIS 100 million and NIS 125 million; (iii) 3% of Profits between NIS 125 million and NIS 150 million; and (iv) 3.5% of Profits exceeding NIS 150 million. The annual bonus is payable for so long as the Chairman serves as a director or officer of the Company or any of its subsidiaries. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | On May 31, 2006, the Company's shareholders approved bonus payments for the fiscal years commencing 2006 to two of the Company's directors, which will be calculated as follows: (i) 0.75% of the first NIS 125 million of Profits (as defined below); (ii) 0.875% of Profits between NIS 125 million and NIS 150 million; and (iii) 1% of Profits exceeding NIS 150 million. Within the framework of an agreement executed with one of the two directors mentioned above regarding its resignation from certain positions within the Group, which were approved by the Company's shareholders on November 1, 2007, the director will be entitled to such bonus payments in respect of the years 2007 and 2008. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 27 - | RELATED PARTIES (CONT.) |
|-----------|-------------------------|

|   | B. | Benefits to key management personnel (cont.) |
|--------|----|----------------------------------------------|

|   | (5) | On January 17, 2008, the Company's shareholder’s approved an agreement with an officer who serves as the Company's executive vice chairman of the board ("VC") according to which the Company has undertaken to allot the VC 5% (five percent) of the aggregate issued and outstanding share capital in each entity through which the Group (excluding operations of PC and its investees) will conduct its operations in India and in Asia (the "Investment Vehicle") during the Sourcing Period (as defined below). In the event the Investment Vehicle is not wholly owned by the Group, the VC will be allotted that number of shares equal to 5% of the issued and outstanding share capital in such Investment Vehicle held by the Group ("VC Shares"). The VC Shares shall not be entitled to receive any distributions (including, but not limited to, payment of dividends, interest, other expenses and principal repayments of shareholder loans, management fees or other payments made to the VC and any loans provided by the Investment Vehicle to the VC) from the Investment Vehicle until the Group's investments (principal and interest calculated in accordance with a mechanism provided for in the agreement) in such Investment Vehicle have been fully repaid.  As of the balance sheet date, the VC's right to receive the shares in each Investment Vehicle is fully vested. The Group's obligation to issue the VC Shares shall apply to all the Group's operations (excluding operations of PC and its investees) initiated in the territory since the Group has commenced its operations in India and shall remain in effect for a period of 2.5 years subsequent to the date on which the VC ceases, for any reason, to devote, in the aggregate, a substantial part of his time and attention to the sourcing activities (the "Sourcing Period"). The agreement includes tag-along rights, preemptive rights and registration rights in favor of the VC and transfer restrictions, right of first refusal and drag-along rights in favor of the Group. On December 31, 2009, the VC informed the Company that he is resigning from his position with the company. This resignation will enter into effect on December 31, 2010. Although VC's full employment with the Company is ending, he continues to serve as the company's Executive Vice-Chairman of the board and as a director. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | On October 27, 2006, PC has entered into an agreement with an officer who through December 31, 2009 served as the Company's executive vice-chairman of the board ("VC") with respect to its operations in India, under which the VC will be entitled to receive options ("the Options") to acquire up to 5% of the holding company through which PC will carry out its operations in India. However, where considered appropriate and by agreement, the VC will be entitled to take up a 5% interest in specific projects, in which case necessary adjustments will be made at the holding company level. PC and the VC will agree on the form of the Option for each project, taking into account taxation, securities laws and regulations applicable to either party or their respective affiliates, and other considerations of the respective parties. If the VC exercises all his Options (5%) at the holding company level, his right to take up interests on a project by project basis will elapse. As of the balance sheet date, the VC's right to receive the shares in each holding company is fully vested. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 27 - | RELATED PARTIES (CONT.) |
|-----------|-------------------------|

|   | B. | Benefits to key management personnel (cont.) |
|--------|----|----------------------------------------------|

|   | (6) | (cont.) |
|--------|-----|---------|

|   | (7) | a. | The directors and officers of the Company and of companies, in which the directors serve on behalf of the Company, are covered by insurance of up to $40.0 million per occurrence and in the aggregate during the duration of the policy. The first layer of such policy in the amount of $10.0 million shall also cover the liability of directors and officers of EIL and its subsidiaries. The coverage is within the framework of a joint insurance policy for the EIL Group companies. The allocation of the insurance costs between the Company and its subsidiaries (90%) and EIL (10%) was approved by the Company's shareholders. The shareholders also approved the renewal and/or extension of the policy and the purchase of other directors and officers policy, provided that the coverage will not exceed the amount described above and that the premium will not exceed an amount representing an increase of 20% as compared to the previous year. The shareholder’s meeting of December 2008 approved the coverage of liability of the Chairman under the above insurance policy. |
|--------|-----|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | PC's directors and officers (including the Company's directors who are non-controlling shareholders of the Company) are covered through September 2012 by Public Offering of Securities Insurance of up to $5.0 million for losses arising under the prospectus filed by PC in October 2006. Such coverage was approved by the Company's shareholders. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 27 - | RELATED PARTIES (CONT.) |
|-----------|-------------------------|

|   | B. | Benefits to key management personnel (cont.) |
|--------|----|----------------------------------------------|

|   | (7) | (cont.) |
|--------|-----|---------|

|   | c. | InSightec's directors and officers (including the Company's directors who are non-controlling shareholders of the Company) are covered on damages caused by illegal activities by insurance policy of up to $10.0 million and includes a component of special cover for risk management (up to an amount of $100 thousands and for intellectual property (up to an amount of one million dollars). The policy is valid throughout the world commencing from March 1, 2009 and up to May 31, 2010, with the retroactive validity of the policy being set at March 1, 1999. The approval of the terms of the policy is subject to the approval of the organs of Insightec and of the Company. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d. | Gamida's directors and officers (including the Company's directors who are non-controlling shareholders of the Company) are covered with the policy includes insurance cover for the Directors and officers in Gamida as well as indemnity for Gamida, cover with respect to financial damage caused to Gamida in the case of claims against the officers and this in the event that Gamida is entitled or obligated, by law, to indemnify the insured with respect to monetary damage. In accordance with the terms and conditions of the policy, the limit of liability of the insurer is 5,000,000 dollars. The limit of liability is the total of the accumulated amount of the liability of the insurer for any monetary damage, resulting from all the claims that will be submitted against all the insured parties in accordance with all the clauses of the insurance cover, in accordance with the accumulative policy. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | As for directors' indemnification - see note 23C (1-3). |
|--------|-----|---------------------------------------------------------|

|   | (9) | Shares and warrants issued to related parties - see note 25. |
|--------|-----|--------------------------------------------------------------|

|   | C. | The following table presents the components of the Group related party transactions and benefit granted to the Group's key management personnel: |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                                       |   | Year ended December 31 |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|
|                                                                                                                                                                                                       |   | 2009                   |    |   | 2008 |   |   | 2007 |   |
|                                                                                                                                                                                                       |   | (in thousand NIS)      |    |
| a.    Benefits to key management personnel                                                                                                                                             |   |                   |    |   |   |   |
| Salaries, management fees, directors' fees and bonuses (i)                                                                                                                                                 |   |                   | 8,096   |   |   |   | 2,132 |   |   |   | 61,770 |   |
| Post employment benefits                                                                                                                                                                                   |   |                   | 225     |   |   |   | 1,332 |   |   |   | 490 |   |
| Termination benefits                                                                                                                                                                                       |   |                   | -       |   |   |   | - |   |   |   | 380 |   |
| Amortization of stock based compensation expenses                                                                                                                                                          |   |                   | 5,003   |   |   |   | 16,690 |   |   |   | 31,665 |   |
|                                                                                                                                                                                                       |   |                   | 13,324  |   |   |   | 20,154 |   |   |   | 94,305 |   |
| b.   Project expenses (coordination, supervision and aviation services) - charged,        mainly to cost of trading property and property plant and equipment |   |                   | 112,232 |   |   |   | 99,407 |   |   |   | 73,747 |   |
|                                                                                                                                                                                                       |   |                   |    |   |   |   |   |   |   |   |   |   |

|   | (i) | 2008: Net after adjustment of bonus provisions accrued in 2007 to the Company's directors in the amount of NIS 6.1 million. See sections (4) and (5) above. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 27 - | RELATED PARTIES (CONT.) |
|-----------|-------------------------|

|   | D. | Balances with related parties |
|--------|----|-------------------------------|

|                                                   |   | Year endedDecember 31 |   |
|--------------------------------------------------------|--------|-----------------------|--------|
|                                                   |   | 2009                  |   |   | 2008 |   |
|                                                   |   | (in thousand NIS)     |   |
| Assets:                                                |   |                  |   |   |   |   |
| Receivables and other debit accounts                   |   |                  | 8,627  |   |   |   | 8,113 |   |
| Jointly controlled entity                              |   |                  | 25,032 |   |   |   | 7,984 |   |
| Deposit, loans and other long-term receivables         |   |                  | 1,082  |   |   |   | 1,082 |   |
|                                                   |   |                  | 34,741 |   |   |   | 17,179 |   |
|                                                   |   |                  |   |   |   |   |   |   |
| Liabilities:                                           |   |                  |   |   |   |   |   |   |
| Payables and other credit accounts                     |   |                  | 8,447  |   |   |   | 4,630 |   |
| Liability to the Company's vice chairman (see 6 above) |   |                  | 3,401  |   |   |   | 5,859 |   |
| Benefits payable to key management personnel           |   |                  | 11,308 |   |   |   | 10,909 |   |
|                                                   |   |                  | 23,156 |   |   |   | 21,398 |   |

|   | E. | Liens and guarantees - see notes 23E.(1). |
|--------|----|-------------------------------------------|

| NOTE 28 - | SEGMENTS REPORTING |
|-----------|--------------------|

|   | · | Commercial and entertainment centers - Initiation, construction and sale, of commercial and entertainment centers and other mixed-use real property projects, predominantly in the retail sector. In certain circumstances and depending on market conditions, the Group operates and manages a commercial and entertainment centers prior to its sale. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Hotels - Hotels operation and management. |
|--------|--------|-------------------------------------------|

|   | · | Image guide treatment - Investments in the research and development, production and marketing of magnetic resonance imaging guided focused ultrasound treatment equipment. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 28 - | SEGMENTS REPORTING (cont.) |
|-----------|----------------------------|

|   | · | Residential projects- initiation, construction and sale of residential projects and other mixed-use real property projects, predominately residential. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Fashion apparel - distribution and marketing of fashion apparel and accessories. |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | Venture-capital investments - investments in high tech companies which are mainly engaged in research and development operations. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | · | Hospitals - initiation and construction of hospitals which are in preliminary stages. |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | Farm and dairy plant- initiations and construction of farm and dairy farm which are in preliminary stages. |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | · | Wholesale trade of home appliances- distribution and marketing of electrical appliances, kitchen appliances, kitchen systems, and facilities. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 28 - | SEGMENTS REPORTING (CONT.) |
|-----------|----------------------------|

|   | B. | Data regarding business segments |
|--------|----|----------------------------------|

|                                                            |   | Commercial andentertainment centers (i)  |      |   | Hotels |   |      | Image guided treatment |   |   | Residential |   |   | Fashion apparel |      |   | Other activities |   |    | Total  |   |
|-----------------------------------------------------------------|--------|------------------------------------------|-----------|--------|--------|--------|-----------|------------------------|--------|--------|-------------|--------|--------|-----------------|-----------|--------|------------------|--------|---------|--------|--------|
|                                                            |   | ( I n  t h o u s a n d  N I S) |      |
|                                                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |
| Revenues                                                        |   |                                     | 102,937   |   |   |   | 396,736   |                   |   |   | 75,318      |   |   |            | -         |   |             |   | 118,386 |   |   |   | - |   |   |   | 693,377 |   |
| Segment profit(loss)                                            |   |                                     | (281,741  | )      |   |   | 27,914    |                   |   |   | (66,044     | )      |   |            | (16,551   | )      |             |   | (15,757 | )      |   |   | (12,655 | ) |   |   | (364,834 | ) |
| Financial expenses                                              |   |                                     | (22,923   | )      |   |   | (106,213  | )                      |   |   | (705        | )      |   |            | -         |   |             |   | (5,742  | )      |   |   | - |   |   |   | (135,583 | ) |
| Share in losses of associates, net                              |   |                                     | (4,226    | )      |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   | (9,813 | ) |   |   | (14,039 | ) |
| Unallocated general and administrative expenses                 |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | (66,153 | ) |
| Unallocated financial expenses                                  |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | (147,963 | ) |
| Financial income                                                |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | 92,725 |   |
| Change in fair value of financial instruments measured at FVTPL |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | (70,702 | ) |
| loss before income taxes                                        |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | (706,549 | ) |
| Income taxes                                                    |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | (35,571 | ) |
| Loss from continuing operations                                 |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | (670,978 | ) |
| Profit from discontinued operation                              |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | 16,550 |   |
| Loss for the year                                               |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | (654,428 | ) |
| Purchase cost of segment assets(ii)                             |   |                                     | 920,235   |   |   |   | 74,581    |                   |   |   | 843         |   |   |            | 358,532   |   |             |   | 12,644  |   |   |   | 14,647 |   |   |   | 1,381,482 |   |
| Depreciation and amortization of segment assets                 |   |                                     | 6,501     |   |   |   | 61,435    |                   |   |   | 3,363       |   |   |            | -         |   |             |   | 8,951   |   |   |   | - |   |   |   | 80,250 |   |
| Unallocated depreciation and amortization                       |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | 1,997 |   |
|                                                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | 82,247 |   |
| Provision for impairment of segment assets                      |   |                                     | 216,962   |   |   |   | 15,593    |                   |   |   | -           |   |   |            | -         |   |             |   | -       |   |   |   | - |   |   |   | 232,555 |   |
| Unallocated provision for impairment                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   |   |   |
|                                                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   |   |   |
| December 31, 2009:                                              |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   |   |   |
| Segment assets                                                  |   |                                     | 3,670,008 |   |   |   | 1,696,902 |                   |   |   | 24,647      |   |   |            | 1,011,994 |   |             |   | 92,052  |   |   |   | 8,796 |   |   |   | 6,504,399 |   |
| Investment on the equity basis                                  |   |                                     | (3,269    | )      |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   | 44,866 |   |   |   | 41,597 |   |
| Unallocated assets                                              |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | 2,817,899 |   |
|                                                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | 9,363,895 |   |
| Segment liabilities                                             |   |                                     | 967,329   |   |   |   | 1,351,980 |                   |   |   | 70,461      |   |   |            | 958       |   |             |   | 60,622  |   |   |   | 3,609 |   |   |   | 2,454,960 |   |
| Unallocated liabilities                                         |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | 4,773,648 |   |
|                                                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |      |   |             |   |    |   |   |   |   |   |   |   | 7,228,608 |   |

| (i) | Includes mainly sales of trading property. |
|-----|--------------------------------------------|

| (ii) | Includes trading property and payments on accounts of trading property. |
|------|-------------------------------------------------------------------------|

----

----

| NOTE 28 - | SEGMENTS REPORTING (CONT.) |
|-----------|----------------------------|

|   | B. | Data regarding business segments |
|--------|----|----------------------------------|

|                                                            |   | Commercial andentertainment centers (i)  |      |   | Hotels |   |      | Image guided treatment |   |   | Residential |   |   | Fashion apparel |    |   | Other activities |   |    | Total  |   |
|-----------------------------------------------------------------|--------|------------------------------------------|-----------|--------|--------|--------|-----------|------------------------|--------|--------|-------------|--------|--------|-----------------|---------|--------|------------------|--------|---------|--------|--------|
|                                                            |   | ( I n  t h o u s a n d  N I S) |      |
|                                                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |
| Revenues                                                        |   |                                     | 568,895   |   |   |   | 387,776   |                   |   |   | 38,076      |   |   |            | 834     |   |             |   | 102,736 |   |   |   |   |   |   | 1,098,317 |   |
| Segment profit(loss)                                            |   |                                     | 119,438   |   |   |   | 19,251    |                   |   |   | (86,152     | )      |   |            | (10,598 | )      |             |   | (15,304 | )      |   |   | (26,993 | ) |   |   | (358 | ) |
| Financial expenses                                              |   |                                     | (16,016   | )      |   |   | (121,369  | )                      |   |   | (5,404      | )      |   |            |    |   |             |   | (2,008  | )      |   |   |   |   |   |   | (144,797 | ) |
| Share in losses of associates, net                              |   |                                     | (4,954    | )      |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   | (7,998 | ) |   |   | (12,952 | ) |
| Unallocated general and administrative expenses                 |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | (54,944 | ) |
| Unallocated financial expenses                                  |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | (151,730 | ) |
| Financial income                                                |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 135,278 |   |
| Change in fair value of financial instruments measured at FVTPL |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 225,244 |   |
| Loss  before income taxes                             |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | (4,259 | ) |
| Income taxes                                                    |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 24,736 |   |
| Loss from continuing operations                                 |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | (28,995 | ) |
| Profit from discontinued operation                              |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 4,934 |   |
| Loss for the year                                               |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | (24,061 | ) |
| Purchase cost of segment assets (ii)                            |   |                                     | 1,279,969 |   |   |   | 192,562   |                   |   |   | 1,101       |   |   |            | 522,026 |   |             |   | 24,039  |   |   |   | 56,930 |   |   |   | 2,076,627 |   |
| Depreciation and amortization of segment assets                 |   |                                     | 6,034     |   |   |   | 53,178    |                   |   |   | 5,711       |   |   |            |    |   |             |   | 5,907   |   |   |   |   |   |   |   | 70,830 |   |
| Unallocated depreciation and amortization                       |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 1,849 |   |
|                                                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 72,679 |   |
| Provision for impairment of segment assets                      |   |                                     | 8,248     |   |   |   | 12,234    |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 20,482 |   |
| Unallocated provision for impairment                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 30,085 |   |
|                                                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 50,567 |   |
| December 31, 2008:                                              |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   |   |   |
| Segment assets                                                  |   |                                     | 2,973,741 |   |   |   | 1,660,014 |                   |   |   | 27,378      |   |   |            | 806,987 |   |             |   | 78,573  |   |   |   | 5,110 |   |   |   | 5,552,004 |   |
| Investment on the equity basis                                  |   |                                     | 996       |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   | 45,659 |   |   |   | 46,655 |   |
| Unallocated assets                                              |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 3,093,053 |   |
|                                                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 8,691,712 |   |
| Segment liabilities                                             |   |                                     | 654,857   |   |   |   | 1,313,239 |                   |   |   | 137,052     |   |   |            | 3,483   |   |             |   | 64,170  |   |   |   | 3,171 |   |   |   | 2,175,972 |   |
| Unallocated liabilities                                         |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 4,077,957 |   |
|                                                            |   |                                     |      |   |   |   |      |                   |   |   |        |   |   |            |    |   |             |   |    |   |   |   |   |   |   |   | 6,253,929 |   |

| (i) | Includes mainly sales of trading property. |
|-----|--------------------------------------------|

| (ii) | includes trading property and payments on accounts of trading property. |
|------|-------------------------------------------------------------------------|

----

----

| NOTE 28 - | SEGMENTS REPORTING (CONT.) |
|-----------|----------------------------|

|   | B. | Data regarding business segments |
|--------|----|----------------------------------|

|                                                            |   | Commercial andentertainment centers (i)  |      |   | Hotels |   |     | Image guided treatment |   |   | Residential |   |   | Fashion apparel |   |   | Other activities |   |   | Total  |   |
|-----------------------------------------------------------------|--------|------------------------------------------|-----------|--------|--------|--------|----------|------------------------|--------|--------|-------------|--------|--------|-----------------|--------|--------|------------------|--------|--------|--------|--------|
|                                                            |   | ( I n  t h o u s a n d  N I S) |      |
|                                                            |   |                                     |      |   |   |   |     |                   |   |   |        |   |   |            |   |   |             |   |   |   |   |
| Revenues                                                        |   |                                     | 2,935,416 |   |   |   | 440,048  |                   |   |   | 54,958      |   |   |            | -      |   |             |   | 68,139 |   |   |   | - |   |   |   | 3,498,561 |   |
| Segment profit(loss)                                            |   |                                     | 1,199,370 |   |   |   | 92,728   |                   |   |   | (84,555     | )      |   |            | -      |   |             |   | (8,545 | )      |   |   | (2,806 | ) |   |   | 1,196,192 |   |
| Financial expenses                                              |   |                                     | (16,367   | )      |   |   | (104,989 | )                      |   |   | (9,951      | )      |   |            |   |   |             |   | (2,431 | )      |   |   |   |   |   |   | (133,738 | ) |
| Share in losses of associates, net                              |   |                                     | (107      | )      |   |   |     |                   |   |   |        |   |   |            |   |   |             |   |   |   |   |   | (12,560 | ) |   |   | (12,667 | ) |
|  Unallocated general and administrative expenses           |   |                                     |      |   |   |   |     |                   |   |   |        |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   | (116,992 | ) |
| Unallocated financial expenses                                  |   |                                     |      |   |   |   |     |                   |   |   |        |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   | (98,828 | ) |
| Financial income                                                |   |                                     |      |   |   |   |     |                   |   |   |        |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   | 73,293 |   |
| Change in fair value of financial instruments measured at FVTPL |   |                                     |      |   |   |   |     |                   |   |   |        |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   | 18,347 |   |
| Profit  before income taxes                           |   |                                     |      |   |   |   |     |                   |   |   |        |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   | 925,607 |   |
| Income taxes                                                    |   |                                     |      |   |   |   |     |                   |   |   |        |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   | 16,288 |   |
| Profit from continuing operations                               |   |                                     |      |   |   |   |     |                   |   |   |        |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   | 909,319 |   |
| Profit from discontinued operation                              |   |                                     |      |   |   |   |     |                   |   |   |        |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   | 10,289 |   |
| Profit for the year                                             |   |                                     |      |   |   |   |     |                   |   |   |        |   |   |            |   |   |             |   |   |   |   |   |   |   |   |   | 919,608 |   |

| (i) | Includes mainly sales of trading property. |
|-----|--------------------------------------------|

|   | C. | Data regarding geographical areas |
|--------|----|-----------------------------------|

|   | (1) | Revenues by geographical areas |
|--------|-----|--------------------------------|

|                       |   | Year ended December 31 |    |
|----------------------------|--------|------------------------|---------|
|                       |   | 2009                   |    |   | 2008 |   |   | 2007 |   |
|                       |   | (in thousand NIS)      |    |
|                       |   |                   |    |   |   |   |   |   |   |
| East and central Europe(i) |   |                   | 238,443 |   |   |   | 669,740 |   |   |   | 3,006,192 |   |
| West Europe (ii)           |   |                   | 293,921 |   |   |   | 305,660 |   |   |   | 353,245 |   |
| Israel                     |   |                   | 132,021 |   |   |   | 102,736 |   |   |   | 96,875 |   |
| Others                     |   |                   | 28,992  |   |   |   | 20,181 |   |   |   | 42,249 |   |
|                       |   |                   | 693,377 |   |   |   | 1,098,317 |   |   |   | 3,498,561 |   |
|                       |   |                   |    |   |   |   |   |   |   |   |   |   |

----

----

| NOTE 28 - | SEGMENTS REPORTING (CONT.) |
|-----------|----------------------------|

|   | C. | Data regarding geographical areas (Cont.) |
|--------|----|-------------------------------------------|

|   | (1) | Revenues by geographical areas (cont.) |
|--------|-----|----------------------------------------|

|   | (i) | The following table provides an additional information in respect of  the revenues in east and central Europe per countries: |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------|

|           |   | Year ended December 31 |    |
|----------------|--------|------------------------|---------|
|           |   | 2009                   |    |   | 2008 |   |   | 2007 |   |
|           |   | (in thousand NIS)      |    |
|           |   |                   |    |   |   |   |   |   |   |
| Hungary        |   |                   | 13,058  |   |   |   | 126,539 |   |   |   | 2,170,733 |   |
| Poland         |   |                   | 27,504  |   |   |   | 43,241 |   |   |   | 761,547 |   |
| Czech Republic |   |                   | 23,198  |   |   |   | 355,237 |   |   |   | 14,964 |   |
| Romania        |   |                   | 131,731 |   |   |   | 83,509 |   |   |   | 51,126 |   |
| Latvia         |   |                   | 20,841  |   |   |   | - |   |   |   | - |   |
| Others         |   |                   | 22,111  |   |   |   | 61,214 |   |   |   | 7,822 |   |
|           |   |                   | 238,443 |   |   |   | 669,740 |   |   |   | 3,006,192 |   |

|   | (ii) | The following table provides additional information in respect of the revenues in west Europe per countries: |
|--------|------|--------------------------------------------------------------------------------------------------------------|

|       |   | Year ended December 31 |    |
|------------|--------|------------------------|---------|
|       |   | 2009                   |    |   | 2008 |   |   | 2007 |   |
|       |   | (in thousand NIS)      |    |
|       |   |                   |    |   |   |   |   |   |   |
| England    |   |                   | 138,676 |   |   |   | 166,110 |   |   |   | 199,661 |   |
| Netherland |   |                   | 66,246  |   |   |   | 74,184 |   |   |   | 80,181 |   |
| Belgium    |   |                   | 60,082  |   |   |   | 60,417 |   |   |   | 64,664 |   |
| Others     |   |                   | 28,917  |   |   |   | 4,950 |   |   |   | 8,738 |   |
|       |   |                   | 293,921 |   |   |   | 305,661 |   |   |   | 353,245 |   |

|   | (2) | Non Current assets by geographical areas |
|--------|-----|------------------------------------------|

|                    |   | Segment assets    |      |
|-------------------------|--------|-------------------|-----------|
|                    |   | December 31       |      |
|                    |   | 2009              |      |   | 2008 |   |
|                    |   | (in thousand NIS) |      |
|                    |   |              |      |   |   |   |
| East and central Europe |   |              | 4,212,508 |   |   |   | 3,523,325 |   |
| West Europe             |   |              | 973,067   |   |   |   | 924,400 |   |
| Israel                  |   |              | 200,732   |   |   |   | 190,921 |   |
| India                   |   |              | 1,158,274 |   |   |   | 957,831 |   |
| Others                  |   |              | 1,414     |   |   |   | 2,182 |   |
|                    |   |              | 6,545,995 |   |   |   | 5,598,660 |   |

----

----

| NOTE 29 - | DISCONTINUED OPERATION |
|-----------|------------------------|

| NOTE 30 - | FINANCIAL INSTRUMENTS |
|-----------|-----------------------|

|   | A. | Principal accounting policies |
|--------|----|-------------------------------|

|   | B. | Balances of financial instruments by categories |
|--------|----|-------------------------------------------------|

|   | (1) | Composition: |
|--------|-----|--------------|

|                                                                              |   | December 31       |      |
|-----------------------------------------------------------------------------------|--------|-------------------|-----------|
|                                                                              |   | 2009              |      |   | 2008 |   |
|                                                                              |   | (in thousand NIS) |      |
|                                                                              |   |              |      |   |   |   |
| Financial assets                                                                  |   |              |      |   |   |   |
| Cash and cash equivalents                                                         |   |              | 1,508,301 |   |   |   | 1,690,433 |   |
| Loans and receivables                                                             |   |              | 486,061   |   |   |   | 507,021 |   |
| Financial assets held for trading                                                 |   |              | 202,309   |   |   |   | 170,692 |   |
| Available for sale financial instruments                                          |   |              | 81,843    |   |   |   | 45,599 |   |
| Held to maturity financial instruments                                            |   |              | 315,101   |   |   |   | 385,755 |   |
| Financial assets  designated at fair value through profit and loss      |   |              | 70,481    |   |   |   | 52,253 |   |
| Derivative financial assets at fair value through profit and loss                 |   |              | 133,594   |   |   |   | 107,657 |   |
|                                                                              |   |              | 2,797,690 |   |   |   | 2,959,410 |   |
|                                                                              |   |              |      |   |   |   |   |   |
| Financial Liabilities                                                             |   |              |      |   |   |   |   |   |
| Derivative financial liabilities at fair value through profit and loss            |   |              | 27,969    |   |   |   | 24,518 |   |
| Financial liabilities  designated at fair value through profit and loss |   |              | 1,221,683 |   |   |   | 957,526 |   |
| Derivative financial instruments designated for cash flow hedge                   |   |              | 39,220    |   |   |   | 37,534 |   |
| Financial liabilities at amortized cost                                           |   |              | 5,742,580 |   |   |   | 5,022,935 |   |
|                                                                              |   |              | 7,031,452 |   |   |   | 6,042,513 |   |

----

----

| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | B. | Balances of financial instruments by categories (Cont.) |
|--------|----|---------------------------------------------------------|

|   | (2) | Additional information: |
|--------|-----|-------------------------|

|   | a. | As for financing income and expenses resulting from the aforementioned financial instruments –see note 26K., L&M. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------|

|   | b. | The total change in fair value which is attributable to the change in the credit risk of PC's debentures measured at FVTPL for the year ended December 31,2009 and 2008 amount to loss of NIS 358 million and revenue of NIS 230 million respectively. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | C. | Management of financial risks |
|--------|----|-------------------------------|

|   | (1) | Foreign currency risk |
|--------|-----|-----------------------|

----

----

| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | C. | Management of financial risks (cont.) |
|--------|----|---------------------------------------|

|   | (1) | Foreign currency risk (cont.) |
|--------|-----|-------------------------------|

|                              | Functional currency |   | Linkage currency |   |   | Change in the exchange rate (%) |   |   | Profit (loss)   |   |
|-----------------------------------|---------------------|--------|------------------|--------|--------|---------------------------------|--------|--------|-----------------|--------|
|                              |                |   |             |   |   |                            |   |   | In thousand NIS |   |
| Assets                            |                |   |             |   |   |                            |   |   |            |   |
| Cash and deposits                 | NIS                 |   | US Dollar        |   |   |                            | +10    | %      |            |   | 9,807 |   |
| Cash and deposits                 | Euro                |   | PLN              |   |   |                            | +10    | %      |            |   | 4,757 |   |
| Cash and deposits                 | NIS                 |   | Euro             |   |   |                            | +10    | %      |            |   | 22,320 |   |
|                              |                |   |             |   |   |                            |   |   |            |   | 36,884 |   |
| Financial liablities              |                |   |             |   |   |                            |   |   |            |   |   |   |
| Loans at amortized cost           | NIS                 |   | US Dollar        |   |   |                            | +10    | %      |            |   | (16,702 | ) |
| Loans at amortized cost (i)       | NIS                 |   | Euro             |   |   |                            | +10    | %      |            |   | (23,367 | ) |
| Debentures at amortized cost      | NIS                 |   | US Dollar        |   |   |                            | +10    | %      |            |   | (4,984 | ) |
| Debentures at amortized cost (ii) | Euro                |   | NIS              |   |   |                            | +10    | %      |            |   | (15,123 | ) |
| Loans at amortized cost           | Euro                |   | CHF              |   |   |                            | +10    | %      |            |   | (1,929 | ) |
| Loans at amortized cost           | RON                 |   | Euro             |   |   |                            | +10    | %      |            |   | (24,323 | ) |
|                              |                |   |             |   |   |                            |   |   |            |   | (86,428 | ) |
|                              |                |   |             |   |   |                            |   |   |            |   |   |   |

|   | (i) | The effect of the exchange rates results in respect of these financial liablities is offset agianst the exchange rate resulting from investments in forigen opertions with the same functional currency. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | In respect of PC's series B debentures which are represented at amortized cost. |
|--------|------|---------------------------------------------------------------------------------|

----

----

| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | C. | Management of financial risks (cont.) |
|--------|----|---------------------------------------|

|   | (1) | Foreign currency risk (cont.) |
|--------|-----|-------------------------------|

|                         | Functional currency |   | Linkage currency |   |   | Change in the exchange rate (%) |   |   | Profit (loss)   |   |
|------------------------------|---------------------|--------|------------------|--------|--------|---------------------------------|--------|--------|-----------------|--------|
|                         |                |   |             |   |   |                            |   |   | In thousand NIS |   |
| Assets                       |                |   |             |   |   |                            |   |   |            |   |
| Cash and deposits            | NIS                 |   | US Dollar        |   |   |                            | +10    | %      |            |   | 13,379 |   |
| Cash and deposits            | NIS                 |   | Euro             |   |   |                            | +10    | %      |            |   | 3,077 |   |
|                         |                |   |             |   |   |                            |   |   |            |   | 16,456 |   |
|                         |                |   |             |   |   |                            |   |   |            |   |   |   |
| Financial liablities         |                |   |             |   |   |                            |   |   |            |   |   |   |
| Loans at amortized cost      | NIS                 |   | US Dollar        |   |   |                            | +10    | %      |            |   | (12,639 | ) (i) |
| Loans at amortized cost      | NIS                 |   | Euro             |   |   |                            | +10    | %      |            |   | (22,740 | ) (i) |
| Debentures at amortized cost | NIS                 |   | US Dollar        |   |   |                            | +10    | %      |            |   | (5,570 | ) |
| Loans at amortized cost      | RON                 |   | Euro             |   |   |                            | +10    | %      |            |   | (24,399 | ) |
| Loans at amortized cost      | RON                 |   | US Dollar        |   |   |                            | +10    | %      |            |   | (4,149 | ) |
|                         |                |   |             |   |   |                            |   |   |            |   | (69,497 | ) |

|                         | Functional currency |   | Linkage currency |   |   | Change in the exchange rate (%) |   |   | Profit (loss)   |   |
|------------------------------|---------------------|--------|------------------|--------|--------|---------------------------------|--------|--------|-----------------|--------|
|                         |                |   |             |   |   |                            |   |   | In thousand NIS |   |
| Assets                       |                |   |             |   |   |                            |   |   |            |   |
| Cash and deposits            | NIS                 |   | US Dollar        |   |   |                            | +10    | %      |            |   | 27,030 |   |
| Cash and deposits            | NIS                 |   | Euro             |   |   |                            | +10    | %      |            |   | 7,973 |   |
|                         |                |   |             |   |   |                            |   |   |            |   | 35,003 |   |
|                         |                |   |             |   |   |                            |   |   |            |   |   |   |
| Liablities                   |                |   |             |   |   |                            |   |   |            |   |   |   |
| Loans at amortized cost      | NIS                 |   | US Dollar        |   |   |                            | +10    | %      |            |   | (12,786 | )(i) |
| Loans at amortized cost      | NIS                 |   | Euro             |   |   |                            | +10    | %      |            |   | (24,318 | )(i) |
| Debentures at amortized cost | NIS                 |   | US Dollar        |   |   |                            | +10    | %      |            |   | (5,788 | ) |
| Loans at amortized cost      | RON                 |   | Euro             |   |   |                            | +10    | %      |            |   | (26,024 | ) |
| Loans at amortized cost      | RON                 |   | US Dollar        |   |   |                            | +10    | %      |            |   | (4,236 | ) |
|                         |                |   |             |   |   |                            |   |   |            |   | (73,152 | ) |

|   | (i) | The effect of the exchange rates results in respect of these financial liablities is offset agianst the exchange rate resulting from investments in forigen opertions with  the same functional currency. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | C. | Management of financial risks (cont.) |
|--------|----|---------------------------------------|

|   | (2) | Price risk |
|--------|-----|------------|

|                                                                                                                             |   | Scope of     |   |   | Profit (loss)          |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|--------|------------------------|--------|
|                                                                                                                             |   | price change |   |   | Year ended December 31 |   |
|                                                                                                                             |   | %            |   |   | 2009                   |   |   | 2008 |   |   | 2007 |   |
|                                                                                                                             |   |         |   |   | (in thousand NIS)      |   |
| Increrase in the prices of marketable securities held for trade                                                                  |   |         | +10    | %      |                   |   | 20,231 |   |   |   | 17,069 |   |   |   | 54,229 |   |
| Increrase in the fair value of the underlying assets  used for the calculation of the embedded derivative's fair value |   |         | +5     | %      |                   |   | (3,548 | ) |   |   | (3,415 | ) |   |   | (5,349 | ) |
|                                                                                                                             |   |         |   |   |                   |   | 16,683 |   |   |   | 13,654 |   |   |   | 48,880 |   |

|   | (3) | Credit risk |
|--------|-----|-------------|

----

----

| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | C. | Management of financial risks (cont.) |
|--------|----|---------------------------------------|

|   | (3) | Credit risk (cont.) |
|--------|-----|---------------------|

|   | (4) | Interest rate risk |
|--------|-----|--------------------|

----

----

| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | C. | Management of financial risks (cont.) |
|--------|----|---------------------------------------|

|   | (4) | Interest rate risk (cont.) |
|--------|-----|----------------------------|

|                                                                           |   | Scope of     |   |   | Profit (loss)          |   |
|--------------------------------------------------------------------------------|--------|--------------|--------|--------|------------------------|--------|
|                                                                           |   | price change |   |   | Year ended December 31 |   |
|                                                                           |   | %            |   |   | 2009                   |   |   | 2008 |   |   | 2007 |   |
|                                                                           |   |         |   |   | (in thousand NIS)      |   |
| Devaluation of the   NIS  against the  Euro |   | (i           | )      |   |                   | 39,224 |   |   |   | (51,421 | ) |   |   | (385 | ) |
|                                                                           |   |         |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Change in the Israeli CPI                                                      |   |         | +2     | %      |                   |   | (4,196 | ) |   |   | 11,580 |   |   |   | 164 |   |
|                                                                           |   |         |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Change in the market interest rate                                             |   |         | +1     | %      |                   |   | 6,759 |   |   |   | (32,001 | ) |   |   | 679 |   |

|   | (i) | December 31, 2009: +12.27% December 31, 2008: +20%; December 31, 2007: +5%. |
|--------|-----|-----------------------------------------------------------------------------|

|   | a. | Part of the Group’s long term borrowings as well as long term loans receivable are bearing variable interest rate. Cash and cash equivalent, short term deposits and short term bank credits are mainly deposited in or obtained at variable interest rate. Change in the market interest rate will affect the Group's finance income and expenses and its cash flow. In certain cases the Group uses interest rate swap transaction in order to swap loans with a variable interest rate to fixed interest rate or alternatively entered into loans with a fixed interest rate. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                 |   | Profit (loss)          |    |
|----------------------------------------------------------------------|--------|------------------------|---------|
|                                                                 |   | Year ended December 31 |    |
|                                                                 |   | 2009                   |    |   | 2008 |   |   | 2007 |   |
|                                                                 |   | (in thousand NIS)      |    |
|                                                                 |   |                   |    |   |   |   |   |   |   |
| Loans, debentures and convertible debentures linked to the US dollar |   |                   | (4,342  | ) |   |   | (5,889 | ) |   |   | (12,714 | ) |
| Loans and debentures linked to the Euro(i)                           |   |                   | (48,984 | ) |   |   | (48,303 | ) |   |   | (13,627 | ) |
| Loans linked to the NIS                                              |   |                   | (811    | ) |   |   | (674 | ) |   |   | (127 | ) |
|                                                                 |   |                   | (54,137 | ) |   |   | (54,866 | ) |   |   | (26,468 | ) |

|   | (i) | In respect of PC's debentures which are linked to the Israeli CPI and for which PC has executed swap transactions in order to exchange the interest to variable interest rate (see note 9A.(iv). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | C. | Management of financial risks (cont.) |
|--------|----|---------------------------------------|

|   | (4) | Interest rate risk (cont.) |
|--------|-----|----------------------------|

|   | b. | As of the balance sheet date the Group holds investments in financial Notes in the amount of NIS 315 million (2008: NIS 386 million) which bear an interest of 11.5%-12% per annum, and which is payable only if the margin between the 30 years Euro swap interest rate and the 10 years Euro swap interest rate (measured on a daily basis) is higher than the margin stated in the agreement. Therefore, the Group is exposed to non payment of interest on these Notes in the event that the aforementioned condition is not met.  A decrease of 5% in the annual effective interest rate on the Notes will lead to a decrease in the Group's financing income and its cash flow for the year ended December 31, 2009  in the amount of NIS 15.8 million( 2008: NIS 19.3 million: 2007: 0 NIS).  After the balance sheet date the company settled financial Notes in the amount of NIS 108 million. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | Liquidity risk |
|--------|-----|----------------|

|   | (i) | Equity investments in the Group's shopping and entertainment centers, hotels and residential projects, which are generally constructed by the Group's Project Companies. The Company and/or PC  generally finance approximately 25%-30% of such projects through equity investments in the Project Companies, while the remaining 70%-75% is generally financed through a credit facility secured by a mortgage on the project constructed by the respective Project Company, registered in favor of the financial institution that provides such financing. The equity investments in the Project Companies are typically provided by the Company or PC through shareholders loans that are subordinated to the credit facilities provided to the Project Company; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Additional investments in InSightec, to the extent necessary. InSightec’s capital resources are obtained primarily from additional investments in equity or in convertible notes by its shareholders and from its revenues from sales of medical systems. Such amounts are used for research and development activities aimed to obtain FDA approvals for further treatments and other general corporate expenses such as cost of revenues, marketing and selling and general and administrative expenses; |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Additional investments in order to expand Elbit Trade’s operations by opening new Mango stores in Israel as well as to expand its activities in other brands, such as G-Star, GAP and Banana Republic; |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|   | (iv) | Interest and principal payments on the Group debentures and loans; |
|--------|------|--------------------------------------------------------------------|

|   | (v) | Payment of general and administrative expenses; and |
|--------|-----|-----------------------------------------------------|

|   | (vi) | Additionalinvestment in associates (mainly venture capital investments). |
|--------|------|--------------------------------------------------------------------------|

----

----

| NOTE 30 - | FINANCIAL INSTRUMENTS |
|-----------|-----------------------|

|   | C. | Management of financial risks (cont.) |
|--------|----|---------------------------------------|

|   | (5) | Liquidity risk (cont.) |
|--------|-----|------------------------|

|                                             |   | 1st year                              |      |   | 2nd year |        |      | 3rd year |   |   | 4th year |   |   | 5th year |    |   | 6th year and thereafter |    |      | Total  |   |
|--------------------------------------------------|--------|---------------------------------------|-----------|--------|----------|-------------|-----------|----------|--------|--------|----------|--------|--------|----------|---------|--------|-------------------------|---------|-----------|--------|--------|
|                                             |   | I n  t h o u s a n d  N I S |      |
| Financial liabilities                            |   |                                  |      |   |     |        |      |     |   |   |     |   |   |     |    |   |                    |    |      |   |   |
|                                             |   |                                  |      |   |     |        |      |     |   |   |     |   |   |     |    |   |                    |    |      |   |   |
| Borrowing with fixed interest rate               |   |                                  |      |   |     |        |      |     |   |   |     |   |   |     |    |   |                    |    |      |   |   |
| Loans linked to Euro                             |   |                                  | 16,848    |   |     |        | 17,819    |     |   |   | 18,462   |   |   |     | 18,101  |   |                    |    | 188,769   |   |   |   | 29,511 |   |   |   | 289,510 |   |
| Loans Linked to the GBP (iii)                    |   |                                  | 612,209   |   |     |        | -         |     |   |   | -        |   |   |     | -       |   |                    |    | -         |   |   |   | - |   |   |   | 612,209 |   |
| Convertible Debentures                           |   |                                  | 7,000     |   |     |        | 7,000     |     |   |   | 7,000    |   |   |     | 63,003  |   |                    |    | 59,503    |   |   |   | - |   |   |   | 143,506 |   |
| Debentures linked to the Israeli CPI             |   |                                  | 472,640   |   |     |        | 485,137   |     |   |   | 472,818  |   |   |     | 539,662 |   |                    |    | 448,559   |   |   |   | 1,170,851 |   |   |   | 3,589,667 |   |
|                                             |   |                                  | 1,108,697 |   |     |        | 509,956   |     |   |   | 498,280  |   |   |     | 620,766 |   |                    |    | 696,831   |   |   |   | 1,200,362 |   |   |   | 4,634,892 |   |
|                                             |   |                                  |      |   |     |        |      |     |   |   |     |   |   |     |    |   |                    |    |      |   |   |   |   |   |   |   |   |   |
| Borrowing with variable  interest rate |   |                                  |      |   |     |        |      |     |   |   |     |   |   |     |    |   |                    |    |      |   |   |   |   |   |   |   |   |   |
| Loans linked to the Euro (iii)                   |   |                                  | 750,660   |   |     | (i) 578,086 |      |     |   | 66,371 |     |   |   | 64,170   |    |   |                    | 222,689 |      |   |   | 206,462 |   |   |   | 1,888,438 |   |
| Debenture linked to the Euro (ii)                |   |                                  | 38,680    |   |     |        | 190,835   |     |   |   | 183,097  |   |   |     | 175,364 |   |                    |    | 167,626   |   |   |   | 159,893 |   |   |   | 915,495 |   |
| Loans linked  to the NIS               |   |                                  | 41,337    |   |     |        | 599       |     |   |   | -        |   |   |     | -       |   |                    |    | -         |   |   |   | - |   |   |   | 41,936 |   |
| Loans linked to the US Dollar                    |   |                                  | 95,613    |   |     |        | 76,723    |     |   |   | 958      |   |   |     | 947     |   |                    |    | 15,824    |   |   |   | - |   |   |   | 190,065 |   |
| Debentures linked to the US Dollar               |   |                                  | 13,320    |   |     |        | 12,829    |     |   |   | 12,339   |   |   |     | 11,849  |   |                    |    | 5,802     |   |   |   | - |   |   |   | 56,139 |   |
|                                             |   |                                  | 939,610   |   |     |        | 859,072   |     |   |   | 262,765  |   |   |     | 252,330 |   |                    |    | 411,941   |   |   |   | 366,355 |   |   |   | 3,092,073 |   |
|                                             |   |                                  |      |   |     |        |      |     |   |   |     |   |   |     |    |   |                    |    |      |   |   |   |   |   |   |   |   |   |
| Suppliers, payable and other credit balances     |   |                                  | 346,615   |   |     |        | 72,677    |     |   |   | 10,596   |   |   |     | 14,700  |   |                    |    | 23,890    |   |   |   | 34,612 |   |   |   | 503,090 |   |
|                                             |   |                                  |      |   |     |        |      |     |   |   |     |   |   |     |    |   |                    |    |      |   |   |   |   |   |   |   |   |   |
| Total financial liabilities                      |   |                                  | 2,394,922 |   |     |        | 1,441,705 |     |   |   | 771,641  |   |   |     | 887,796 |   |                    |    | 1,132,662 |   |   |   | 1,601,329 |   |   |   | 8,230,055 |   |

|                                      |   |   |      |
|-------------------------------------------|--------|--------|-----------|
| Financial assets                          |   |   |      |
| Cash and cash equivalent                  |   |   | 1,508,301 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,508,301 |   |
| Short term deposits                       |   |   | 563,719   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 563,719 |   |
| Trade receivables and other receivables   |   |   | 164,939   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 164,939 |   |
| Long term deposits, loans and investments |   |   | -         |   |   |   | 51,940 |   |   |   | 60,844 |   |   |   | 39,625 |   |   |   | 37,970 |   |   | (iv) 435,316 |   |   |   | 625,695 |   |
| Total financial assets                    |   |   | 2,236,959 |   |   |   | 51,940 |   |   |   | 60,844 |   |   |   | 39,625 |   |   |   | 37,970 |   |   |   | 435,316 |   |   |   | 2,862,654 |   |

----

----

| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | C. | Management of financial risks (cont.) |
|--------|----|---------------------------------------|

|   | (5) | Liquidity risk (cont.) |
|--------|-----|------------------------|

|                                             |   | 1st year                              |      |   | 2nd year |   |    | 3rd year |   |   | 4th year  |   |   | 5th year |    |   | 6th year and thereafter |   |    | Total  |   |
|--------------------------------------------------|--------|---------------------------------------|-----------|--------|----------|--------|---------|----------|--------|--------|-----------|--------|--------|----------|---------|--------|-------------------------|--------|---------|--------|--------|
|                                             |   | I n  t h o u s a n d  N I S |      |
|                                             |   |                                  |      |   |     |   |    |     |   |   |      |   |   |     |    |   |                    |   |    |   |   |
| Borrowing  with fixed interest rate    |   |                                  |      |   |     |   |    |     |   |   |      |   |   |     |    |   |                    |   |    |   |   |
| Loans linked to Euro                             |   |                                  | 189,596   |   |     |   | -       |     |   |   | -         |   |   |     | -       |   |                    |   | -       |   |   |   | - |   |   |   | 189,596 |   |
| Loans Linked to the GBP                          |   |                                  | 48,713    |   |     |   | 47,326  |     |   |   | 549,712   |   |   |     | -       |   |                    |   | -       |   |   |   | - |   |   |   | 645,751 |   |
| Debentures linked to the Israeli CPI             |   |                                  | 230,990   |   |     |   | 349,679 |     |   |   | 336,161   |   |   |     | 329,581 |   |                    |   | 399,253 |   |   |   | 1,255,696 |   |   |   | 2,901,360 |   |
|                                             |   |                                  | 469,299   |   |     |   | 397,005 |     |   |   | 885,873   |   |   |     | 329,581 |   |                    |   | 399,253 |   |   |   | 1,255,696 |   |   |   | 3,736,707 |   |
|                                             |   |                                  |      |   |     |   |    |     |   |   |      |   |   |     |    |   |                    |   |    |   |   |   |   |   |   |   |   |   |
| Borrowing with variable  interest rate |   |                                  |      |   |     |   |    |     |   |   |      |   |   |     |    |   |                    |   |    |   |   |   |   |   |   |   |   |   |
| Loans linked to the Euro(i) (iii)                |   |                                  | 514,322   |   |     |   | 264,738 |     |   |   | 36,873    |   |   |     | 36,622  |   |                    |   | 36,370  |   |   |   | 767,768 |   |   |   | 1,656,693 |   |
| Debentures linked to the Euro(ii)                |   |                                  | 54,163    |   |     |   | 89,272  |     |   |   | 235,485   |   |   |     | 225,539 |   |                    |   | 215,587 |   |   |   | 475,971 |   |   |   | 1,296,017 |   |
| Loans linked  to the NIS               |   |                                  | 19,544    |   |     |   | 15,876  |     |   |   | -         |   |   |     | -       |   |                    |   | -       |   |   |   | - |   |   |   | 35,420 |   |
| Loans linked to the US Dollar                    |   |                                  | 45,984    |   |     |   | 76,040  |     |   |   | -         |   |   |     | -       |   |                    |   | -       |   |   |   | - |   |   |   | 122,024 |   |
| Debentures linked to the US Dollar               |   |                                  | 7,919     |   |     |   | 13,283  |     |   |   | 12,819    |   |   |     | 12,354  |   |                    |   | 11,890  |   |   |   | 5,829 |   |   |   | 64,094 |   |
| Convertible debentures linked to the US Dollar   |   |                                  | 54,506    |   |     |   | 871     |     |   |   | 20,216    |   |   |     | -       |   |                    |   | -       |   |   |   | - |   |   |   | 75,593 |   |
|                                             |   |                                  | 696,438   |   |     |   | 460,080 |     |   |   | 305,393   |   |   |     | 274,515 |   |                    |   | 263,847 |   |   |   | 1,249,568 |   |   |   | 3,249,841 |   |
|                                             |   |                                  |      |   |     |   |    |     |   |   |      |   |   |     |    |   |                    |   |    |   |   |   |   |   |   |   |   |   |
| Total                                            |   |                                  | 1,165,737 |   |     |   | 857,085 |     |   |   | 1,191,266 |   |   |     | 604,096 |   |                    |   | 663,100 |   |   |   | 2,505,264 |   |   |   | 6,986,548 |   |

|   | (i) | Includes loans in the amount of NIS 310 million and NIS 205 million (2008: 304 million) with a contractual maturity date on January 1, 2011 and respectively and which, in accordance with the provisions of the agreements, have a mechanism to accelerate the repayment of the loans in certain events as stipulated in the agreements. See also note 23E (1), (2) & (3)(iii) . |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | In respect of PC's debentures which are linked to the Israeli CPI and for significant portions of which PC has executed swap transactions in order to exchange the debentures linkage currency into Euro, see 9 A.(iv). |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | Include loans in the amount of NIS 731 million (2008: NIS 392 million), in respect of which the Group is not in compliance with certain covenants included in the loan agreements. See also note 23E.(3)(i) & (ii) |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | An amount of NIS 108 million was settled after the balance sheet date see (4) (b). |
|--------|------|------------------------------------------------------------------------------------|

----

----

| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | C. | Management of financial risks (cont.) |
|--------|----|---------------------------------------|

|   | (6) | Consumer Price Index ("CPI") risk |
|--------|-----|-----------------------------------|

|   | (7) | Collaterals |
|--------|-----|-------------|

|                             |   | December 31       |
|----------------------------------|--------|-------------------|
|                             |   | 2009              |   |   | 2008 |
|                             |   | (in thousand NIS) |
|                             |   |              |   |   |
| Long term borrowings             |   |              | 10,671 |   |   |   | 12,929 |   |
| Short term credits               |   |              | 138,526 |   |   |   | 191,487 |   |
| Guarantees provided by the Group |   |              | 19,622 |   |   |   | 14,450 |   |
| Interest rate swap transactions  |   |              | 78,012 |   |   |   | 104,145 |   |
| Forward transactions             |   |              | 34,283 |   |   |   | - |   |
|                             |   |              | 281,114 |   |   |   | 323,011 |   |

|   | D. | Fair value of financial instruments |
|--------|----|-------------------------------------|

|   | (1) | Fair value of financial instruments |
|--------|-----|-------------------------------------|

----

----

| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | D. | Fair value of financial instruments (cont.) |
|--------|----|---------------------------------------------|

|   | (1) | Fair value of financial instruments (cont.) |
|--------|-----|---------------------------------------------|

|   | (2) | The principal methods and assumptions which served to compute the estimated fair value of the financial instruments |
|--------|-----|---------------------------------------------------------------------------------------------------------------------|

|   | a. | Financial instruments included in current assets (cash and cash equivalents, deposits and marketable securities, trade receivables, other current assets and assets related to discontinue operation) - Due to their nature, their fair values approximate to those presented in the balance sheet. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | Financial instruments included in non–current assets - the fair value of loans and deposits which bear variable interest rate is an approximate to those presented in the balance sheet. The fair value of long term Financial Notes (see note 9A.(ii) &(iii)), is determined using a price quotations provided to the Group by the issuer of the Notes as of the balance sheet date. Such quotation is generally, based on discounted expected cash flows from the Notes, taking into consideration factors such as the credit rating of the issuer, the prevailing and the expected relevant interest rates and others. The fair value of derivatives (mainly swap transactions) is done by relying on third party professional expert which takes into account the expected future cash flow based on the terms and maturity of each contract using market interest rates for a similar instrument prevailing at the measurement date. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | Financial instruments included in current liabilities - (short-term credit, suppliers, other current liabilities and liabilities related to discontinued operation)) - Due to their nature, their fair values approximate to those presented in the balance sheet. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d. | Financial instruments included in long-term liabilities - the fair value of the traded liabilities (debentures) is generally determined according to closing prices as of the balance sheet date quoted on the Tel- Aviv Stock Exchange, multiplied by the quantity of the marketable financial instrument issued as of that date, except for PC's traded debentures for which it was determined that the trade in said debentures as of the end of 2008 is pointing the existence of inefficient and inactive market and accordingly their fair value was determined using a valuation techniques (see note 2 AG.(1)e.). The fair value of non-traded liabilities at fixed interest rate is determined according to the present value of future cash flows, discounted at a rate which reflects, in the estimation of the Group, the level of risk embedded in the financial instrument. The fair value of liabilities which carried variable interest rate is approximate to those presented in the balance sheet. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | D. | Fair value of financial instruments (cont.) |
|--------|----|---------------------------------------------|

|   | (3) | The following table presents the book value and fair value of the Group's financial assets (liabilities), which are presented in the financial statements at other than their fair value: |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                    |   | December 31        |       |
|-----------------------------------------|--------|--------------------|------------|
|                                    |   | 2009               |       |   | 2008 |   |
|                                    |   | Book Value         |       |   | Fair Value |   |   | Book Value |   |   | Fair Value |   |
|                                    |   | (In thousands NIS) |       |
|                                    |   |               |       |   |   |   |   |   |   |   |   |   |
| Financial Notes held to maturity        |   |               | 315,101    |   |   |   | 244,436 |   |   |   | 385,755 |   |   |   | 252,448 |   |
| Long- term loans at fixed interest rate |   |               | (779,278   | ) |   |   | (816,695 | ) |   |   | (681,577 | ) |   |   | (723,859 | ) |
| Debentures                              |   |               | (2,568,276 | ) |   |   | (2,625,528 | ) |   |   | (2,208,457 | ) |   |   | (1,390,764 | ) |
|                                    |   |               | (3,032,455 | ) |   |   | (3,197,787 | ) |   |   | (2,504,279 | ) |   |   | (1,862,175 | ) |

|   | (4) | Fair value levels |
|--------|-----|-------------------|

|   | · | Level 1: fair value measurements derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 2: fair value measurements derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 3:  fair value measurements derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                              |   | December 31, 2009  |    |
|-----------------------------------|--------|--------------------|---------|
|                              |   | Level 1            |    |   | Level 2 |   |   | Level 3 |   |   | Total |   |
|                              |   | (In thousands NIS) |    |
|                              |   |               |    |   |   |   |   |   |   |   |   |   |
| Marketable securities             |   |               | 202,309 |   |   |   | - |   |   |   | - |   |   |   | 202,309 |   |
| AFS financial assets              |   |               | 81,843  |   |   |   | - |   |   |   | - |   |   |   | 81,843 |   |
| PC's forward transactions         |   |               | -       |   |   |   | 23,938 |   |   |   | - |   |   |   | 23,938 |   |
| Financial note measured at FVTPL  |   |               | -       |   |   |   |   |   |   |   | 70,481 |   |   |   | 70,481 |   |
| PC's  swap transactions |   |               | -       |   |   |   | 109,656 |   |   |   | - |   |   |   | 109,656 |   |
|                              |   |               | 284,152 |   |   |   | 133,594 |   |   |   | 70,481 |   |   |   | 488,227 |   |

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----

| NOTE 30 - | FINANCIAL INSTRUMENTS (CONT.) |
|-----------|-------------------------------|

|   | D. | Fair value of financial instruments (cont.) |
|--------|----|---------------------------------------------|

|                                                       |   | December 31, 2009  |      |
|------------------------------------------------------------|--------|--------------------|-----------|
|                                                       |   | Level 1            |      |   | Level 2 |   |   | Level 3 (ii) |   |   | Total |   |
|                                                       |   | (In thousands NIS) |      |
|                                                       |   |               |      |   |   |   |   |   |   |   |   |   |
| PC's Debentures (i)                                        |   |               | 1,193,713 |   |   |   | - |   |   |   | - |   |   |   | 1,193,713 |   |
| Interest swap transaction designated as hedging instrument |   |               | -         |   |   |   | 39,220 |   |   |   | - |   |   |   | 39,220 |   |
| Exit fee to financing bank                                 |   |               | -         |   |   |   | - |   |   |     27,969 | (iii)  |   |   | 27,969 |   |
| Liability to the Office of Chief Scientist                 |   |               | -         |   |   |   | - |   |   |   | 27,970 |   |   |   | 27,970 |   |
|                                                       |   |               | 1,193,713 |   |   |   | 39,220 |   |   |   | 55,939 |   |   |   | 1,288,872 |   |

|   | (i) | As of December 31,2008, PC's debentures were measured based on a valuation techniques and not based on their quoted market price on the TASE since the trade in the said debentures as of the end of 2008 pointed the existence of inefficient and inactive market. Accordingly such debentures would have been classified at Level 2 in the financial statements of 2008. As of December 31, 2009, these debentures are measured based on their quoted market price at the TASE and therefore were transferred to Level 1  See note 2 AG (1) e. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | The changes in the fair value of the Group's financial liabilities included in Level 3 were charged mainly to the profit and loss. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | See C (2) above |
|--------|-------|-----------------|

| NOTE 31 - | SUBSEQUENT EVENTS |
|-----------|-------------------|

|   | A. | in January and February 2010, and following the public offering in Israel of unsecured non-convertible Series B Notes of PC (the “Series B Notes”), pursuant to PC's prospectus dated 3 February 2008, PC has agreed with Israeli Investors to issue approximately an additional NIS 35 million (EUR 6.8 million) and NIS 273 million (EUR 51.8 million) respectively in principal amount of Series B Notes (the “Additional Notes”) for an aggregate consideration of approximately NIS 38 million (EUR 7.4 million) and NIS 292 million ( EUR 55.4 million) respectively.  The terms of the Additional Notes are identical to the terms of the Series B Notes issued to the public under Plaza's prospectus dated 3 February 2008 (the “Prospectus”). |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | In February 2, 2010, the Company announced that it intends to restructure its bio-tech and medical holdings (InSightec – 60%, and Gamida Cell – 28%; both on a fully diluted basis) under a wholly-owned subsidiary of the Company ("Elbit Medical") and to offer shares of such subsidiary in a public offering on the Tel Aviv Stock Exchange (“IPO”). |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 31 - | SUBSEQUENT EVENTS (CONT.) |
|-----------|---------------------------|

|   | C. | In February 9, 2010, the Company announced that its subsidiary, Elbit Plaza USA, L.P. (“Elbit Plaza USA”) a real estate investment venture jointly formed by the Company and PC has entered into a framework and co-investment agreement (the “Agreement”) with Eastgate Property LLC, an affiliate of NCH Capital Inc. (“Eastgate”). Under the Agreement the parties have committed to co-invest in equal portions a combined $200 million with a U.S. real estate investment fund EPN GP, LLC (“EPN”)  that will be jointly established by the parties with outside investors and which will focus on investments in the U.S. retail and commercial real estate sectors (the “Fund”). Eastgate shall take an active role in the joint management of the Fund utilizing its long standing experience in fund management activities in the U.S. The Agreement provides that the parties will identify and locate potential investments during a two-year period in which the Fund together with the co-investment facility will acquire assets or enter into joint ventures with owners of relevant assets or portfolios, with the objective of selling the Fund's assets or holdings and dissolving the Fund within a five-to-seven-year period of the initial closing of the Fund. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | D. | On March 25, 2010 the Company issued 100,000,000 principal amounts of Series G debentures, at the price of NIS 1,000 per unit (each unit is comprised of NIS 1,000 principal amount) pursuant to the shelf prospectus filed on July 21, 2009. The debentures are bearing interest rate of 5.08% linked to increases in the Israeli consumer price index. Interest will be payable on June 30 and December 31 of each of the years 2010 through 2018. The principal of the Series G Debentures will be subject to repayment as follows: |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 10% of the principal will be payable on December 31, 2014; |
|--------|--------|------------------------------------------------------------|

|   | · | 20% of the principal will be payable on December 31 on each of 2015 and 2016; and |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | 25% of the principal will be payable on December 31 on each of 2017 and 2018. |
|--------|--------|-------------------------------------------------------------------------------|

----

----

| NOTE 31 - | SUBSEQUENT EVENTS (CONT.) |
|-----------|---------------------------|

|   | E. | In February 2010, the Company's board of directors adopted an option plan ("option plan") for the grant of up to 500,000 non-marketable options to 35 employees of the Company exercisable into 500,000 Insightec's ordinary shares. Each option is exercisable to one share for an exercise price of 2$ .The exercise price of each option will be reduced upon distribution of dividend, stock dividend etc., according to the approved option plan. At the same day the Company's board of directors approved the grant of 400,000 options to the Company's employees out of which 67,500 options granted to the Company Co-CEOs and CFO additional 50,000 intended to be granted to the Company's chairman of the board which is subject to the shareholders meeting approval. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | F. | In April, 2010 the Group together with jointly control partner acquired a hotel (the Holiday Inn Schipol hotel) for a total consideration of EUR 30 Million (Group share – Euro 15 million) out of which 28 million will be financed by the Bank. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ELBIT IMAGING LTD.

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| Name of company                            |            | Nature of Activity                                                                                             |   | Rate of ownership and control (direct as well as indirect) |   | Country of Residence |
|--------------------------------------------|-----------------|----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|--------|----------------------|
|                                       |            |                                                                                                           |   | %                                                          |   |                 |
|                                       |            |                                                                                                           |   |                                                       |   |                 |
| Elscint Ltd.                               | ("Elscint")     | Management and investment in companies                                                                         |   | 100.0                                                      |   | Israel               |
| Bea Hotels N.V.                            | ("BH")          | A holding company in the hotel segment, mainly in Europe                                                       |   | 100.0                                                      |   | The Netherlands      |
| Elbit Trade and Retail Ltd.                | ("Elbit Trade") | A distributor and retailer of the retail brand name MANGO - MNG TM ,GAP, Banana Republic and  G-Star |   | 100.0                                                      |   | Israel               |
| Elbit Ultrasound Netherlands B.V.          | ("EUN")         | A holding company                                                                                              |   | 100.0                                                      |   | The Netherlands      |
| Plaza Centers N.V.                         | ("PC")          | Development and sale of commercial centers in Central and Eastern Europe and in India                          |   | 68                                                         |   | The Netherlands      |
| InSightec Ltd.                             | ("InSightec)    | Development manufacturing and marketing of means of imaging-guided treatment                                   |   | 71.3                                                       |   | Israel               |
|                                       |            |                                                                                                           |   |                                                       |   |                 |
| Elbit-Plaza India Real Estate Holding Ltd. | ("EPI")         | Development of real estate projects in India designated mainly for residential and commercial use              |   | 100.0(*)                                                   |   | Cyprus               |

| (*) | The Company holds 47.5% of the shares directly and 47.5% through PC.  5% of the shares were allotted to the Company's Vice Chairman of the Board following the approval of the Company's shareholders' meeting in January 2008. The VC's shares are not entitled to voting rights. - see note 27B.(5)& (6). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM 19.   EXHIBITS

| 1.1  | Amended and Restated Memorandum of Association (incorporated by reference to Appendix B to Exhibit 99.1 of Elbit Imaging Ltd.'s Report on Form 6-K filed with the Securities and Exchange Commission on April 2, 2009).                                                                                                                                                                                                                                                      |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.2  | Amended and Restated Articles of Association (incorporated by reference to Exhibit 1.2 of Elbit Imaging Ltd.'s Annual Report on Form 20-F filed with the Securities and Exchange Commission on June 26, 2008).                                                                                                                                                                                                                                                               |
| 2.1  | Form of share certificate of Elbit Imaging Ltd. (incorporated by reference to Exhibit 2.1 of Elbit Imaging Ltd.'s Annual Report on Form 20-F filed with the Securities and Exchange Commission on June 26, 2008).                                                                                                                                                                                                                                                       |
| 4.1  | Framework Transaction Agreement dated July 29, 2005, among Klepierre S.A., Plaza Centers N.V. and others (incorporated by reference to Exhibit 4.15 of Elbit Imaging Ltd.'s Annual Report on Form 20-F filed with the Securities and Exchange Commission on June 30, 2006).                                                                                                                                                                                                  |
| 4.2  | English summary of Share Purchase Agreement dated June 14, 2007, among ELS Trust Ltd., Elscint Ltd. and Manofim Finances for Israel (Mapal) Ltd. for the sale of the Arena commercial and entertainment center in Israel (incorporated by reference to Exhibit 4.14 of Elbit Imaging Ltd.'s Annual Report on Form 20-F filed with the Securities and Exchange Commission on July 2, 2007).                                                                                   |
| 4.3  | English translation of Agreement for the Provision of Consultancy Services for the Development of Real Estate Projects dated May 31, 2006, between Elbit Imaging Ltd. and Control Centers Ltd. (incorporated by reference to Exhibit 4.13 of Elbit Imaging Ltd.'s Annual Report on Form 20-F filed with the Securities and Exchange Commission on July 2, 2007).                                                                                                             |
| 4.4  | English translation of Deed of Trust dated January 31, 2008, between Plaza Centers N.V. and Reznik Paz Nevo, as amended on February 17, 2008 (incorporated by reference to Exhibit 4.6 of Elbit Imaging Ltd.'s Annual Report on Form 20-F filed with the Securities and Exchange Commission on June 30, 2008).                                                                                                                                                               |
| 4.5  | English translation of Employees, Directors and Offices Incentive Plan of 2006, as amended (incorporated by reference to Exhibit 4.6 of Elbit Imaging Ltd.'s Annual Report on Form 20-F filed with the Securities and Exchange Commission on June 26, 2009).                                                                                                                                                                                                                 |
| 4.6  | Framework Agreement dated April 22, 2010, among EPN GP, LLC, Macquarie DDR Management Limited, Macquarie DDR Management LLC, Developers Diversified Realty Corporation, DDR MDT Holdings II Trust, DDR Macquarie Fund LLC, DDR MDT PS LLC, DDR MDT MV LLC, Macquarie DDR U.S. Trust Inc., Macquarie DDR U.S. Trust II Inc., Macquarie MDT Holdings Trust, Macquarie MDT Holdings Inc., Belike Nominees Pty Limited and Macquarie Group Services Australia Pty Limited.  |
| 8.1  | List of subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 12.1 | Certification of the co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                   |
| 12.2 | Certification of the co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                   |
| 12.3 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                      |
| 13.1 | Certification of the co-Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                   |
| 13.2 | Certification of the co-Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                   |
| 13.3 | Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                        |
| 15.1 | Consent of Brightman Almagor Zohar & Co.                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 15.2 | Table of advisors relied upon in the consolidated financial statements for the years ended December 31, 2009, 2008 and 2007.                                                                                                                                                                                                                                                                                                                                                 |
| 15.3 | Consent of SHM Smith Hodgkinson (Romania) srl                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 15.4 | Consent of Financial Immunities Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 15.5 | Consent of Financial Immunities Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 15.6 | Consent of Financial Immunities Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                         |

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| 15.7  | Consent of Financial Immunities Ltd.                   |
|-------|--------------------------------------------------------|
| 15.8  | Consent of Financial Immunities Dealing Room Ltd.      |
| 15.9  | Consent of BDO Ziv Haft Consulting and Management Ltd. |
| 15.10 | Consent of Financial Immunities Dealing Room Ltd.      |
| 15.11 | Consent of BDO Ziv Haft Consulting and Management Ltd. |
| 15.12 | Consent of Giza Zinger Even                            |
| 15.13 | Consent of BDO Ziv Haft Consulting and Management Ltd. |
| 15.14 | Consent of Giza Zinger Even                            |
| 15.15 | Consent of Giza Zinger Even                            |
| 15.16 | Consent of Giza Zinger Even                            |
| 15.17 | Consent of Tavor Economic Consulting Ltd.              |
| 15.18 | Consent of King Sturge Kft                             |
| 15.19 | Consent of Giza Zinger Even                            |
| 15.20 | Consent of KPMG Hungaria Kft                           |

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|   | Elbit Imaging Ltd. |                              |
|--------|--------------------|-----------------------------------|
|   |               |                              |   |
|   | By:                | /s/ Dudi Machluf             |   |
|   |               | Name: Dudi Machluf                |   |
|   |               | Title: co-Chief Executive Officer |   |
|   |               |                              |   |

|   | By:    | /s/ Ran Shtarkman            |   |
|--------|--------|-----------------------------------|--------|
|   |   | Name: Ran Shtarkman               |   |
|   |   | Title: co-Chief Executive Officer |   |
|   |   |                              |   |

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