Gazit Globe : Reports Its Results for the Third Quarter of 2020

THIS DOCUMENT IS AN ENGLISH TRANSLATION OF THE HEBREW VERSION OF THE COMPANY'S

FINANCIAL STATEMENTS AND THE MANAGEMENT DISCUSSION AND ANALYSIS FOR THE THIRD QUARTER OF 2020 (THE "REPORTS"). THE HEBREW VERSION OF THE REPORTS IS THE BINDING

VERSION AND THE ONLY VERSION HAVING LEGAL EFFECT. THE ENGLISH TRANSLATION HAS BEEN CREATED FOR THE PURPOSE OF CONVENIENCE ONLY. THE APPROVAL OF THE COMPANY'S BOARD OF DIRECTORS WAS GIVEN TO THE HEBREW VERSION ONLY AND NO SUCH APPROVAL HAS BEEN GIVEN TO THE ENGLISH TRANSLATION. THE ENGLISH TRANSLATION WAS NOT PUBLISHED AND HAS NOT BEEN SUBMITTED TO THE ISRAELI SECURITIES AUTHORITY FOR ITS REVIEW.

QUARTERLY REPORT as of September 30, 2020:

Page
Directors' Report on the Company's Business	2
Update of Description of the Company's Business	37
Consolidated Financial Statements as of September 30, 2020	39
Separate Financial Statements as of September 30, 2020	65
Quarterly Report on the Effectiveness of Internal Control over Financial Reporting and	77
the Disclosure

GAZIT-GLOBE LTD.

DIRECTORS' REPORT ON THE COMPANY'S BUSINESS

GAZIT-GLOBE LTD.

Directors' Report to the Shareholders For the period ended September 30, 2020

The Board of Directors of Gazit-Globe Ltd. (the "Company") is pleased to present the Directors' Report of the Company for the period ended September 30, 2020 (the "Reporting Date):

1.

The Company and its Operations 1.1. Overview

The Company, through its public and private investees1 (collectively: the "Group"), engages mainly in acquisition, improvement, development and operating of income-producing properties for mixed-use, including retail, office and residential located in North America, Israel, Brazil, Northern, Central and Eastern Europe with focus on densely populated urban cities. In addition, the Company evaluates opportunities within its core business and similar fields, in other regions.

The Company's shares are listed on the Tel Aviv Stock Exchange Ltd. ("TASE" or " Tel Aviv Stock Exchange") under the "GZT" ticker.

Currently, the Company operates generally through two investment categories:

• · Wholly-owned private subsidiaries that are consolidated in its financial statements and in which the Company outlines the strategy, is responsible for their financing activities, and oversees their operations. These operations are conducted through G Israel Commercial Centers Ltd. ("G Israel")2, through the Company's subsidiaries in Brazil ("Gazit Brasil"), through Gazit Horizons Inc. ("Gazit Horizons") in the U.S.A and a subsidiary operating in Canada ("Gazit Canada"). Including through partnership "Gazit Tripllle".

• · Public entities under the Company's control with a similar strategy that are consolidated in its financial statements, in which the Company is the largest shareholder. These operations are conducted through Citycon Oyj. ("CTY") and through Atrium European Real Estate Limited. ("ATR").

The Group's strategy is to focus on the acquisition of income-producing properties (including with partners) mainly in densely-populated urban areas that meet the needs of the population which have a potential for value appreciation and cash flows growth by proactive management, improvement, addition of uses, development and redevelopment. The Group also takes measures to sell non-core properties which it believes have a limited growth potential and/or are in regions in which the Company wishes to reduce its activity.

As part of its strategy, the Company operates to increase the share of private real estate activity, which in the opinion of Company's management is likely to grow and improve the Company's cash flows and to create added value. Moreover, the Company believes that increasing the number of its directly owned properties will strengthen its financial ratios and result in receiving an international investment rating and, consequently, a reduction in financing costs and to diversification of the Company's financing sources to international financial institutions and new capital markets.

In addition, after examining the effects of the Covid-19 crisis (see section 1.2 below), the Company is working on strengthening its capital structure, while maintaining the high credit rating, by taking the following actions, among other things:

1. Realization of properties held by the private subsidiaries that are non-core properties or that the Company has

• concluded their improvement, amounting up to NIS 1 billion until the end of the third quarter of 2021.

• 2. Updating the quarterly dividend policy per share from NIS 0.43 per share to NIS 0.30 per share, for the period beginning with the dividend declared on the approval date of the financial statements for the third quarter of 2020 and until (including) the announced dividend on the approval date of the financial statements for the third quarter of 2021 (total of 5 consecutive quarterly dividend distributions). The update of the dividend policy, as mentioned, is expected to result in savings on dividend payments of NIS 100 million by the end of 2021.

• 3. The completion of G Israel merger to and into the Company, in accordance with the final approval of the Tax Authority to carry out the merger received in July 2020. The completion of the operational merger will enable

• 1 Reference to investees includes, unless stated otherwise, companies that are fully consolidated by the Company and companies that are presented according to the equity method.

• 2 On July 2020, the Israeli taxes authority approved the merger of G Israel into the Company (as the surviving company) (the "Tax Ruling"). Therefore, all the conditions for the merger, according to the Company's Board of Directors approval in December 2018, were met.

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GAZIT-GLOBE LTD.

DIRECTORS' REPORT ON THE COMPANY'S BUSINESS

the continued expansion of the merged company's operations in Israel and the expansion of the Company's financing options.

The Company's estimations regarding execution of the strategic plan as well as the sale of properties, are forward-looking information as defined in the Securities Law, 1968. Its assessments regarding the execution of strategy and sale of properties are based on the Company's and Group companies assumptions and estimates, but they are uncertain, may not materialize and are largely uncontrolled by the Company. As the global economic crisis continues and worsens, and as the Covid-19 Pandemic continues and there is a stagnation in the income-producing real estate sector, there may be delays in sale of assets.

1.2. Corona virus effects on the Group's activity

General

At the beginning of the report period, the Covid-19 virus spread rapidly from China to many countries across the globe, including those where the Company holds commercial assets, until the World Health Organization declared it a pandemic ("the Covid-19 Pandemic"). The Covid-19 virus is unknown and its rapid spread was explained, among other things, by uncertainty as to how it is transmitted, how to treat it and how the population can be vaccinated against it. Hence, the Covid-19 Pandemic is characterized firstly by extreme uncertainty and fear.

Many countries dealt with the rapid outbreak of the virus in various ways, mainly by imposing a partial or complete lockdown on the population, closing businesses, social distancing and significantly reducing movement between countries. The directive of the governments in those countries, together with the response of the capital, oil, interest and foreign currency markets to such extreme uncertainty led to extreme uncertainty that brought about a global economic crisis on one hand and a massive flow of funds from governments on the other.

During the Reporting Period, most countries in which the Company operates reported a moderation in the morbidity effects of Covid-19 virus and significant facilitations of the lockdown directives. Close to the end of the reporting period and even more so after the reporting period, those countries reported a gradual increase in morbidity indices and imposed new restrictions on the population. As of the report November 23, 2020, all countries in which the Company operates in various stages of tightening restrictions and reducing the activity of public transport and businesses.

However, after the reporting period, there were scientific breakthroughs in the discovery of vaccines for the corona virus, the most notable of which is the announcement by a leading pharmaceutical company about the effectiveness of the vaccine it is developing and the significant probability that the vaccine will be commercially due in 2021.

During March this year, there were sharp fluctuations in foreign currency exchange rates, in particular the rate of the Euro and the BRL against the NIS, which is attributed to the extreme uncertainty and fear that gripped the markets. There was also volatility in the capital markets worldwide during that period, leading to a sharp decline in shares prices, increase of returns on corporate bonds, a drastic drop in interest on government bonds and a dramatic decrease in the VIS index (the "fear" index). For information about the effects of the financial markets on the Company see below.

Effects of the investment property activities

The gradual closure of some of the Group companies compounds started in the second half of March 2020.

However, essential enterprises, including supermarkets, pharmacies, banks, clinics and food stores that provided deliveries continued to operate, even in closed compounds, and these constitute 55% of the total GLA.

At the end of April 2020, the Group's open properties gradually started to open in Israel and at the beginning of May, there was also a gradual opening of the Group companies closed properties in Israel and Europe, until their full opening, except for businesses of recreation and leisure such as cinemas in Israel (properties in Northern Europe were not closed all along, other than in Estonia). Since June, all of the Group's assets were opened and the number of visitors has been rising steadily and the "conversion ratio" (ratio of proceeds to the number of visitors) has risen significantly compared to the conversion ratio in the same period last year.

During July, the level of morbidity in Israel deteriorated, which led to a decrease in the number of visitors in the Company's closed compounds in Israel, to closing closed compounds on weekends and postponing the

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GAZIT-GLOBE LTD.

DIRECTORS' REPORT ON THE COMPANY'S BUSINESS

opening of cinemas, which affected the number of visitors and the revenues of businesses within the cinemas complex.

In mid-September, a full lockdown was announced in Israel and by November 23, 2020, the businesses located in closed shopping centers had not yet opened with the exception of essential businesses. In the other countries, additional restrictions were gradually imposed, which worsened after the reporting period, and as of November 23, 2020, there are differences between the restrictions that were applied in each of the countries, as stated. In countries such as Poland and the Czech Republic, company complexes are closed by government directive, with the exception of essential businesses. In the Nordic countries, no instructions were imposed for closing the shopping centers, however restrictions were imposed on the gathering and on the opening hours of restaurants and places of entertainment.

During periods in which businesses operate, the government directives regarding dilution of the number of visitors in the Company's and Group Companies' properties as well as those regarding the dilution of the movement of public transport that connects many of the Group companies' properties, still continued to apply. The restriction on air traffic between countries and a decrease in the frequency of passengers traveling abroad may lead to an increase in the number of visitors to its commercial properties during periods when opened, and a growth in the consumption of products and services that normally would have been purchased during the travels. As at the approval date of the report, the Company is unable to estimate or assess the cumulative effect of the different trends, and whether and to what extent they will impact its operations and financial results in the future.

During the period when businesses were closed under government directives, the Company and some of the Group companies deferred the collection of rent and management fees in some of the assets, but notified the tenants of their policy that the obligation to pay remains in place and any deviation from the amount and payment date requires its consent, if and as granted, specifically and based on the circumstances. The Company and Group companies allowed specific tenants to defer and split rent and management fee payments to a date to be agreed after opening of the businesses, including into 2021, as well as determining rental fees as a rate from the business income. In addition, the governments in many countries Such as the US and the Czech Republic, provided aid programs to tenants, among other things, by grants for payment of part of the rent. In Poland, the Government passed a law, according to which tenants of shopping centers across the country may not pay rent for the period during which they remained closed, provided that its lease term will be extended in six months plus the period in which they remained close.

Collection rates of the Group in the quarter amounted to 86% compared with 84% in the second quarter of 2020:

Constitute 71% of the NOI in the

consolidation relative to the third

quarter

As reported in the companies Public Interim Financial Statements.

Wholly owned Subsidiaries, Collection rate out of unadjusted basic rental fee.

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