Clal Insurance Enterprises Holdings Ltd

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Clal Insurance Enterprises Holdings Ltd Clal Insurance Enterprises Holdings Ltd. Financial Statements As of September 30, 2016 Board of Directors’ Report...............................................................................................1-1 Condensed Consolidated Interim Financial Statements................................................2-1 Financial Data from the Consolidated Interim Financial Statements Attributed to the Company Itself (Regulation 38D).....................................................................................3-1 Report Regarding the Effectiveness of Internal Control over Financial Reporting and Disclosure............................................................................................................................4-1 This report is an unofficial translation from the Hebrew language and is intended for convenience purposes only. The binding version of the report is in the Hebrew language only. 1 - 1 Board of Directors’ Report Clal Insurance Enterprises Holdings Ltd. Table of Contents Page 1.8T 8T Description8T of the Company 8T ............................................................................................................................ 1 1.1.8T 8T Organizational8T structure 8T ....................................................................................................................... 1 2.8T 8T Description8T of the Business Environment8T .......................................................................................................... 2 2.1.8T 8T Material8T developments and changes in the macroeconomic environment during the reporting year .. 28T 2.2.8T 8T Developments8T in the Israeli insurance market8T ...................................................................................... 7 3.8T 8T Board8T of Directors’ Remarks Regarding the Corporation’s Business Position 8T ............................ 9 3.18T 8T Financial8T information by operating segments 8T ....................................................................................... 9 3.28T 8T Additional8T financial data 8T ..................................................................................................................... 32 3.38T 8T Principal8T data from the consolidated statements of financial position................................8T ................ 33 3.4.8T 8T Cash8T flows 8T ............................................................................................................................................ 34 3.5.8T 8T Financing8T sources 8T ................................................................................................................................ 34 4.8T 8T Developments8T Subsequent to the Publication of the Periodic Report 8T ............................................. 36 4.18T 8T Additional8T events during and after the reporting period 8T .................................................................... 36 4.28T 8T Legal8T proceedings 8T ................................................................................................................................ 36 4.3.8T 8T R8T estrictions and supervision of the corporation’s business................................8T ................................. 37 5.8T 8T Exposure8T to and Management of Market Risks8T ...................................................................................... 68 7.8T 8T Disclosure8T Regarding the Corporation’s Financial Reporting 8T .......................................................... 72 7.1.8T 8T Report8T concerning critical accounting estimates8T ................................................................................. 72 7.2.8T 8T Contingent8T liabilities 8T ............................................................................................................................ 72 7.3.8T 8T Internal8T control over financial reporting and disclosure 8T .................................................................... 72 1 - 1 Quarterly report as of September 30, 2016 The board of directors’ report on the state of the corporation’s affairs for the period ended September 30, 2016 (hereinafter: the “Board of Directors’ Report”) reviews the principal changes which occurred in the operations of Clal Insurance Enterprises Holdings Ltd. (hereinafter: the “Company”) during the first nine months of 2016 (hereinafter: the “Reporting Period” and/or the “Interim Reports”). The board of directors’ report was prepared in accordance with the Securities Regulations (Periodic and Immediate Reports), 5730-1970, and is based on the assumption that the reader is also in possession of the company’s complete periodic report for the year ended December 31, 2015 (hereinafter: the “Periodic Report”). The board of directors’ report, with respect to insurance business operations, was prepared in accordance with the Control of Insurance Business Regulations (Particulars of Report), 5758-1998, and in accordance with the circular issued by the Commissioner of Capital Markets, Insurance and Savings (hereinafter: the “Commissioner”) dated January 20, 2014, on the subject of “Updates to the provisions of an insurance company’s periodic report”. 1. Description of the Company 1.1. Organizational structure Presented below are details regarding the main shareholders in the company, whose shares are traded on the stock exchange, and regarding their approximate rates of holding: As of September 30, 2016 Holding of Holding of voting rights in voting rights the company, at in the company full dilution 1) Shareholder % % IDB Development Corporation Ltd. 2) 54.92 53.38 Bank Hapoalim 9.50 9.24 1) The holding rate, at full dilution, was prepared according to the theoretical assumption of the exercise of all warrants from the 2007 plan (as of the publication date of the report - 50,000 warrants) into an identical number of company shares, and according to a maximum theoretical assumption of the exercise of all warrants which were allocated on behalf of employees according to the 2013 plan, including warrants which were allocated to the company’s CEO (as of the publication date of the report, 2,894,668 warrants), and all warrants allocated on behalf of employees according to the 2015 plan (as of the publication date of the report - 470,000 warrants) when the price of the company’s stock on the stock exchange reaches a price at which, according to the terms of the warrants plans, an automatic exercise is implemented, and subject to adjustments, as specified in the 2013 plan, the 2015 plan, and the agreements regarding allocation to offerees. For additional details, see Note 43(a) to the annual financial statements. 2) It is noted that IDB Development Corporation Ltd. pledged approximately 4% (approximately 3.88% at full dilution) of the company’s shares to a financial entity. Additionally, On August 21, 2013, in accordance with the Commissioner’s demand, 51% of the issued share capital and voting rights in the company, which are held by IDB Development Corporation Ltd. (hereinafter: the “Means of Control”), were transferred to the trust account in the name of Mr. Moshe Terry (hereinafter: “Mr. Terry”), and Mr. Terry was also given an irrevocable power of attorney with respect to the aforementioned shares, for the purpose of exercising the authorities conferred by virtue of those shares, in accordance with the provisions of the deed of trust which was signed between IDB Development Corporation Ltd. and Mr. Terry. For additional details regarding the holdings of IDB Development Corporation Ltd. in the company, and the obligation of IDB Development Corporation Ltd. to sell the company’s shares, see Note 1 to the consolidated periodic reports. 1 - 1 Board of Directors’ Report 2. Description of the Business Environment 2.1. Material developments and changes in the macroeconomic environment during the reporting year The group’s operations and results are significantly affected by the capital markets, and by the economic, political and security situation in Israel and around the world, which affect its income from investments, sales in various branches, the scope of insurance claims and the various costs associated with its operations. Developments with respect to employment and salary mainly have an effect on operations in the long term savings segment. Presented below are details regarding the major developments in the macro-economic environment which impact the group’s operations: From the beginning of the year, a mixed trend has characterized the leading indices around the world. During the three month period ended on the reporting date, a positive trend was recorded in stock markets around the world, led by emerging markets and the Japanese market. The British stock market also stood out favorably, due to the devaluation of the GBP following the referendum in which the residents of the United Kingdom voted in favor of separating from the European Union (“Brexit”). During the nine month period ended on the reporting date, a negative trend was recorded in the leading indices of the local stock market, while on the other hand, a positive trend was recorded in the Yeter index. In the third quarter, a positive trend was recorded in the local stock market. The bond market in Israel was characterized by decreased yields, mainly in long term series. In the third quarter, a slight increase in returns was recorded in the linked channels, while on the other hand, slightly decreased returns were recorded in the NIS channels, primarily in the long term. The total impact of market developments on
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