GAZITRESULTS2019 When drafting this letter slightly over a month ago, our lives were in the routine we grew accustomed to for over a decade, with the typical “ups and downs”. Covid-19 sounded more like a new car model than a virus capable of changing our way of life overnight, making life as we knew it unrecognizable, rendering certainty unattainable and the obvious subject to proof (if there is any such proof). However, I have no doubt that with joint effort, discipline and cohesion, we can all overcome this cursed virus, and if history is a guide, our previous daily routine that we all miss so much will be restored. At Gazit, our strategy has always been to be ready for any crisis, CHAIM KATZMAN | Founder & CEO whenever or wherever it emerges, anticipating a temporary dislocation of the capital markets in Israel and worldwide. Even with calls for why “it is different this time”, we always, without exception, maintain a high liquidity level. Such liquidity enables us to continue to operate regularly even when the capital markets close for an extended period of time, for instance, with ample runway for three years. Thanks to the strategic measures that we recently completed we entered the current crisis well prepared to meet our financial obligations. These measures include a drastic reduction in leverage, a dramatic improvement in the quality of our assets, the spreading out and extending of our liability maturity schedules and maintaining an extremely high-level of liquidity. The letter I intended to write a month ago has clearly lost much of its relevance in-light of the current circumstances. Nevertheless, I will review the Group’s results in 2019, which I admit seem like an eternity ago. Please read my summary as if the current date is January 1, 2020, for context. We concluded 2019 with impressive results. In 2019, same property NOI in NIS increased by 4.5%, led by our private platforms, including Brazil which increased by 18.2% and Israel by 2.8%. Our occupancy rate remained high and was 96.6% at the end of year. Our FFO per share was within the upper range of the forecast for the year, amounting to NIS 3.24 per share. The growth in FFO is due to an increase in same property NOI, property acquisitions in our private real estate portfolio and projects under development that were completed and started producing income. In addition, we implemented several debt redemptions and restructuring measures on a significant scale. In 2019, we redeemed “expensive” debenture series which reached maturity or which we redeemed early, in a total amount of NIS 3.1 billion, at an average interest rate of 5.3%. We used part of the proceeds from the sale of our share of our Canadian corporate investment in First Capital to reduce our leverage and issued new debt in the amount of NIS 1 billion at an average cost of 1.27%. In aggregate, this equates to an annual saving of NIS 150 million in our financing expenses. GAZITRESULTS2019 In the last quarter of the year, the fair value of our private property portfolio increased by NIS 635 million. This growth is due to a decline in capitalization rates in Brazil and Israel, and primarily asset management and other value improvement activities that generated value in our private subsidiaries. The Company’s share price did not remain indifferent to the positive and accelerated developments either, and in 2019 Gazit’s share price increased by 54.6%. Strategy During the year, we continued to implement the strategy announced three years ago to increase the share of our private investments by acquiring irreplaceable properties while actively realizing our mature investments in public companies and reducing the Company's leverage. In April 2019, we finalized the sale of most of our interest in First Capital for NIS 3.3 billion in cash. The sale was another significant milestone in realizing the strategy, and subsequently the Group’s private real estate portfolio grew to over 50% of the Company’s total investments while at the same time leverage was reduced to 49.2%. Following the announcement of the First Capital sale, the spreads of our long-term debentures to corresponding duration government bonds decreased by 130 basis points. The cost of our debt dropped significantly, as reflected in the Company’s results and cash flows, which will lead to substantial savings in the coming years as well. During the year, we tried to privatize our Central European subsidiary Atrium, but were unsuccessful due to a demand by some Atrium shareholders to raise the offer to a higher price, a demand to which we did not agree. The property portfolio in Atrium is highly urban, and fits Gazit’s investment parameters while possessing growth opportunities including the possibility to expand its areas of activity. We will continue to support the management of Atrium in implementing its strategic plan and creating value for all shareholders. As of the publication date of this letter, we invested NIS 1.5 billion in acquisitions and development in our private companies. We are continuing to expand our urban property portfolio in North America, where last year we acquired assets in the amount of NIS 660 million, together with promotion of the development plan in Israel and North America for a total of NIS 1.5 billion. Our development plans will progress with particular attention and consideration given to the impact of the Coronavirus outbreak. The share of our private holdings as a percentage of our total investments reached 56% compared to 38% in 2018. The Company implemented a substantial part of our outlined strategic plan, as reflected among other ways, in our free cash flow. Key Developments in our Wholly-Owned Subsidiaries Israel Our property portfolio in Israel demonstrated a growth in NOI of 6.9%, amounting to NIS 171 million. The same property NOI grew by 2.8% and the occupancy is at a peak of 98.8%. In 2019, the construction of the 2,200 sq.m property in the Kochav Hatzafon neighborhood of Tel Aviv was completed at a total investment of NIS 107 million (applications were submitted to increase the property building rights by another 1,500 sq.m), as well as the expansion of G City in Rishon Lezion by 13,000 sq.m for a total investment of NIS 160 million. Both properties are in the advanced stages of handover to tenants and full occupancy. These properties are expected to increase Gazit Israel’s NOI by NIS 22 million. In parallel, we are currently working on utilizing the land on which our urban properties are located. By exercising rights and increasing density, we are expanding the use of properties that also strengthen the existing assets and convert them into “Live, Work, Play” complexes. We are planning a 50,000 sq.m office building on the G City property in Rishon Lezion and development is expected to start in the third quarter of 2020, subject to relevant considerations with regards to the Coronavirus pandemic. The property, which stretches 1 km along Moshe Dayan Boulevard, is expected to be connected to two light rail stations, the office building being connected to the western station. At G Kfar Saba, we are in the midst of constructing a Decathlon retail branch and headquarters and are in the planning stages of a 27,000 sq.m office building on the property. The addition of the office component to the property is expected to increase the daily number of visitors to the center and the consumption from dining, supermarkets, fitness club members, etc. Naturally, such expansion and additional construction will be reviewed after and in view of the then current climate once the Coronavirus pandemic subsides, based on the circumstances at such time. Kochav Hatzafon | TEL AVIV Key Developments in our Wholly-Owned Subsidiaries (Cont.) We believe that the value of the land in Rishon Lezion and Kfar Saba, which offer quick access to roads and railway stations, will continue to increase with their connection to the planned light rail stations and subway. We are preparing urban construction plans with the regional municipal authority to add rights and increase the floor area ratio (FAR) in both assets, which will enable turning them into commercial, business and even residential centers in the future. In Israel, we are engaged in additional projects, including expansion of the Savyon property, and the renovation of the Chen Cinema in Tel Aviv and the Rothschild Mall in Rishon Lezion. The expansion and development investment plan is expected to increase the volume of investment in Israel by NIS 1 billion and the annual NOI rate from NIS 200 million to NIS 300 million. Given the changing circumstances, we are investing most of our efforts in the extensive development activities in Israel and in increasing investments there, which currently constitutes 24% of the Group’s total assets, and all will naturally be reviewed with attention to the Coronavirus effect once we understand it and its impact on the financial profile and anticipated success of the project become clearer. North America At the reporting date, our property portfolio in the USA and Canada was USD 600 million and focused on super urban areas in leading East Coast cities, in real mixed-use properties in which we believe we will generate a significant surplus yield. During the year and through to the reporting date, we invested USD 300 million in North America. Prior to year-end, we reported the establishment of a partnership in Canada with Dori Segal, which intends to invest mainly in mixed-use properties in Toronto where unique opportunities to create value can be found and realized.